Social Housing Speed Read – voluntary Right to Buy

The first purchases by housing association tenants have taken place under the new pilot scheme. This is the first step of the scheme which was announced in May 2015 via the Government’s commitment to extend Right to Buy to Housing Association tenants.

As the Scheme is set to be replicated nationally, it will have a huge effect on housing associations and the social housing market.

The scheme in theory

As the name makes clear, the scheme is voluntary rather than statutory, with the Government paying Right to Buy level discounts to eligible tenants. The following housing associations have undertaken the pilot:

• L&Q – Croydon LBC, Enfield LBC, Greenwich LBC, Haringey LBC, Lambeth LBC, Lewisham LBC, Newham LBC, Southwark LBC;
• Riverside – Liverpool CC, Halton BC, Knowsley MBC, Sefton MBC, St Helens MBC, Wirral MBC;
• Saffron Housing – South Norfolk DC;
• Sovereign – Cherwell DC, West Oxfordshire DC, Vale of White Horse DC, South Oxfordshire DC.

In exchange for the deal, the Government offered greater flexibility, full compensation and no legislation to introduce it…so far so good.

In theory, for each of these council homes sold, an additional affordable home would be provided on at least a one-for-one basis (and at least two-for-one in respect of council homes sold in London).

The Housing Department’s expectation is that the sales of high-value council homes that become vacant will pay for the extended Right to Buy discounts, thus making the policy fiscally neutral.

However, no high value council homes have sold yet, and of course there is a finite supply of unsold high value council homes.

The scheme in practice

The problem of course is that despite the implications and complexity of the policy, the Government has not clarified many key details. Housing providers are relying on vague assurances as to how the scheme will work in practice. It is difficult to conceive of an instance whereby the scheme will not require additional funding from central or local government.

To date, just 790 tenants out of 48,000 in the pilot areas have applied to buy their home under the Right to Buy scheme which represents just 5% of those who were eligible but not excluded.

This may be due to the fact that, under the pilot scheme, tenants must have lived in their properties for the last 10 years, in comparison to the council Right to Buy scheme, which requires only 3 years’ residency.

Verdict

Any scheme put in place that generates a demand for social housing and increases opportunities for housing providers might be welcomed; however, the jury is out as to whether this scheme will achieve that.

Not taking into account whether the new homes funded by this policy will be genuine replacements for those sold and on the basis that there will be no abuse of the scheme due to the significant discounts proposed, the sustainability of social housing is the key issue.

If housing providers are forced to sell social housing properties at a reduced market value this will ultimately disrupt a sector that is still in recovery.

The scheme will reduce the number of affordable properties available in the UK when there is a need for a greater supply of housing. This will inevitably make it harder for housing associations to allocate resources to housebuilding and more difficult for investors to lend to them.

We would all agree that there needs to be a solution to the housing crisis. However, the pilot scheme does nothing to allay concerns that the concept will struggle when it is put into practice.

What is however clear from new Housing Minister Gavin Barwell’s message to the Nat Fed conference last week – the Government remains entirely committed to its manifesto promise to press on with the Right to Buy in the Housing Association sector.

If you have any questions on the above and how it will affect social housing providers, or any other questions as a social housing provider, please do not hesitate to contact John Murray or a member of our expert Social Housing Team.