Wednesday, 22 October 2014

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

Readers' comments (8)

  • Rick Campbell

    woods/bears/pope

    It's not as if posters to IH were behind the door in pointing this out.

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  • Fear & Loathing

    Will we say "told you so" - yes we probably will. RTB hmm..... Just another Tory vote catcher.

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  • F451

    And still the Minister has not come forward to explain how reality and his view compare.

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  • Evan Owen

    Cut back on spending on the military, embassies and aid, put it into housing.

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  • Gavin Rider

    RTB reduces the housing stock but reduces the demand by exactly the same amount, so net effect on availability is zero.

    As in the case of the Welsh Assembly report mentioned in the "Environmental Groups urged to block immigration" article, many existing council houses are not well suited to the needs of those currently seeking social housing, so it is beneficial to replace older homes with new ones that match current needs.

    So, councils need to buckle up and get on with it - it may take some creative thinking but in the end it will be better for the housing stock because older, harder to maintain properties will be replaced with new ones that are more efficient and require less upkeep.

    It is time some of those who are rabidly against RTB recognised the benefits of the system which - providing the replacements are actually forthcoming - will improve social housing availability quicker than would otherwise happen.

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  • F451

    'RTB reduces the housing stock but reduces the demand by exactly the same amount, so net effect on availability is zero.'

    This is not true.

    Where a family purchases a family house then it may be true, but where a couple or single person purchases that family house, or when the family's children leave, the socially rented property that would have been available to meet the social rent demand is no longer available to the new family as it is underoccupied by the owner.

    If one believes that the 2 Million family homes sold under right to buy are currently occupied by family's as if they had remained socially let then one must be more delusional than the Housing Minister.

    Yes, a 141 replacement policy was what was deliberately missing when the Tories embarked upon their housing privatisation programme and chose to make private renting viable through massive housing benefit increases. However, the current proposal simply relies on new borrowing to fund the replacement, not recycled capital to do so. Worse still, the Coucil will still be left funding the original borrowing for the sold unit. Thus the new tenant will be expected to pay rents that fund the borrowing for the building of their current home, and the borrowing for the building of the one now sold. If that tenant then exercises their right to buy then the next tenant will be funding three sets of borrowing. Such lunacy needs to be opposed, not welcomed.

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  • Gavin Rider

    F451 - utter nonsense.

    Long term residents are offered the chance to buy the houses that they have made their family homes. If they did not buy them they would probably remain living in them until they died, whether they were under-occupying them or not, so those homes would not be available for re-letting to anyone else for a very long time.

    However, selling them and replacing them with a new home that is better suited to the needs of current families and individuals on the waiting list is a better solution, because it removes one family from social housing dependency and provides a new home for another family.

    Simply rehousing the long-term social resident in a smaller home retains that resident as a social housing dependent and the process does not supply a new home for a new family. Therefore, RTB with replacement of the old stock with new is a far better solution.

    No, not all homes sold under RTB are still occupied by the original tenants. They will have used their home as the first step on the housing ladder - they may have allowed their children to move into the old family home, or may have sold it to help pay for their care in old age, or may have traded up and moved on. It does not matter what they have done with it after they have bought it - it is theirs to do with what they wish because they own it.

    My parents bought their council house when they were offered the chance. They had lived in it for 25 years from new and raised two children there. They did not want to move as it was their first and only family home. They wanted to buy it so that they could really say it was their own, because that was how they viewed it. When dad retired and mum took redundancy pay they had enough cash to buy it.

    My mother remained living in that house until I finally convinced her to move nearer to me so that I can take care of her in her old age.

    She sold the ex-council house after 53 years of occupancy to a newly wed couple as their first independent home, at a price that they could afford. They had been living in one room of one of their parents' house up until then because they could not get a Council house (not enough priority points).

    So, the ex-council house helped a newly forming household onto the property ladder and that took them off the Council waiting list. One less family waiting for years for something they will never get, and it was only possible thanks to RTB.

    The new RTB policy relies on new borrowing AND THE REVENUE FROM THE SALE to pay for the new home. That is money that otherwise would not be available to help with new housing provision.

    New homes are better for social tenants than old ones - they are more energy efficient and they take less maintenance for the Council or the RPSH. They can be tailored to suit current needs better than houses that were built sixty years ago in a different age.

    There are many many advantages to RTB - people who want to improve social housing should learn to exploit the advantages and not constantly moan about what they perceive as disadvantages. The objective is not to have more and more social housing, the objective is to house as many people as possible in the most cost effective way possible, and RTB helps to achieve that and to take people out of social dependency.

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  • Gavin Rider

    Incidentally, my first house was an ex-council house. It was all I could afford but it got me onto the property ladder. This is the route into home ownership for many, because not many people can afford new-builds.

    Unfortunately, many of the properties sold under RTB have subsequently been acquired by Buy-To-Let investors, and this has choked off the supply of affordable homes on the open market, forcing many prospective first-time buyers to rent privately instead.

    The demon is not RTB, it is BTL. Get rid of Buy-To-Let and things will operate more smoothly. More houses will be available and affordable.

    The rich gits who currently make themselves richer at the expense of those struggling to afford their housing will just have to find some other way to keep themselves in the manner to which they have become accustomed. Try working instead.

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