Right To Buy Social Housing: When Is "Right" Right?
Published Thursday, January 12, 2012 - 02:14
Home Group was the first organisation to highlight that the coalition's Housing Strategy was missing a trick - the right to buy for social tenants. Mark Henderson makes the case.
TAKE a stroll down George Street in Whitehaven, Cumbria, speak to the residents living there and then consider the question of ‘when is right right?’.
Home Group has tenants living in 95 properties – flats and terraced homes - on a street that is under a quarter of a mile long.
Of the 95, 21 homes are owned by the residents living there – people who exercised their right to buy under current legislation as their properties were once part of Copeland Borough Council.
Those renting a further 49 of the properties have a preserved right to become homeowners, should they so wish. But, the remaining 25 do not.
Few would argue against the fact that there is an inequitable situation, not just on George Street but in streets, roads, crescents and drives across England and Wales where there is one rule for council tenants and another for housing association customers.
When the Government published its Housing Strategy last November, a great deal was made of plans to extend right to buy opportunities for council tenants.
Home Group was the first organisation to highlight that the Strategy was missing a trick. Subsequently, the IPPR think tank has also come to the conclusion that changes should be made to increase the opportunities for housing association tenants to buy their own properties.
Home Group has calculated that more than 200,000 housing association properties could be sold if changes came into force which would inject £68bn into the UK economy. As contributions go, this is something of which our sector could be rightly proud.
However, creating opportunities for more housing association tenants to buy their own homes is not without issue.
While, ethically speaking, it is right that our tenants should be afforded the same opportunity as their near neighbours in council-owned properties, there is a very practical issue regarding how we maintain and hopefully grow stock levels.
The UK is gripped by a chronic housing crisis and we cannot afford for the volume of properties to drop. Giving more housing association tenants the chance to buy their home must come with the caveat that another property of similar size be built in the same area. At its ultimate conclusion, such a move would achieve the equivalent of doubling the amount of affordable housing because each sale removes a tenant from the rental roster while at the same time building a new property to ease demand.
The Government’s plans to increase right to buy for council tenants has received a hail of criticism over how ‘one for one’ stock replacement can be delivered with a £50,000 cap on sales. We have run our own modelling on this basis and consider it a tough ask.
Home Group is advancing a different approach to this conundrum that works for all sides.
Over the last six decades, consecutive UK governments have invested some £40bn in developing social housing. A share of this figure sits on the balance sheet of every housing association as a legacy debt, with no provision of repayment to the Treasury.
Home Group proposes that this historic grant be used as a deposit for tenants to raise mortgage finance to buy their own home. This would give the means to make the purchase and the resulting sales receipt would be used by the housing association to build a replacement property.
This innovative model of affordable home delivery would help move the sector away from a reliance on Government grant, increase the borrowing power of registered providers alongside helping tenants into home ownership and delivering new affordable homes.
There are concerns about the implications of reducing the historic grant without returning funds directly to the Government but as the legacy debt does not sit on either the Communities and Local Government or HM Treasury books as an asset this could be used without it affecting government balance sheets. In short there is no adverse impact on the public finances to formally writing the grant off.
There are other hurdles beyond the question of how to help tenants to buy their own homes.
One example is the issue that all grant is paid at varying rates so the legacy debt that sits within each property will differ. To avoid a public perception of unfairness, the Government would need to find an equitable and financially sound way of setting either an average grant level based on type of property or setting support as a percentage of the home’s value.
In addition, as the UK’s largest rural social housing provider we recognise that replacing one for one would be harder due to the availability of land in rural areas but again this should not be insurmountable when working with local community land trusts and the surrounding communities.
Ultimately, we are all facing incredibly difficult times and the sector is coming under increasing strain as it works to deliver more for less and with greater pressures than ever before to match supply to demand.
We need to find solutions to these problems and we have to rigorously explore new opportunities to deliver these solutions. Extending the home-buying option to the 25 homes on George Street in Whitehaven, and to the estimated 1 million other tenants who currently don’t enjoy the same opportunities as their near neighbours has to be considered seriously as a way to benefit the individual, boost supply in the sector and inject momentum into the UK economy. This is undoubtedly the right thing to do.
