'Replacing homes under the right to buy isn't working, it's time to think again.'
As housing minister Gavin Barwell says right to buy is only justifiable if replacements are built, policy officer David Pipe says it's time for the government to seriously rethink the policy.
It's time for the government to rethink right to buy.
The latest statistics show that since 2012, when discounts were significantly increased, a total of 48,000 council and housing association homes have been sold under the right to buy. Against this, work has begun on just 9,500 replacements.
However despite clear evidence of an ongoing net loss of social housing, government ministers have remained adamant that their high profile promise to replace additional homes sold under the reinvigorated scheme is on track - or at least they had done, until very recently.
This week when giving evidence to the Public Accounts Committee (a cross-party group of MPs who scrutinise the government’s use of public money) the housing minister, Gavin Barwell, suggested that he wanted to look again at the use of right to buy receipts. And it was at least the second time in as many weeks that he has raised the issue, having also discussed it in Birmingham at one of his housing white paper events which we jointly hosted.
In Birmingham Barwell described himself as a supporter of the right to buy, but said that he accepted that it could only be justified as a policy if homes are replaced.
Current policy is that this should happen within three years of the sale. While this deadline has not yet elapsed for most of the homes sold since 2012, the minister is absolutely right to acknowledge that under current arrangements most will never be replaced.
Back in 2015 we published research on the prospects for one-for-one replacement with the Local Government Association and National Federation of ALMOs. The headline finding from that work was that three quarters of councils expected to be able to replace no more than half of the homes they had sold, while one in 10 said that they would not replace any homes at all.
That the minister now recognises that there is a problem and is willing to listen to solutions is therefore really welcome, but what does he actually need to do if we are to make one-for-one replacement really work in practice?
Our research showed that the barriers which prevent councils from replacing more of the homes that they sell are not universal, they vary considerably depending on local circumstances. For some the sums simply don’t stack up. A combination of large discounts, (relatively) low house prices and significant proportions of the receipts being lost to the Treasury and to HRA debt repayments can leave very little, or in some cases nothing at all, to reinvest.
For example, one council told us that in 2013/14 they sold 48 homes under the reinvigorated right to buy (20 more than they expected to sell under the old scheme, with significantly lower discounts). On average these homes were sold for just £40,000, and of this the council retained an average of just £9,000 to reinvest in a replacement. This is clearly insufficient.
However this is not the case in every area. Many councils operating in higher value areas are actually retaining substantial amounts of money to reinvest, even once the large discounts and other deductions are taken into account. They are instead constrained by a set of scheme rules which can make it very difficult for them to make the most of that money. For example, receipts cannot be used to fund more than 30 per cent of the cost of replacement homes and they cannot be used in conjunction with government grants.
One London borough told us that they sold more than 120 properties in 2013/14 (a huge increase on the 11 they had expected to sell, had the discounts not been increased). The combined value of those sales exceeded £12 million and even after deductions the council still retained more than £7 million, a substantial sum, to reinvest. However the 30 per cent rule means that in order to fully utilise this money they would need to lever in almost a further £18m of investment from other sources. Where councils have no means of doing this, the money simply remains unspent.
If the government is now serious about enabling councils to replace more of the homes they are selling, they could start by making a few simple changes.
Firstly they could let councils keep 100 per cent of the money raised from sales. This would mean the Treasury giving up their share but it would make an enormous difference to the prospects for one-for-one replacement, particularly in lower value areas.
Secondly they could give councils much more freedom to use this money as they see fit, by removing unnecessary restrictions on how it is spent.
And finally in some of the lowest value parts of the country it might be worth reviewing the level of discounts that are on offer. In particularly affordable areas these are currently more generous than would be necessary to make the scheme attractive, while very low sales prices inevitably leave little to reinvest.
David Pipe is a policy and practice officer at the Chartered Institute of Housing.