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

Published Thursday, October 25, 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 in the Midlands was launched on 16 August 2018. The Government has said that the impact of the pilot scheme will be assessed before decisions are made on the next steps. 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. The Department for Communities has consulted on the future of its House Sales Schemes which are Northern Ireland’s equivalent to the RTB - consultation closed on 24 September 2018.

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 were concerned that the measure would be paid for, in part, by the sale of their most valuable (vacant) stock.  Commentators questioned whether sales of vacant council stock would 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. The pilots completed their work and a report on findings was published in 2017.

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 would take place in the Midlands. The pilot was launched on 16 August 2018 – those interested had to register online before midnight on 16 September 2018: Register for the Midlands Voluntary Right to Buy Pilot. Applicants who were successful in the ballot must apply direct to their landlord to continue with the process. Landlords are carrying out additional eligibility checks.

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

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

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.

The Government has said that they will assess the impact of the pilot before deciding on the next steps for this policy.

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 would have required 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 were to be used to compensate housing associations for selling housing assets at a discount to tenants.  

The Green Paper, A new deal for social housing (August 2018), announced that the Government would not “bring the Higher Value Assets provisions of the Housing and Planning Act 2016 into effect”. 

This leaves unanswered the question of how tenants' discounts under the VRTB will be funded.

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 on 1 April 2012. RTB sales have increased from 2,638 in 2011/12 to over 11,000 per year since 2013/14; there were 11,833 sales in 2017/18. The total number of dwellings started on site or acquired by local authorities, the Greater London Authority (GLA), and the Homes and Communities Agency (now Homes England) between 2012/13 and the first quarter of 2018/19 was 18,958. The Right to Buy one-for-one additions policy allows for replacement of the homes sold within three years of the date of sale. The replacement properties are 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 former 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 Government’s March 2018 statistical release noted for the first time that housing starts were “falling short” of the commitment to replace additional RTB sales within three years. The September 2018 statistical release confirmed that starts and acquisitions are falling short of the three-year replacement target. Dominic Raab, then Housing Minister, said that consultation would take place which would consider giving councils more flexibility over the use of RTB capital receipts. August 2018 saw the launch of a consultation exercise on Use of receipts from Right to Buy sales – submissions were accepted up to 9 October 2018 and responses are now being analysed.

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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