Friday, 7 August 2015

Wrong to Buy

by Allan Hepple

The much vaunted Conservative manifesto commitment to allow 1.3 million families to buy their housing association home, dubbed Right to Buy 2, at Right to Buy discounts, between £77,000 and £104,000, has generated much discussion and criticism from professionals and Housing Associations alike. Such august bodies as the National Housing Federation and the Chartered Institute of Housing have been particularly vocal on the matter.

I will attempt to summarise the position as I understand it.

Current position Council tenants since 1980 have had the ‘Right to Buy’ (RTB) with discounts on the open market value currently of between £77,000 and £104,000. This was on the promise of replacement on a one to one basis with new council homes. In reality local councils can only build one for every 10 sold!

Housing association tenants have the ‘Right to Acquire’, introduced under the 1996 Housing Act. It is substantially different from the RTB:-
* It only applies to eligible tenants who live in properties provided with social housing grant, or transferred to housing association, after 1st April 1997
* Housing associations have right to sell the tenant an alternative property other than the one they live in.
* Properties in rural areas, population at or less than 3,000, are excluded
* Current discounts stand between £9,000 and £16,000 dependant on location

Consequently take up is low.

Housing associations; to which paradoxically the then Tory government in the 1980’s  gave powers as alternative providers of new social housing in place of local authorities; are private and not public bodies like councils and have the ability to borrow on the private market as well as obtaining social housing grant from the government. Most have charitable status but all have a legal responsibility to house those in housing need. Their debts, estimated at around £60bn, are private debts and are not counted toward the UK national debt.

Extending RTB to all housing association tenants would see discounts increased dramatically to between £77,000 and £104,000. Whilst the detail of the Tory plan is yet to be released, currently there is no planned restriction on rural areas.
So why is it ‘Wrong to Buy’?
First Housing associations are not-for-profit organisations. Their properties are not government assets to sell off.
A third of RTB properties have ended up as private rented homes at a greater cost to taxpayers as result of higher rents requiring increased Housing Benefit expenditure. Private rents in the UK have increased by 10% in the last year (5% in the North East. SHOUT (Social Housing Under Threat) have estimated that HB expenditure could rise to £200bn in the next few years if current housing policies don’t change.

The sell-off will be funded by the forced sale of council’s most expensive homes when they become vacant. Effectively compensating HAs for the sale of their homes by councils.  Funding through forcing sell off of most expensive council houses is wrong. Government estimates the cost of discounts will be £4.5bn a year yet Savills estimate the sell-off of the most expensive council houses will raise £3.2bn at best. The numbers simply don’t stack up. This money will be used to fund no fewer than 5 discrete things: fund the discounts to tenants: replace the sold council property, repay the grant on the sold housing association home; replace the sold housing association home and the contribution to the [government’s] brownfield regeneration fund? What’s even more interesting is that the Times claims that Whitehall officials warned David Cameron against the plan to RTB scheme weeks before the general election!

According to Inside Housing the Conservative’s policy is to sell off the most expensive in the area not nationally. The numbers from Inside Housing (12-06-15) give valuations at or above which they'd be sold off in the North East: 1 bed £80,000 2 bed £125,000 3bed £155,000 4 bed £250,000
It is highly likely that this could affect the most rural parts of Northumberland where house prices are highest but demand for affordable homes is highest.

The irony is that they are largely in Tory constituencies! If you add to that sell off of rural HA homes and the inability for us to get any affordable home contribution for less than 10 homes built by private developers it really is a nightmare scenario for affordable homes in rural areas.

The government have promised a one for one replacement on all homes sold. We’ve heard this since 1980 but it’s never been achieved. Between April 2012 and December 2014, 26,184 homes were sold but just 2,712 were built from these proceeds – a rate of 1 built to every 10 sold!

This could also pose a threat to our Core Strategy which provides a good policy for new affordable housing being affordable in perpetuity in rural areas. 

Credit agency Standard and Poors, which provides ratings for 17 HAs, said the policy could affect their credit worthiness in the long term affecting their ability to borrow on the private market. Social housing grant has been cut since 2010 from £60,000 to £20,000 a unit so HAs rely more and more on private loans to finance new development.

The Office of National Statistics said if the policy led to greater control over housing associations, the ONS would have to assess Housing associations as public bodies. This would result in their current private debt being added to public debt amounting to £60bn or 4% of the total national debt.

Overall, there are clearly many unintended consequences but the most important impact will simply be less affordable housing particularly social rented housing and less opportunity to build new homes. At current rates of provision homes built today will have to last about 250 years!

In short that’s why this policy is not Right to Buy but Wrong to Buy!

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