CIH response to the consultation on Reforming the Right to Buy

Q1: How long do you think someone should be required to be a secure tenant before qualifying for the RTB?

10 years. There is a general consensus that a longer qualification period is needed, and 10 years is a reasonable requirement.

Q2: Should someone be prevented from exercising the RTB if they have already benefitted from the RTB or if they own another property?

Yes. RTB should be a form of one-off assistance towards homeownership, and this restriction would reflect that. There is some scope for reviewing exceptional circumstances for this restriction, such as in the case of marital breakdown or domestic abuse.

Q3: Do you have any other views on criteria to determine eligibility for the RTB?

Yes. If rules can be drafted satisfactorily, it would be advantageous to ensure tenant affordability when exercising RTB, such as through a clear rent account for an extended period of time. It may also be desirable for eligibility to include no legal action being taken against the tenant in the past five years.

Q4: What level should the percentage discount for an eligible tenant start at and what level should the maximum percentage discount be?

We agree with the lowest percentages suggested in the consultation paper, i.e. starting at zero per cent with a maximum of five per cent.

Q5: Do you agree that the same rules governing percentage discounts should apply to flats and houses, and that the discount should increase by one per cent for every extra year that an individual has been a public sector tenant, up to the maximum?

Yes. There is also a case for removing flats from eligibility for RTB. Sales of flats have resulted in enormous problems for both buyers and councils in terms of building safety and decarbonisation works, with very high service charges that buyers did not anticipate. Given the priority that is rightly being given to investment in tackling these issues, such problems and costs for leaseholders will only worsen if they continue to be eligible for RTB.

Q6: Do you agree that cash caps should be retained alongside discounts capped at a percentage of the market value of the home?

Yes. However, an alternative suggestion has been made, which has some merits. This would fix maximum discounts according to the length of time the property has been in public ownership, which would be a different way of protecting newer properties.

At present, new investment has the same discounts as a property that is 100 years old. This means that the risk to that investment is real and significant – after a few years the tenant can buy at a discount that is more than their rent paid and more than they need to be encouraged to buy. This double subsidy to the buyer (even more so if the rent was paid through housing benefit) is on top of the already subsidised rent that is much lower than the private sector.

The proposal is therefore to add a further cap on discounts of one per cent per full year that the property has been in the ownership of the council. This means that a new property that is say 10 years old cannot be sold at a discount of any more than 10 per cent. This rule could be added to the current rules and would not alter much in terms of the rights of tenants but would restrict the investment risk for councils by a significant degree, as well as limiting the impact of RTB on new build properties, in line with the government’s aim of increasing the supply of social housing.

Q7: Do you agree that the current exemptions to the RTB scheme should be retained? If yes, please outline any changes that should be made to the exemptions.

Yes. However, there are several areas where these exemptions should be extended:

• The current definition of property for occupation by older people excludes homes where there is no warden; this should be adjusted, as many specialist retirement/ sheltered schemes no longer have a warden on site but are still exclusively for older people, with on-call facilities and communal areas to encourage community and activities etc, all of which are beneficial for older people.
• In rural areas, an exemption from the RTB in parishes of 3,000 or lower population would align with the rural exemptions from the right to acquire and leasehold enfranchisement of shared ownership housing.
• The designated rural areas that provide safeguards when existing homes sold under the RTB come up for re-sale should be extended to all parishes of 3,000 population or lower and all parishes in National Parks and AONBs. Currently under Section 157, this only covers about 30 per cent of parishes.
• Given the general shortage of large properties, homes with four or more bedrooms should be exempt from RTB. There may also be scope to review other types of properties in short supply, such as specifically designed wheelchair accessible bungalows.

Q8: Should newly built social housing be exempt from the RTB? If yes, please explain why the existing cost-floor provisions are insufficient.

Yes. Given the urgent need for new social housing, it seems logical to exempt new homes and make this clear to tenants at the outset. Investment in new homes for social rent is expensive for both social landlords and for government, and the clear intention of the new government’s policy is to expand the supply of social rented homes (within the overall target of supplying 1.5 million homes in the next five years). Allowing newly built homes to be sold would mean that supply grows more slowly, running counter to government aims.

Q9: If yes, how long after construction should newly built social housing be exempt from the RTB?

Permanently. Please see our response to question eight.

Q10: How can council investment in retrofitting or improving homes to a high standard be protected under the RTB scheme?

The protections proposed elsewhere in the consultation, combined with the reduced discount levels that have already been legislated for, are likely to be sufficient to remove the disincentive for landlords to invest in retrofitting or improving existing stock.

