Friday, 03 July 2015

Borrowing caps will inhibit authorities’ ability to replace sold properties

Councils fear RTB won’t deliver homes

Fears are growing among local authorities that government plans to increase right to buy discounts will fail to deliver replacement homes.

A consultation on coalition plans to revitalise the right to buy in England was released before Christmas by the Communities and Local Government department, proposing a new maximum discount of £50,000. The previous maximum discount varied but was as low as £16,000 in some areas.

The consultation reiterated the government’s commitment to providing a new affordable rent home for each council home sold. However, some authorities have claimed government caps on borrowing would restrict their ability to replace stock.

‘If I had the [borrowing] headroom I would want to keep the receipts and build new houses, but I don’t have it,’ said Glyn Hall, head of housing at Durham Council.

The CLG’s impact assessment shows councils would need £40,000 to £50,000 in receipts from each home to fund a replacement. The average council stock price in some parts of the north is less than £70,000, which could leave councils with less than £25,000 in receipts to replace a sold home after other costs such as payment of historic debt are returned, forcing them to increase their borrowing.

‘It will be a struggle for many [councils] to make it work,’ said David Hall, a director at housing consultancy Sector. ‘There are issues that they [CLG] haven’t acknowledged around the borrowing cap.

‘Those authorities that want to do new build but are at or close to their borrowing cap will find it difficult to provide replacement homes without extra borrowing power.’

A CLG spokesperson said: ‘The receipts generated from right to buy will naturally vary between properties and places but we would expect landlords to deliver these new homes within their existing borrowing limits, working closely with partners including housing associations, and making best use of their own land, assets and other resources, instead of putting in capital or increasing borrowing.’

The consultation on right to buy closes on 2 February.

In numbers: right to buy

100,000
number of RTB sales targeted by prime minister David Cameron

£40,000 to £50,000
receipts required from each RTB sale to build a replacement home

£34,000
council contribution per home to provide one-for-one replacements

3,690
estimated RTB sales in England in 2010/11

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