Calls for councils to retain Right to Buy receipts

Councils should retain 100% of receipts generated by Right to Buy sales if they are to raise funds to replace homes that are sold in their area, a report has claimed. 

The research by the Chartered Institute of Housing (CIH), the National Federation of ALMOs (NFA) and the Local Government Association (LGA) recommends that the next government should give councils more flexibility to combine the receipts with other grants, funding and land to replace sold homes. 

Councils can use receipts to fund only 30% of the cost of the new home under the current rules, and face restrictions on using land and other funding for the other 70%. 

In total 78 local authorities, 47% of all those who have retained ownership of their housing stock, participated in the research. It was revealed that 67 authorities who were able to provide a complete set of statistical information sold 5,265 homes in 2013-14, generating a total of £333m in receipts. 

However, the analysis shows that only £144m of this was retained locally for reinvestment. Furthermore, to be able to utilise this fully these authorities would still need to be able to lever in a further £336m in additional funding from other sources, a major challenge given the constraints within which they are currently working, the report claims. 

Over the same year these authorities started to build or acquired a total of 544 replacement homes. 

Cllr David Sparks, chair of the LGA, said: “There are millions of people on council waiting lists and local authorities want to get on with the job of building new homes that people in their areas desperately need. That is why it is so important that councils have the power and funding to replace any homes sold under the Right to Buy quickly. 

“The common sense answer to this housing crisis is for the government to allow councils to retain 100% of the receipts from Right to Buy directly and give councils greater flexibility over the level of discount and how they use them to replace the homes sold.” 

Most of the authorities who participated in the research stated that they were planning to build or acquire more homes using currently unspent receipts from 2013-14 sales. However, there was a strong consensus that not all of the homes sold during 2013-14 will ever be replaced. Only one in five (21%) participants suggested that they will be able to replace at least the majority of homes sold, while almost three quarters (73%) said that they only expect to replace half or fewer, including one in 10 (12%) who said that they will not be able to replace any at all. 

Since April 2012, the coalition government has increased the discount available for tenants in England who purchase their home using RTB. These currently stand at a maximum of £102,700 in London, £77,000 elsewhere in England. 

It has been suggested that the government grants individual local authorities freedoms to reduce discounts locally, where they are able to demonstrate that they will otherwise have insufficient receipts to enable them to replace homes sold, and a reduction in the discount would be unlikely to significantly impact on the volume of sales.

Gavin Smart, CIH interim chief executive, said: “Councils could be replacing many more homes if complex funding arrangements on the current Right to Buy scheme were changed.  By taking action now government can ensure that more social and affordable housing won't be lost, which is vital for people on low incomes. 

“Since its inception, Right to Buy has helped millions of people become homeowners but there are many more who remain in housing need. It is crucial that every home sold is replaced - a few simple reforms would give councils a real fighting chance of achieving this.” 

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