REEPS11/4
Turnover rates
Turnover Rates in the Owner Occupied and Private Rented Sector
Introduction
This note presents three proxies to turnover rate:
1. Length of tenure
2. Sales over stock
3. Adjusted sales over stock
Each of the proxies are described below in detail. After careful consideration, it is recommended to
use length of tenure to measure the turnover rate in the REEPS study.
Length of tenure
The Scottish House Condition Survey (SHCS) asks respondents for the number of years they have
been living in the property. SHCS data for 2011-2013 (three years) was used to calculate the length of
tenure in the owner occupied sector (OO) and the private rented sector (PRS) by EPC band.
The advantages of using this indicator to measure the number of properties that will be impacted by
REEPS are the following:

Methodological consistency across OO and PRS

Possibility to break down the results by EPC band. As it is no legally required, there is no
information collected on EPC for new build, however, it is highly unlikely that any new
dwelling built in accordance to the 2010 Building Regulation would be lower than an EPC of
D.

Possibility to produce the results by individual years to estimate a profile of sales within a
period of time.
Figure 1: Length of tenure in the OO by EPC band and year
12%
10%
8%
A-C
6%
D
4%
E
F-G
2%
All
0%
0
5
10
15
20
25
30
35
40
Years
Source: Scottish House Condition Survey (SHCS)
1
45
50
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Turnover rates
For households staying in their properties for more than 10 years, SHCS data is produced in 5-year
bands while the last category is more than 30-year. We have adjusted this dividing the 5-year bands
by 5 while the more than 30-year category was divided by 20 to produce a 50 years period. The
original data on the length of tenure by EPC is presented in Tables 2 to 5.
It needs to be noted that 21% of properties with an EPC of F and G and 14% of properties with an
EPC of E have a the length of tenure of more than 30 years. This might be relevant for specifying an
backstop date.
The same approach is applied for the PRS. It is worth highlighting the high turnover rate in the private
rented sector with 40% of E and 33% of F and G properties with a turnover of less than year. The fast
turnover rate means that 88% of properties with an EPC of E and 77% of properties with an EPC of F
and G will be on the market for rent and therefore will be subjected to REEPS before 10 years.
Figure 2: Length of tenure in the PRS by EPC band and year
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
A-C
D
E
F-G
All
0
5
10
15
20
25
Years
Source: Scottish House Condition Survey (SHCS)
Length of tenure as a proxy for turnover can be used to calcualte the rate at which properties in the
OO and PRS are impacted by REEPS. For example the SHCS show us that in the first year of
REEPS 4% of EPC E properties in the OO and 40% in the PRS will be sold or rented, and depedning
on the secenario, will need to be upgraded.
In the second phase of thes REEPS study, Ipsos MORI and Alembic Research produced a
breakdown of properties in the private sector by EPC band.
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Turnover rates
Table 1: Breakdown of EPC bands among private sector stock in bands EFG.
Percentage
of
OO
PRS
Dwellings
dwellings
EPC band E
dwellings
%
dwellings
%
57.4%
229,840
194,158
60%
35,682
46%
35.2%
141,032
110,904
34%
30,128
39%
7.4%
29,676
17,776
6%
11,900
15%
100%
400,548
322,838
100%
77,710
100%
(39-54)
EPC band F
(21-38)
EPC band G (020)
All
Applying length of tenure to the figures in Table 1 produces a profile of the number of properties that
will be upgraded as a result of REEPS. The following graphs show the cumulative number of
properties impacted by REEPS per year for the first three scenarios as specified in REEPS10. The
boxes below higlight from which year the cumulative number of properties reaches 50% and 75% of
all properties which are subjected to REEPS under each scenario.
Scenario 1: All dwellings to reach Band F
Source: SHCS; Ipsos MORI and Alembic Research
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Turnover rates
Scenario 2: All dwellings to reach Band E
Source: SHCS; Ipsos MORI and Alembic Research
