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Introducing a voluntary Right to Buy for housing association tenants in England

Published Thursday, May 24, 2018

The Government has committed to extend the Right to Buy to assured tenants of housing associations on a voluntary basis. No implementation date for full roll-out has been announced. A large regional pilot scheme will begin in the Midlands in 2018 which will inform the shape of the final scheme. This paper provides background on the policy and explains progress to date.

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The statutory Right to Buy (RTB) was introduced in October 1980.  To date, just under 2 million council properties in England have been sold.  As a general rule, assured tenants of housing associations (aside from those who were previously secure council tenants with a ‘preserved’ RTB) do not have the RTB on the same terms as council tenants. Housing association homes built since 1989 have generally been financed with a mixture of public and private funding - this reliance on private investment has acted as a barrier to selling the properties at below market value.

Scotland has abolished the RTB and Wales is following suit - the final date for the abolition of the RTB in Wales is 26 January 2019.

Government proposals 2015

The Conservative Party’s 2015 Manifesto contained a commitment to “extend the Right to Buy to tenants in Housing Associations to enable more people to buy a home of their own.” Subsequently, the 2015 Queen’s Speech announced that a Housing Bill would be introduced to “dramatically extend the Right to Buy to the tenants of Housing Associations – putting home ownership within the reach of 1.3 million more families.”

While welcomed by housing association tenants who have long sought the RTB, the measure is controversial and has generated strong reactions from social landlords. Local authorities are concerned that the measure will be paid for, in part, by the sale of their most valuable (vacant) stock.  Commentators have questioned whether sales of vacant council stock will generate sufficient funding to pay for an extended RTB. Housing associations have questioned the legitimacy of legislating to force the sale of assets owned by charities/not-for-profit companies.

A voluntary Right to Buy

The National Housing Federation (NHF) put an offer to Government in September 2015 in which it proposed the implementation of an extended RTB on a voluntary basis. This offer was described as a compromise with a view to securing the independence of housing associations and the best deal on compensation (for discounts) and flexibilities (the ability to refuse the RTB in relation to certain properties). During his speech to the Conservative Party Conference on 7 October 2015, the then Prime Minister announced that agreement had been reached on the NHF’s offer and that the first housing association tenants would be able to buy their homes in 2016. During the Autumn Statement and Comprehensive Spending Review 2015, the Chancellor announced that the extended RTB would be piloted by five housing associations.  These pilots are now complete and a report on the findings has been published. 

No implementation date for the extended RTB has been announced. Tenants interested in being kept up to date on progress in developing the extended RTB can sign up here (click on the link entitled ‘Housing association tenants’ at the top right-hand of the page and complete a pop-up contact box).

The Autumn Statement 2016 announced that the Government would fund “a large-scale regional pilot of the Right to Buy for housing association tenants.” The Autumn Budget 2017 confirmed that this pilot will take place in the Midlands. It will begin in 2018 and last for one year. 

Guidance for housing associations taking part in the Midlands pilot scheme was published in May 2018. The pilot will be particularly focused on two aspects of the voluntary agreement that the original pilots did not cover, namely:

  • one-for-one replacement; and
  • portable discounts.

A full list of housing associations participating in the Midlands pilot will be published in due course on the NHF/MHCLG website.

The then Housing Minister, Alok Sharma, was questioned about progress in implementing the voluntary RTB when giving evidence to the Communities and Local Government Select Committee on 1 November 2017, he said:

On voluntary Right to Buy and high-value assets, we are still considering the next steps. I completely understand that, particularly for voluntary Right to Buy, from the perspective of those who are looking to buy homes, they want clarity. We recognise we need to provide that clarity soon.

It is unlikely that full-roll out will begin before the completion of the Midlands regional pilot.

The Housing and Planning Act 2016

The Housing and Planning Act 2016 does not contain measures to implement a statutory RTB for housing association tenants.  The Act does, however, contain measures that will require English local authorities to make an annual payment to Government in respect of the expected sales of “higher value” vacant stock over the year. These payments will be used to compensate housing associations for selling housing assets at a discount to tenants.  The then Secretary of State confirmed that no higher value asset payments would be required from local authorities in 2018/19.

Replacing the sold properties

The Government has said that the properties sold under the voluntary scheme will be replaced on a one-for-one basis; however, this has raised questions around how replacement will be financed, the timing of replacement (there will always be a time-lag), and where the replacements will be built. In London, in certain circumstances, there will be a requirement to secure the development of two affordable homes for each dwelling sold.

Comparisons have been drawn with the existing commitment to replace properties sold since the discount levels were increased in 2012.  RTB sales increased from 2,638 in 2011/12 to 13,416 in 2016/17, while the total number of dwellings started on site or acquired by local authorities, the Greater London Authority (GLA), and the Homes and Communities Agency (HCA) since 2012/13 up to the end of 2016/17 was 12,930. The Right to Buy one-for-one additions policy allows for replacement of the homes sold within three years of the date of sale.

Since 2012, properties built to replace those sold under the reinvigorated RTB have been let at affordable rent levels of up to 80% of market rents (i.e. they are not like-for-like) and there is no requirement for the replacement properties to be built in the same area or to be the same size or type.

The previous Housing Minister, Gavin Barwell, acknowledged issues with the replacement policy when giving evidence to the Communities and Local Government Select Committee on 27 February 2017. Commenting on the rate of replacement, he said: “ At the moment, we are delivering on that but the projection suggests that, in the future at some point, we will not be.  Therefore we need to look at what we can do to make sure that we get those replacement homes.” The most recent statistics on RTB sales (March 2018) show that starts and acquisitions fell short of the three-year replacement target at the end of December 2017. Dominic Raab, the Housing Minister, said that consultation would take place which would consider giving councils more flexibility over the use of RTB capital receipts.

Communities and Local Government Select Committee inquiry

The extension of the RTB to housing association tenants was the subject of an inquiry by the Communities and Local Government Select Committee over 2015-16. The Committee’s report expressed support for the Government’s aspiration to extend home ownership and increase housing supply, but concluded that there are “unresolved issues” and said that the Committee “remain concerned that the Government’s policies could have a detrimental effect on the provision of accessible and affordable housing across all tenures.”

The Public Accounts Committee (April 2016) also criticised the lack of information on “the potential impacts of the legislation required to implement this policy.”

 

 

 

 

 

 

   

 

 

Commons Briefing papers CBP-7224

Authors: Wendy Wilson; Cassie Barton; Richard Cracknell; Alex Bate

Topics: Housing, Owner occupation, Social rented housing

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