The right stuff

Posted by: Tom Lloyd

22/11/2011

One of the more interesting bits of David Cameron’s ‘radical’ vision for housing is his reinvention of the 1980’s policy right to buy.

At his party’s conference in October the prime minister promised a ‘revolution’ on housing, and yesterday he was similarly full of rhetoric. In reality though, much of the Laying the foundations strategy is a reworking or extension of existing ideas.

That isn’t necessarily a bad thing. In the last 18 months we’ve had such an avalanche of housing policy initiatives that a paper bringing it all together into a coherent whole would be very useful. The strategy has a good stab at that task, but whether it truly succeeds remains to be seen.

What it does do is give more detail about how the revitalised right to buy will work. When Mr Cameron first raised the policy in Manchester there was some confusion about how discounts could be increased and still allow a replacement home to be built for every one sold. Questions were also asked about how the move fitted in with reform of the housing revenue account subsidy system, and the move to self-financing.

While the strategy doesn’t have all the answers, it does give some clues. On the first point, it is clear the government doesn’t intend the sale of a council home to generate enough money to build another one outright. Instead enough money should be left over once discounts have been applied, and debts paid off, to be roughly equivalent to the subsidy given for development through the affordable rent programme – about 20 per cent of the cost.

It also promises that the right to buy reforms will not have an impact on the viability of councils managing their own revenue from housing under self-financing. Under existing rules 75 per cent of right to buy receipts go back to the Treasury. The changes will see the money from sales used to pay off housing debt, then Treasury and council forecast receipts, then used to build more homes.

Much of the detail remains to be decided. How the money for new homes is handled, for example, will be subject to a consultation expected next month. Clearly some progress has been made though, and you get the feeling the government will find a way to resolve any outstanding financial and legislative issues.

What could be a greater concern is appetite for the new product. Even with the discount rate upped to 50 per cent there is some concern in the sector that tenants won’t want to exercise their enhanced right to buy. Are the declining right to buy sales the consequence of declining discounts – as the government claims – or simply a reflection of the fact that many of the most desirable council homes have already been bought?

The government wants to see the right to buy result in 100,000 new homes, but that relies on there being 100,000 sales. With just 8,410 council homes sold in England last year, quite a jump will be needed if that figure is to be achieved any time soon.

An interesting potential solution to the demand problem comes from Home Group. The association, which has endeared itself to Conservative ministers through its transparency initiative, is calling for the right to buy to be extended to housing association homes.

It believes this could result in an extra 100,000 properties if homes sold were replaced on a like for like basis.

Such a move could create a genuine resurgence in right to buy sales by extending the mechanism to tenants and homes that are currently excluded. It would also present a whole range of new financial and legislative problems, but if enough new homes could be built then it might be worth it.

Perhaps Mr Cameron’s radical vision for housing just isn’t radical enough.