Scenario 3: All dwellings to reach Band D.
Source: SHCS; Ipsos MORI and Alembic Research
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Turnover rates
Table 2: Owner-occupied: Proportion length of stay by EPC band
A-C
D
E
F-G
All
<1year
5%
4%
4%
3%
4%
1<2 years
5%
3%
2%
2%
4%
2<3 years
8%
4%
3%
4%
5%
3<4 years
10%
4%
4%
4%
6%
4<5 years
9%
5%
4%
3%
6%
5<6 years
8%
5%
5%
4%
6%
6<7 years
6%
5%
3%
2%
5%
7<8 years
5%
3%
3%
3%
4%
8<9 years
4%
4%
3%
4%
4%
9<10 years
3%
4%
4%
2%
4%
10<15 years
15%
20%
20%
18%
19%
15<20 years
8%
12%
12%
11%
11%
20<25 years
6%
10%
13%
11%
10%
25<30 years
3%
6%
8%
7%
6%
30+ years
3%
11%
14%
21%
10%
Source: Scottish House Condition Survey (SHCS)
Table 3: Owner-occupied: Cumulative length of stay by EPC band
A-C
D
E
F-G
All
<1year
5%
4%
4%
3%
4%
1<2 years
10%
7%
6%
5%
8%
2<3 years
18%
11%
9%
9%
12%
3<4 years
29%
16%
13%
13%
18%
4<5 years
37%
21%
17%
16%
24%
5<6 years
46%
26%
22%
20%
29%
6<7 years
52%
31%
25%
22%
34%
7<8 years
57%
34%
28%
25%
38%
8<9 years
61%
38%
31%
29%
42%
9<10 years
64%
42%
35%
31%
45%
10<15 years
80%
62%
54%
50%
64%
15<20 years
87%
74%
66%
61%
75%
20<25 years
94%
83%
78%
72%
84%
25<30 years
97%
89%
86%
79%
90%
30+ years
100%
100%
100%
100%
100%
Source: Scottish House Condition Survey (SHCS)
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Turnover rates
Table 4: Private Rented Sector: Proportion length of stay by EPC band
A-C
D
E
F-G
All
<1year
48%
42%
40%
33%
43%
1<2 years
21%
20%
15%
14%
19%
2<3 years
10%
11%
12%
8%
11%
3<4 years
9%
7%
7%
6%
8%
4<5 years
5%
4%
3%
4%
4%
5<6 years
1%
4%
3%
2%
3%
6<7 years
1%
3%
2%
3%
2%
7<8 years
1%
1%
3%
2%
1%
8<9 years
1%
1%
2%
2%
1%
9<10 years
0%
1%
1%
2%
1%
10<15 years
2%
3%
6%
11%
4%
15<20 years
0%
1%
3%
2%
1%
20<25 years
0%
1%
1%
2%
1%
25<30 years
0%
0%
0%
2%
0%
30+ years
0%
1%
1%
5%
1%
Source: Scottish House Condition Survey (SHCS)
Table 5: Private Rented Sector: Cumulative length of stay by EPC band
A-C
D
E
F-G
All
<1year
48%
42%
40%
33%
43%
1<2 years
69%
62%
55%
47%
61%
2<3 years
79%
73%
66%
55%
72%
3<4 years
88%
80%
74%
61%
80%
4<5 years
93%
84%
77%
65%
84%
5<6 years
95%
89%
80%
68%
87%
6<7 years
96%
92%
82%
71%
89%
7<8 years
96%
93%
85%
73%
90%
8<9 years
97%
93%
87%
75%
91%
9<10 years
97%
95%
88%
77%
92%
10<15 years
100%
98%
94%
88%
97%
15<20 years
100%
98%
98%
91%
98%
20<25 years
100%
99%
99%
93%
99%
25<30 years
100%
99%
99%
95%
99%
30+ years
100%
100%
100%
100%
100%
Source: Scottish House Condition Survey (SHCS)
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REEPS11/4
Turnover rates
Sales over stock: Private sector sales as a percentage of private sector stock
Turnover rate can be measured as the number of property sales over the total number of properties.
Registers of Scotland (RoS) produces the number of property sales by financial year in the private
sector including new build, property sales between companies, and person to person sales 1. The
Scottish Government collects and produces figures on the total number of properties in the private
sector2.
The advantage of using RoS over SHCS is that RoS includes all private sector sales in Scotland while
SHCS estimates this figure from the sample of interviewed households.
Turnover rate defined as private sector sales divided by private sector stock declined from 8.8% in
2006-07 to 3.9% in 2012-13 while recovering in the last financial year to 4.8%.
Figure 3: Property sales over private sector stock
10%
9%
8%
8.8%
8.1%
7%
6%
5%
4.8%
4%
3.9%
3%
2%
Sales over Stock
1%
0%
2003 - 2004 - 2005 - 2006 - 2007 - 2008 - 2009 - 2010 - 2011 - 2012- 2013 04
05
06
07
08
09
10
11
12
13
14
Source: Number of sales (RoS); Private sector stock (Scottish Government Housing Statistics)
Using this measure as the proxy for turnover rate in the OO presents a number of shortcoming:

It includes sales of new build properties. As current building standards are above the potential
minimum EPC, it is highly unlikely that new build will be affected by the regulation.

Dwellings sold more than once. The data above includes repeated sales. As REEPS will
impact properties only once at the point of sale or rent, the above measure of turnover,
including repeated sales, overestimates the number of properties improving their energy
performance.

