Right to Buy cash pledge 'doesn't stack up', says housing chief

Published by Ross Macmillan for 24dash.com in Housing

A housing association in the North West says using cash to build homes with proceeds from the Right to Buy (RTB) scheme "doesn't add up".

The Government wants to re-introduce attractive incentives for tenants to buy their council homes which could see discounts of up to 50% being offered - in line with how the original offer worked under Margaret Thatcher.

The Government wants to use the cash generated to build homes for affordable rent - which will see properties let at near-market rents. It estimates that the plan could deliver 100,000 homes.

However, the plan has been attacked by critics who fear it will simply shrink the pool of traditional social homes, replacing them with more expensive to rent properties.

While Right to Buy never ceased to operate, the Labour Government effectively put a stop on the huge swathes of council homes being bought up by decreasing the discount.

The maximum discount - based on how long you've been a tenant - now stands at between £16,000 and £38,000 depending on where you live in the country.

Wirral Partnership Homes (WPH), which was formed following a stock transfer from Wirral Borough Council seven years ago, manages around 13,000 homes. 

Deputy chief executive of WPH Patrick McCarthy said the association sold 14 homes via RTB last year, exercised by tenants who had their 'Right to Buy' preserved following the stock transfer.

He said it generated £500,000 as a net receipt.

"It costs us around £100,000 to build a normal sized semi-detached house, so basically we've got rid of 14 homes and we'd be able to put back five. So we're already on a ratio of one replacement for every three (1:3) we get rid of.

"If the discount is higher, the net receipt will be lower so 1:3 becomes 1:4 or 1:5 even. I don't see how this stacks up."

In a radio debate this week, Mr Shapps said one option would be to pool the receipts into a fund given to the Homes and Communities Agency and channelled to housing associations to top up the Affordable Rent programme.

McCarthy, however, is sceptical.

He said: "I can see that point of view. If you went back to just a few years then the rates of grant for new build housing was 50% or more of the build cost. Now it's down to around 20%. Even if there is more available it will still not go as far as it used to because of those reduced grant rates."

McCarthy estimates that around 7,000 of WPH tenants have the 'Preserved Right to Buy' - i.e. those that had the right continued following the stock transfer, but adds that out of the 14 who exercised their Right to Buy last year, all had waited for the maximum discount.

He says in the 1980s/90s, out of the family, it was often the tenants' working children that put up the finance for the parents to buy their homes under RTB - as it provided a nest egg for the future.

However, times are different, explains McCarthy. He said: "Because people are worried about the economy and having to meet their own housing costs, they will find it hard to get the extra money to buy mum and dad's council/housing association house.

"The boom days of the 1980s/90s aren't there at the moment because people haven't got the spare resources to, perhaps, take out what would be a second mortgage - even with a hefty discount. That's a significant change from where we were 20 years ago."

He said he is concerned about the shrinkage of traditional social-rented homes.

He said: "We have just under 13,000 homes. Theoretically, we could have every tenant leave tomorrow and fill every one of those homes because the waiting list is greater than the total number of homes we have.

"That shows the size of the demand for it. If people are buying their properties and taking them out of the social rented sector it will not reduce the numbers on the waiting list."