Clearly, it is vital that retrofit and related home improvement work is carried out to as close to 100 per cent of a landlord’s stock that requires it. On balance, the challenges of specifically protecting investment of this kind probably outweigh the advantages, especially given the other proposals in the consultation and reduced discount levels. For example, if tenants were aware that accepting retrofit work would automatically restrict their ability to buy their home, it is possible that a proportion would refuse the work. We are aware that resident refusal of retrofit work is already a challenge for some housing providers, and this could exacerbate this challenge. On balance, our view is that it is probably better to leave this investment without specific protection.

There should also be flexibility for councils to exempt adapted, accessible properties where there is a high degree of adaptations. Councils should have the flexibility to enable a transfer of discounts to a different property where appropriate.

Q11: If answering on behalf of a council, would exemptions to market rent homes have a significant impact in allowing more cross-subsidy for the building of affordable housing?

Market rent homes should be excluded from RTB, on the basis that they are aimed at households on higher incomes who should be able to buy in due course on the open market.

Q12: Should the time period in which the council has the right to ask on the sale of the property for repayment of all or part of the discount received be increased from five years to 10 years?

Yes.

Q13: Do you have any other views on restrictions that might apply to a property following its sale under the RTB?

CIH believes there is a case for covenants that limit the use of the property to homeownership, since that is the purpose of RTB. It could be framed to require any purchaser to occupy the property as his or her main residence. CIH believes that the fact that around half of properties sold are now in the private rented sector must be addressed, since these properties are now let at market rents, are often problematic in management terms for local authorities, and are expensive to reacquire.

Q14: Should there be a target for all council homes sold under the RTB to be replaced, as far as possible, with a home of the same size, tenure and/or location as the home sold?

No. It is important that councils have flexibility in the use of receipts and are able to reconfigure their stock to meet changing needs. The need to increase the supply of homes is clearly outlined in other policies, such as the new local housing targets in the National Planning Policy Framework.

Q15: If answering on behalf of a council, do you have any evidence to demonstrate the impact of increased flexibilities around spending of RTB receipts in accelerating and boosting replacement homes?

Responses received from CIH members in local authorities strongly support such flexibility and suggest that it would be an incentive to councils to build replacement homes.

Q16: Do you have any evidence to demonstrate that combining receipts with grant would accelerate and boost delivery of affordable housing and how the risk of double subsidy would be mitigated?  

CIH strongly supports the principle that councils should have flexibility to reuse receipts in the manner which best addresses housing needs in their area. This should include combining receipts with grant. This is not “double subsidy”, because the receipt is a local resource, just as debt is, so it is not correct to call it a “subsidy”. As noted above, insofar as there was any remaining Treasury subsidy in a council house, that disappeared as local authority HRAs took on the additional debt in 2012 to “buy themselves out” of Treasury control of their finances.

Q17: How long should councils have to spend their one-for-one receipts?

We believe it is inappropriate to place time limits on the use of receipts. They are (and should always have been) a local resource, available to the local authority to use for replacement social/affordable housing. It is wrong to have rules in which councils must return their receipts, they should no longer be regarded as a remnant of the original central government investments via grant/debt.

The only exception is the limited number of RTB sales involving properties built with social housing grant, where the rules relating to the Recycled Capital Grant Fund will presumably continue to apply.

Q18: Should unspent replacement receipts be returned to the relevant Mayoral Combined Authority as happens currently with London Boroughs and the GLA?

No. Please see our response to question 17.

Q19: Should the local authority share and buy-back allowance be incorporated within replacement receipts?

Yes.

Q20: Do you agree that the total attributable debt should be calculated by multiplying the average attributable debt of each authority’s housing stock?

Yes.

Q21: Should the requirement to return 75 per cent of mortgage repayments that relate to pre-2012 sales be ended?

Yes.

Q22: Should the secretary of state be provided with a power to set the rules governing the use of RTB receipts by general determination?

Yes.

Q23: Should Arm’s Length Management Organisations (ALMOs) be permitted to use RTB receipts to deliver new affordable housing?

Yes. The current restriction preventing council-owned companies, including ALMOs, from using receipts to provide new housing has no defensible rationale, and is preventing organisations well-placed to make a significant contribution to building the new social homes we need from playing their full part.

Q24: Do you have any other views on the rules governing RTB receipts that have not been covered by the questions above?

CIH’s overarching position is that receipts should be seen in future as a local resource available to local authorities to reuse to provide social/affordable housing of a type and over a timescale as they see fit.

Q25: Are any additional measures needed to ensure that high performing Green Belt land is not degraded to meet grey belt criteria? 

No.

Visit the government's website for more information on the consultation.

For more information on our response please contact John Perry, policy adviser, john.perry@cih.org or Megan Hinch, senior policy officer, megan.hinch@cih.org.