The sale of the century
The government wants to make right to buy popular again, but details on the proposal are sketchy, says Sarah Lines, social housing lawyer with Cobbetts LLP.
Prime minister David Cameron has announced plans to increase right to buy discounts to make the 30-year-old scheme attractive once again and rejuvenate England’s housing stock.
A Q&A published on the Communities and Local Government department’s website last week, however, provides little detail. What we do know is:
- proceeds will be used to fund new affordable (not social) rented homes;
- the plans will apply to both right to buy and preserved right to buy, which some tenants may have if, for example, their council home was sold to another landlord while they were renting it;
- it will not apply to right to acquire, which relates to housing associations rather than local authorities;
- the government will work with landlords to ensure the changes do not have a detrimental financial impact on those local authorities whose tenants have a preserved right to buy.
The last changes to the qualifying period and how the right to buy discount is calculated were made in the Housing Act 2004. Secured tenancies granted before the act retain their two-year qualifying period. Section 180 of the act extended the qualifying period from two to five years for new secured tenancies and altered the starting percentage for the discount.
For houses, the minimum discount to which a tenant is entitled is 32 per cent for a qualifying period of two years. The discount then increases by 1 per cent each year, up to a maximum of 60 per cent. For tenants who have a qualifying period of five years, the starting point for the discount is raised to 35 per cent.
For flats, the starting point for a two-year qualifying period is 44 per cent, rising by 2 per cent. For the five-year qualifying period the starting point is 50 per cent.
Any changes would only apply to secure tenancies granted after the change in legislation comes into force - though it is not yet know when this will be. If the qualifying period isn’t also reduced, the earliest date on which this ‘rejuvenation’ can take effect as a result of the announcement will be five years from the introduction of the new legislation.
Furthermore, it is unclear how local authorities will build new homes with the 25 per cent balance of the sales receipt they are allowed to keep currently. Presumably, the government hopes this will be given to developers in lieu of social housing grant and the homes will be funded that way.
Assuming that this figure remains the same, local authorities may well now find their 25 per cent portion of the capital receipts are ring-fenced for new build projects rather than for the maintenance of their existing stock. This is notwithstanding the fact that the receipts may have been factored into their financial settlements under housing revenue account reform.
For social landlords who have right to buy sharing agreements as part of their stock transfer agreement, the sharing of preserved right to buy receipts will be bound by that and will need to be taken into account.
The details to be made available in the forthcoming Conservative Party housing strategy will certainly make for interesting reading.