Maggie Rafalowicz, Director at Campbell Tickell, discusses key areas to consider for the Right to Buy consultation, closing 9 October 2018.
Supporting home ownership has been a political priority for successive governments. Since 1980, approximately 2 million social homes have been sold off under the Right to Buy (RTB). Â Yet RTB has led to a major increase in numbers of homeowners (and increasingly private landlords) at the same time as being a substantial contributor to homelessness and use of expensive temporary accommodation. Funding for new affordable homes and replacement Right to Buy units has never replenished the pot of much-needed social rented housing. When the Coalition Government revitalised RTB in 2012 with the promise that stock sold would be replaced, nobody who worked in housing believed that promise could be kept.
So, if the target can’t be met, why not change the target and the tenure? Alongside the Social Housing Green Paper, the Government is consulting on the use of receipts from Right to Buy sales. There are nine areas that the Government is seeking views on – the last one being changing the target, so it measures the net increase of all social and affordable housing, not just those replacing RTB homes. It may be a more honest target, but it won’t make up for the shortfall of lost stock. Another suggestion that the government is consulting on is whether replacements could come in the form of shared ownership. In some locations, this may make schemes more viable, but as above it will not provide the much needed social rent stock.
Other key areas are the following:
Increasing the timeframe within which LAs need to spend RTB receipts from three to five years. This will only apply to receipts that a local authority currently holds. Clearly it takes time for a council to identify deliverable development opportunities and build up the capacity to develop themselves. The three year rule would be retained for future receipts to encourage development not to slow down, however.
Increasing the amount that can be spent on replacement homes. Currently RTB receipts can only fund 30% of a replacement home. Government is seeking views on whether to raise the cap to 50% of the build cost (not the total cost) for social rent. But build cost is just one factor and LAs will still press to be able to retain 100% of the receipts.
The Government is questioning whether RTB receipts should continue to be used to acquire existing properties, as this does not increase the overall supply of homes. In some places, it may indeed be cheaper to buy properties, but in locations like London it would be cheaper to build a new property. However, this does not consider the cost of land, which is the greatest factor affecting house prices in expensive areas, so it would only work on free or heavily discounted public land.
Changing the way the cost of local authority owned land is treated is one of the more interesting suggestions. Currently a ring fence separates a council’s Housing Revenue Account (HRA) from General Fund (GF) assets. When a LA builds affordable homes on GF land, the HRA is meant to compensate the GF. Government is considering relaxing the restriction and allowing land to be gifted at nil cost. We need to see the detail before judging this proposal, but it might free up opportunities. Local Authorities should assess the best use of all their assets, whether vacant land, with or without derelict buildings, and regardless of whether they are attributed to the Housing Revenue Account of the General Fund. We have been advising local authorities who are considering setting up housing
The consultation closes on 9 October 2018.
To discuss the issues raised in this article, contact: maggie.rafalowicz@campbelltickell.com
