Right to buy

May 10, 2018   By Trinley Walker, Senior Policy Researcher

Recent data on the Government’s Right to Buy (RtB) housing policy has cast further doubt on the initiative’s feasibility. With councils having been unable to channel the resources provided from the sale of housing stock on new homes, as well as further spending restrictions, the policy is reducing the volume of local government-held housing stock. The policy is failing on its own terms.

When the RtB policy was revived by the Coalition Government in 2012, it was underpinned by the pledge that council housing bought by tenants would be replaced in the housing stock by new dwellings on a one for one basis. The policy was further re-packaged by increasing the maximum discounts for would-be-buyers to £75,000 of the property’s asking price, with this figure increased to £100,000 for London tenants a year later. Under the new provisions established in 2012, councils began to keep a proportion of the receipts from RtB sales to fund additional affordable housing, as well as to pay of outstanding debts. Additionally, the qualifying period for the scheme was reduced from five to three years.

But the pledge to replace sold housing stock is going unfulfilled. The Ministry of Housing, Communities and Local Government’s (MHCLG) most recent statistical release on the scheme showed that for the first time since 2012, the volume of houses being sold under the scheme is outstripping the number of homes started to replace the lost housing stock. The figures reported that since 2012, 15,981 replacement units had been started in order to replace 17,072 sales. Analysis undertaken by Inside Housing shows that twelve councils have a gap of more than 1,000 between total sales and replacements started.

The schemes’ funding arrangements have rendered achievement of the one-for-one replacement pledge nigh on impossible. Restrictions mean councils are only permitted to use receipts from sold housing stock for only 30% of the cost of new builds, and have been barred from combining monies received with government grant funding for housing. A large proportion of the housing sector drew a collective gasp when the policy was announced in 2012, with the prospect that lost housing stock would be replaced unlikely – and so it has come home to roost. This failure is even more glaring considering that the replacement housing is officially affordable housing, which can be charged at up to 80% of market rents, rather than social rents which require greater subsidisation.

The Government response to the shortfall was somewhat predictable – in that it sought to shift blame away from MHCLG onto local authorities – putting the shortfall down to the inability of councils to build at an appropriate pace – ‘It is clear that local authorities need to increase their rate of delivery of new homes’.

But this stance is simply untenable in light of the financial strait jacket that local government has been wrestling with when it comes to housing. Data obtained by the Municipal Journal – through a Freedom of Information Request – shows that a fifth of total monies raised from RtB receipts between 2012-2017, £875 million, has been channelled from councils to Whitehall.

In its current incarnation – RtB is clearly undermining the ability of councils to provide the social housing so desperately needed across the country. Given that government still intends to extend RtB to housing association tenants through a voluntary arrangement, the workings of the policy merit a serious re-think.

That so much of the RtB receipts pour into central government coffers marks it as a further initiative that is half-baked in its commitment to devolve power to local authorities. If government really is serious in its intention to empower local government to provide social housing, then it must lift the borrowing cap for all local authorities, which acts as a shackle preventing councils from delivering social housing. This policy recommendation was set out in NLGN’s report – Working together for more homes.

The Government is firmly committed to RtB, and in its statement in response to the shortfall of replacement homes mentioned above, committed to consulting local authorities on how they can be provided with more flexibility in terms of how they use RtB receipts. Recent reports indicate that Government will allow for the pooling of RtB receipts with grant funding for housing. This commitment is necessary as unless government takes action to amend the RtB policy – it is likely to result in a deeper net loss of social housing stock.

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