Thursday, 26 February 2015

Government raises right to buy discounts

The government will offer increased discounts of up to £75,000 to council tenants who want to purchase their homes when it launches its reinvigorated right to buy scheme today.

The discounts are higher than the £50,000 maximum that was widely expected to be put in place after the publication of a consultation on the scheme last December.

A statement on the discounts is expected from prime minister David Cameron and housing minister Grant Shapps later this morning.

Last month, the Chartered Institute of Housing wrote to Mr Shapps calling for the discount cap to be raised, while suggesting that the percentage discount offered to tenants be lowered to ensure the policy has the same effect across the country while still delivering one-for-one replacement housing.

However, in percentage terms, the discounts are expected to stay the same as outlined in the preferred option in December’s consultation, with tenants able to claim up to 60 per cent off the price of their home, up to the cap, depending on their length of residency.

Abigail Davies, assistant director of policy and practice at the CIH, said: ‘It does sound like they have more or less taken on what we have said, but we need to wait to see the detail.

‘It looks like they have been brave enough to step away from saying it has to be a maximum of £50,000.’

The money raised from right to buy sales will be committed to building replacement affordable homes, but councils have expressed concern that increased discounts might leave them struggling to deliver these replacements.

Readers' comments (54)

  • Stephen Gibson

    So we lose social housing, which in all likelihood won't be replaced on a one-for-one basis due to the increased discounts and Council's inability to fund replacement affordable homes. Council tenants bag themselves a house at a massively reduced price without having to save a deposit. Non-social housing tenants either save for years for a deposit so they can buy a property, or stay privately renting for the rest of their lives. Fair and sensible system.

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  • I do wish IH would read the consultation and not the spin

    The figures on which it is based are false, there will be no 1 for 1 replacement as you might be expected to believe from the announcement.

    If you read the Government's own consultation on the revised Right to Buy you will see that far from being a one for one replacement policy, it only kicks in once all the homes predicted to be sold in this spending review have been sold (12,700 in total), they won't be replaced.

    On Page 5 you will find

    "That is, all Right to Buy sales above current predicted levels will be replaced by new homes for Affordable Rent funded (in part) by the additional Right to Buy receipts.

    The receipt needed to fund replacement will only be a fraction of the cost of a new home. This is because most of the funding for new affordable rented homes comes from borrowing by the provider against the future rental income stream and, in many cases, cross-subsidy from the landlord’s own resources, including land."

    In the worked example on Page 43
    they assume that 10 sales were predicted, 16 actually occurred and the receipt per property was £50,000
    Once debt had been repaid and the government had taken its share a grand total of £92,000 is available to build 6 new homes, despite 16 leaving the sector.

    So you may have to whistle to see the replacement homes and, don't forget that the Affordable Homes Programme run by the HCA currently worth £4.5Bn up to 2015 is intended to be the last government bricks and mortar subsidy to social housing.

    Who will buy these properties? Well if the document is to be believed up to 25% of the properties will be sold to tenants in receipt of full housing benefit! Page 27.

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  • Gavin Rider

    The failure to build enough social housing, whether as replacements for RTB sales or generally in response to increasing demand due to economic conditions, has nothing to do with a lack of funding. It has everything to do with a lack of a policy to achieve it.

    This revised RTB policy belatedly adds the requirement that all proceeds of RTB sales must be used to build replacement homes.

    That is a step in the right direction.

    Every journey no matter how long starts with the first step, so what has to happen now is that people ensure the taking of the second and third steps, to keep up the momentum.

    It is better to replace the older housing stock with new to satisfy newly arising demand for social housing than it is to keep trying to recycle the existing stock and add to it.

    Every RTB sale also removes the demand placed on social housing by one household - and it selectively takes out of social housing the households who are able to afford to be self-sufficient. In terms of meeting the aspirations of social tenants, who otherwise could probably not afford to become home-owners, this is good for society because it reduces their dependency on the state.

    Stephen is right, of course, that it seems unfair to those who rent from private landlords rather than social landlords and are unable to buy their own homes regardless of the length of their tenancy. But being unable to help everyone is no justification for trying to help those one can help.

    If by doing so the number of new social homes being built to satisfy a rising demand can be increased, it has to be a good thing.

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  • Eric Blair

    Gavin said, 'Every journey no matter how long starts with the first step.'

    Indeed; especially if it's off the edge of a cliff.

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  • Gavin Rider

    Eric - very good! ;-D

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  • Gavin Rider

    I meant to say "being unable to help everyone is no justification for NOT trying to help those one can help" my "nots" in a "knot"...

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  • The maths is not difficult is it. Take away one house, add one house, you get an increase of ZERO. Thus, even if there were one for one replacement, which there won't be, that which have zero impact on the housing waiting list.

    Shapps the man who wanted Council to put tenants on houseboats can't add up such a simple sum!

    Build new Council houses and end the RTB - that's the way to tackle the housing crisis.

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  • Gavin Rider

    Incidentally, responding to Tim's advice, I have re-read the consultation about how the new scheme will work. It says:

    "Section 131 of the Housing Act 1985 (the cost floor) limits the Right to Buy discount to ensure that the purchase price of the property does not fall below what has been spent on building, buying, repairing or maintaining it over a certain period of time (relevant expenditure). This is to ensure that the public sector can generally recoup significant expenditure on upgrading homes. We do not propose to make any changes here."

    So, all housing debt is paid off and the recent cost of maintaining and improving the home is also paid for, before any further income derived from the sale is put towards the provision of replacement housing.

    That looks like a net gain in accounting terms to me. Without this income stream all future housing provision would have to be paid for from the taxpayer or the housing provider's own resources. Since the taxpayer is already in debt over his metaphorical head, it seems unlikely that he can be relied upon to inject more cash for social housing, rather the amount available is likely to reduce. Faced with that prospect, it seems that generating any revenue that can be used to finance new social housing construction has to be better than not doing so.

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  • Is this exercise using Grant Shapps calculator and monopoly money. I seem to remember somebody doing the calculation on here and it came out as 1 replacement for every 16 houses sold.

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  • Alex Brown

    The majority of tenants I speak to have for years advocated a stop to right to buy and a to right to acquire they have known for years that to constantly diminish the supply of social housing and the increasing lack of affordable homes to buy will leave the next generation with nowhere to live.
    With the impact of Welfare Reform about to start impacting on our communities it does seem to be absolutly the wrong time to be diminishing stock when my landlord alone is expecting to be several hundred small homes short of expected new demand to add to the 13,000 already on the waitiing list.

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