Social Housing Speed Read – Right to Buy extension

The Public Accounts Committee (“the Committee”) has published its report on the Government’s plan to extend the right to buy to 1.3 million Housing Association tenants. The scheme, which is due to be rolled out across England later this year, is currently being piloted in five areas of England.

The Committee’s report brings into question the Government’s approach to funding the extended right to buy policy and its wider impact.

Publication of the report is surprising in circumstances where the Committee heard evidence in relation to a policy that has not yet been brought into force and where the legislation is still being debated.

The Committee, however, has said that it wanted to look at the policy early in view of the large number of individuals and amount of public money likely to be involved.

Background

In October 2015, the Government announced a voluntary agreement with Housing Associations and the National Housing Federation to give Housing Association tenants the right to buy at right to buy level discounts, an entitlement currently afforded to council tenants. Provision to implement this voluntary agreement is included in the Housing and Planning Bill 2015-16.

The Bill was introduced in the House of Commons in October 2015 (there was no debate on the Bill at this stage) followed by a second reading in November 2015. It was again considered in the House of Lords in February and a Third Reading took place on 27 April 2016.

The Bill returned to the House of Commons on 3 May 2016 and was considered again on 9 May. The House of Lords considered the Commons amendments on 10 May and it returned on 11 May to the Commons for consideration of a Lords amendment.

The Government has said that it will fund the cost of the discounts by requiring councils to sell off their most valuable council houses as these become vacant. These houses will be replaced with affordable housing within three years.

Each property sold by Housing Associations will be replaced on at least a one to one basis with new affordable homes being provided in respect of properties sold by local authorities with at least two additional affordable homes provided for each one sold in London.

To be eligible, potential buyers must have been Housing Association tenants for at least three years before discounts of up to £103,900 in London and £77,900 elsewhere will be made available.

Half a million Housing Association tenants are already eligible with a further 800,000 becoming eligible as the policy is rolled out later this year.

The report

The Department for Communities and Local Government (DCLG) has been criticised as it has not produced a detailed impact assessment in respect of the policy.

Parliament has therefore had to consider the legislation without detailed information and in the absence of key policy details such as the likely cost of the discounts.

Concerns by the Committee centre around funding, the extent to which new homes funded by the policy will be genuine replacements for those sold and whether there will be controls in place to prevent the discount offered being abused.

In summary, the Committee has recommended that the DCLG should:

• publish a full impact assessment setting out the impact of the policy on housing benefit and universal credit and the impacts on local authorities;
• publish a full analysis showing how this policy is to be funded before the Autumn Statement 2016;
• publish data on where replacement homes are built, what size and type of tenure they are, and when they are completed (not just started);
• within six months, write to the Committee to, amongst other things, provide full details of how the DCLG plan to tackle fraud and abuse to protect public money.

Implications

The committee reports that extending the right to buy could lead to:

• A shortage of housing and increased overcrowding for those in housing need as it will be difficult to replace homes on a one for one basis;
• A danger that increased discounts for Housing Association tenants would lead to greater fraud;
• Increased home ownership by those Housing Association tenants who decide to exercise their right to buy thus reducing its stock and potentially it ability to attract private investment as a result;
• Loss of much needed affordable homes;
• Depleted housing association stock.

The recommendations made by the Committee will serve to clarify a number of significant aspects of the Government’s plans and, importantly for Housing Associations and councils, set out exactly how the policy will be funded.

If you have any questions on the right to buy extension 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.