Low energy efficiency houses have a lower turnover. Evidence from SHCS shows that
households living in lower EPC dwellings are less likely to move.
1
2
Source: http://www.ros.gov.uk/public/news/quarterly_statistics.html
Source: http://www.scotland.gov.uk/Topics/Statistics/Browse/Housing-Regeneration/HSfS/KeyInfoTables
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Turnover rates
The above analysis is still useful as it shows the trend of sales over the stock for the last 11 years and
the break in the series before and after the financial crisis as well as the increase in sales over the
stock for 2013 -14.
The figure of sales over the stock for the last financial year (4.8%) is in line with the proportion of
households that stay in their property for less than a year as in OO sector (5%) as it was measured in
the 2013 SHCS3. This supports the use of SHCS to proxy for the turnover rate. There is, however,
potential for future sales to increase if the level of activity returns to pre-recession levels. In that case,
it is likely that the number of households staying for a shorter period of time in their households
increases.
If the number of sales picks up and recovers the level of activity shown before the crisis, using the
SHCS 2011-2013 to measured length of tenure4 would produce conservative estimate of the impact of
this policy. Sensitivity analysis (increasing turnover rate to the levels before the crisis) can be used to
measures the impact of higher turnover rate on the effectiveness of the policy.
Adjusted Owner-Occupied Sales
The Adjusted Owner Occupied sales tries to offset some of the described shortcomings of Sales over
the stock. Lack of data availability means that this proxy is only available for 2011, 2012, and 2013.
The table below shows the number of person to person sales in the period 2011-20135. Scottish
Government analysts estimate that between 2011 and 2013 there were more than 8,100 re-sold
properties. For the purpose of the analysis we assume that re-sold properties were equally distributed
as around 2,700 properties re-sold per annum. The table below shows unique sales (person to person
sales minus re-sold properties) as a percentage of owner occupied stock excluding new build.
Evidence from SHCS suggests that households living in dwellings with lower energy efficiency are
less likely to move. Table 7 shows that compared with households living in dwellings rated A-C,
households in dwellings rated E, F and G are less likely to move to another property.
3
2013 SHCS Table 3.5: Length of time at current address by tenure
The analysis required SHCS for 2011, 2012, and 2013 to be grouped in order to calculate statistical significant
figures of length of tenure by EPC band.
5
New build, company sales, Social housing transfers, inter family transfers, non-market sales, and Right to Buy
sales are excluded.
4
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Turnover rates
Table 6: Households moving to dwelling in the last year
EPC Rating
Owner-occupied
PRS
National
%
%
%
A-C
5.1%
47.2%
12.9%
D
4.0%
42.7%
8.9%
E
3.4%
39.4%
9.3%
F-G
3.0%
32.3%
9.7%
Total
4.1%
42.4%
10.2%
Source: SHCS
The final turnover rates for properties E and F-G are therefore adjusted to account for the ‘stickiness’
of households living in this type of properties.
Table 7: Adjusted Owner Occupied Sales – 2011 to 2013
2011
2012
2013
Private sales (excluding new build)
46,673
54,325
64,548
Re-sales
2,724
2,724
2,724
New Sales in 2011-12-13
43,949
51,601
61,824
OO Stock (excluding new private build)
1,489,878
1,454,817
1,447,298
New Private sales (excl. new build) / OO (excl. new private
2.95%
3.55%
4.27%
E properties
2.47%
2.98%
3.58%
F-G properties
2.16%
2.59%
3.13%
build)
Source: Registers of Scotland, Scottish Government Housing Statistics and SHCS
The Adjusted Owner Occupied Sales produces similar results as the length of tenure. The 3-year
average turnover rate for E properties equals 3% which is similar to the 4% as calculated in the
proportion of households which stayed for less than a year in E properties. In the case of F-G
properties both proxies equal 3%.
The Adjusted Owner Occupied Sales does not account for the properties bought by landlords when
those landlords are registered as a companies as this information is not collected in the RoS
database. Using the Adjusted Owner Occupied Sales produces a turnover rate which will be fixed in
each year of the analysed period. However, as it was shown using length of tenure, there are a
significant number of households that stay in their houses for a longer period time.
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Appendix
Assessing indicators of turnover rate
Data Source
Sales over stock
Adjusted OO sales
Length of tenure
Sales – Registers of
Private sales –
SHCS – Length of
Scotland
Registers of Scotland
tenure
Stock – SG Housing
Re-Sales – Registers of
statistics
Scotland
Stock – SG Housing
statistics
E/F-G adjustment –
SHCS
X

Available for OO and PRS
X
Does not include new build
X


Does not include re-sales
X


Accounts for EPCs
X


Probability of moving
X
properties
X
changes with length of
tenure
10
