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Councils 'doubtful' over Shapps' Right to Buy claims

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Councils 'doubtful' over Shapps' Right to Buy claims


Published by 24publishing for in Housing and also in Central Government, Communities, Local Government

Councils 'doubtful' over Shapps' Right to Buy claims Councils 'doubtful' over Shapps' Right to Buy claims

From 2 April local authority tenants in England could qualify for a maximum discount of up to £75,000 to buy their council home - dramatically increasing the current caps which currently stand at £16,000 - £38,000 depending on location.

Despite the huge increases in discounts - more than quadrupling the current discount cap in London - the Government wants councils to use the receipts to replace every home sold.

Here, Matthew Warburton, policy spokesperson for the Association of Retained Council Housing (ARCH) argues that the plan will not deliver the one-for-one pledge.

“A revitalised Right-to-Buy will unleash a new generation of home ownership and ensure every sold home is replaced.”  So said Housing Minister Grant Shapps in opening the Right to Buy (RTB) consultation last December. 

"But it looks doubtful whether the final RTB scheme announced earlier this month will deliver either part of his claim.  Massively increasing the maximum discount to £75,000 will enable tenants to buy homes more cheaply, but also cut the receipts available to fund replacements.

"From the start, the small print of government statements has revealed that any commitment to replace applies only to sales additional to those which might have been expected under the current Right-to-Buy rules.  The self-financing settlement  includes an assumption about how many sales each council can expect and the total receipt they will yield.  Of this, the Treasury takes 75% and the rest is counted towards the council’s ability to fund capital spending. Only receipts above and beyond this amount will be used to replace sold homes.  With bigger discounts, and thus smaller receipts, councils will have to sell more homes to achieve the assumed receipt.

"The government hopes that raising the maximum discount to £75,000 will deliver a big increase in sales; but this may be too optimistic.  RTB sales in many areas are currently well below expected numbers. This year, Birmingham, England’s largest social landlord,  for example, will sell only around 150 homes out of an expected 200.  And with 3 out of 4 tenants receiving housing benefit, raising the RTB discount may not have that much impact.

"Receipts available to build new homes are unlikely to yield one-for-one replacement in most areas. Councils have been invited to put forward replacement schemes that fund no more than 30% of costs from receipts.  But with houses selling with discounts of up to 60% (70% for flats) receipts after debt has been repaid will often – possibly always - be well below 30% of the cost of building a new home. ARCH member councils will respond to the government’s call for replacement schemes, but the new homes these will provide will only slow the loss of council homes, not reverse it."

ARCH currently represents over 60 councils that own and manage housing. The organisation has announced it will be providing a stronger and more effective support to councils in the new self-financing environment. Its new partnership with the Chartered Institute of Housing and HouseMark will provide a much-improved website and, for the first time, dedicated policy support. 


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