Housing associations could see Right-to-Buy funds
Published by 24publishing for 24dash.com in Housing and also in Communities, Local Government
Housing associations could see Right-to-Buy funds
Housing minister Grant Shapps has said funds generated from a revitalised Right to Buy (RTB) scheme could be re-channelled to housing associations via the Homes and Communities Agency (HCA).
The Government wants to re-introduce attractive discounts 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.
However, unlike 30 years ago, it wants to replace each one sold with one built. It estimates that the policy could see 100,000 homes built, with two million families thought to still qualify for the scheme. The Government thinks 40% of those families would and could purchase their home at a discount.
On the question of replacing the sold homes – which will be let at near-market rents – Mr Shapps said this month: “…it seems to me there are different options. You could do it locally or you could re-channel it through the Homes and Communities Agency through housing associations. We need to make sure the homes are built where they are required. There's no hidden agenda to this."
The details are expected to be announced in November's Housing Strategy.
The Association of Retained Council Housing (ARCH) says the RTB plans, announced six months before stock retainers go self-financing - paying off housing debt in exchange for keeping rent receipts – have thrown their business plans up in the air.
ARCH treasurer Paul Price said that although councils are “adept” at working in partnership with housing associations and the HCA to maximise return on investment, what Mr Shapps is “failing” to acknowledge is that neither of these routes will be practicable given its stance on pooling of receipts from Right to Buy.
It was announced in the Spending Review (SR) last year that councils will still have to submit 75% of their Right to Buy sales to the Treasury until 2015. The SR document, published in November 2010, revealed the Treasury is set to claw-back £40m from this for 2010/11.
Mr Price, who is also head of housing services at Tendring Council in Essex, said: “If the average cost of a new property is around £100k after discounts, for example, having to hand £75k of its sale value over to national coffers renders it financially unsustainable to build, particularly as land may need to be acquired.”
He said the Government had to allow 100% of RTB receipts to be retained by councils to allow self financing and for any chance of supplying new homes.
Patrick McCarthy, deputy chief executive of Wirral Partnership Homes – which sold 14 homes last year through Right to Buy, said - said: “If you went back 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 [through the HCA] it will still not go as far as it used to because of those reduced grant rates."
Right to Buy – can the numbers stack up?
Steve Douglas, partner, Altair
"This latest initiative to increase supply has left many scratching their heads.
"The introduction of Right to Buy in the early 1980s brought with it a home owning revolution. With heavy discounts, heavy marketing and disinvestment in council-owned stock, it became the holy grail for many council tenants. But whilst it meant a stake in a property and the benefits of rises in property values benefitted the household, it also meant that repairs and maintenance bills were transferred to the individual. It also pushed the boundaries of affordability with many mortgaging themselves to the hilt to get on the property ladder. However, the objective was clear - to turn this country into a property owning democracy. There is a debate to be had about whether this has been achieved and at what cost but no one can disagree the intention and objectives were clear.
"The current attempt to put new life into Right to Buy is, however, not driven by the desire to get the remaining council tenants on the remaining estates or in the properties that missed out first time, to buy a stake. It is driven by a desire to generate funds to recycle into new supply. And this is where it gets confusing. For local authorities, who were building their business plans around HRA reform and the increased freedoms on the use of receipts, they must now factor in a different set of assumptions. Will they keep the receipts from Right to Buy sales? Will they be ringfenced to new supply within the local authority area? Will they go into the coffers of the Homes and Communities Agency to be invested according to a government-determined strategy or into Treasury coffers to support growth initiatives more widely.
"There is talk of ‘buy one get one as a replacement’, but will the numbers stack up where land values have increased significantly, since the first homes were built.
"As always the devil is in the detail. We look on with interest."