Government urged to reform Right to Buy

Housing associations have told the government that a radical reform in social housing policy is needed to protect the UK social housing sector.

Related topics:  Property
Warren Lewis
30th October 2014
Property
NHF chief executive David Orr, has written a letter to Housing minister Brandon Lewis co-signed by 20 housing associations.

Within the letter the National Housing Federation urges the Government to reform Right to Buy to ensure that every home sold is replaced on a like-for-like basis.

Under current rules, some council and housing association residents can buy their homes with a 70 per cent discount of up to £77,000 (£102,700 in London). While the National Housing Federation supports the principle of home ownership which underlies Right to Buy, these huge discounts mean housing associations are simply not receiving enough money from the sale of Right to Buy properties to build new homes to replace them. It is even more difficult for housing associations to replace homes sold as the money from the sale is shared with the local authority as well as the Treasury.

In some instances the amount received by the housing association following the sale of a home under Right to Buy is less than £30,000. With the average cost of building a new home exceeding £140,000, the National Housing Federation is concerned that homes sold will not be replaced, leaving a lasting legacy on the availability of affordable homes in the future.

Following the reinvigoration of the scheme in 2012, which led to larger discounts, sales have shot up. Some 5,944 local authority homes were sold in the first year, and since then only 3,634 replacement homes are complete or underway. The National Housing Federation believes the Deregulation Bill proposal, debated this week in the House of Lords, to reduce the eligibility period of residents from five years to three will increase demand further and make the situation even worse.

Right to Buy was set up to enable council tenants to buy their own homes but some tenants whose properties were transferred from the council to a housing association are also eligible.

David Orr said: “We support Right to Buy for helping people into home ownership but that should not be at the expense of the 1.7 million people currently waiting for desperately needed social housing across England.

Selling off homes at a price that leaves very little to replace them does not make sense. Unless we can replace every sold home with a new affordable home, there will be drastic consequences for future generations.

We want to see this policy reformed in order to safeguard social housing and help end the housing crisis within a generation.”

Phoenix Community Housing was set up in December 2007 to receive the transfer of 5,500 social rented homes from Lewisham Council in south London. The transfer was approved by the Government at a time when the maximum discount under the Right to Buy was £16,000.

Under the terms of their stock transfer from Lewisham Council, Phoenix only retains a small proportion of the proceeds from each Right to Buy sale. Recently one of their homes valued at £205,000 was sold through Right to Buy for £105,000, but Phoenix only received £27,332.

Jim Ripley, chief executive of Phoenix Community Housing, said: “We are keen to develop more of the affordable homes London desperately needs, but the current level of discount available through Right to Buy is seriously reducing our capacity to do this.

The money we receive from a Right to Buy sale will barely cover the net rental income we have lost on the property. It certainly doesn’t provide us with any money to build a new affordable home to replace the one sold.”
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