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10.02.16

Right to Buy extension ‘lacks robust funding and long-term planning’

The robustness of the funding model for the government’s Right to Buy (RTB) scheme for housing associations is “extremely questionable”, as are its plans for the future provision and sustainability of the scheme, MPs have said.

As well as a lack of detail on how the government will meet its ambitious target of a one-for-one replacement in the extended RTB, its decision to cut social rents by 1% will significantly reduce housing associations’ income, the Communities and Local Government Committee argued in a new report today.

But a DCLG spokesman claimed “there are billions of pounds locked up” in council housing assets, adding: “It is only right that when they become vacant they are sold, enabling the receipts to be reinvested in building new homes and supporting home ownership through RTB.

“Our voluntary agreement with the National Housing Federation will ensure that more than 1.3m housing association tenants will have the opportunity to do so, while for every home sold there will be at least one additional property built.”

Importantly, the committee also demanded that the extended scheme should be funded centrally, rather than through the local levy of selling high value council homes. The shadow housing minister, John Healey MP, agreed with the proposal, claiming that government policies should not be a “cash-grab from councils” forced to sell off their housing stock to pay for RTB discounts.

LGA’s housing spokesman, Cllr Peter Box, agreed that extending the scheme “should absolutely not be funded by forcing councils to sell off their homes”.

“As a minimum, we forecast councils would be forced to sell 22,000 ‘high value' homes in order to fund plans to extend the RTB scheme. This number could be much higher depending on how government chooses to define ‘high value'. Councils should always be free to manage their assets to meet the needs of local communities and must retain 100% of all receipts,” he said.

Labour’s Clive Betts MP, chair of the committee, added: “The fundamental success of this policy will depends not just on whether more tenants come to own their home but on whether more homes are built. As a committee, we are concerned that there are a number of unresolved issues with the government’s policy which could have a detrimental effect on the provision of accessible and affordable housing, particularly affordable rented property.

“The governments needs to set out in more detail on how it will meet its target of at least one-for-one replacement of the sold homes, particularly given issues such as  the availability of land, the capacity of the building industry and the uncertainty of income from council home sales.”

In terms of the four-year social rent cut, which will apply to all but specialist housing from April, the committee said this threatens to damage the ability of housing associations to build new homes.

It could also negatively impact the pastoral services tenants currently have access to, such as helping people get back into work.

And regardless of the 1% cut, a large number of homes sold through statutory RTB for council tenants have rapidly become private sector rentals – and, with that, move expensive and possibly lower quality.

Calling this shift a “significant concern”, the group recommended that the DCLG explore and implement measures that keep homes sold through the RTB scheme from ending up in the private rented sector.

“New housing measures, such as the loss of £2.2bn from council housing budgets by 2020 as a result of social housing rent cuts, risk making building any replacements all but impossible,” Box continued.

“This loss of social rented housing risks pushing more families into the private rented sector, driving up housing benefit spending and rents and making it more difficult for families to save the deposit needed for their first house.”

Fundamental recommendations

Before this year’s Autumn Statement, the government should provide some certainty over post-2020 rent levels to help long-term business planning and investor confidence, the committee said.

Beyond this Parliament, housing associations should also be given the freedom to set their own rents as part of the government’s move to deregulate them.

The group even touched on the subject of starter homes, which it argued should not built at the expense of other forms of tenure if there is a local need for affordable rented homes – going directly against David Cameron’s ambition to create a ‘generation buy’ rather than a ‘generation rent’.

“Anybody who works hard and aspires to own their own home should have the opportunity to realise their dream,” a DCLG spokesman reiterated today.

The government’s radical and controversial Housing & Planning Bill, which has suffered a series of attacks and amendments since first being introduced, is currently in committee stage at the Lords.

(Top image c. Joe Giddens, PA Wire)

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