In a nod towards Thatcherite populism, Grant Shapps has pledged to revive the Right to Buy and promised that every sale will be matched with a new affordable home. This may go down well in certain parts of the press, but how it will be achieved in practice is something of a puzzle. The Question and Answer document produced by CLG raises more questions than it answers, as does this blog.
Right to Buy sales last year stood at 3,960 in England compared to well over 150,000 at the height of the RTB boom in 1982. Clearly the only way to prompt more sales is significantly to increase the level of discounts. At present, these range from £22,000 to £38,000 depending on the region. Even if the discounts are doubled will this be enough to tempt buyers, given the drought of mortgage finance? Remember that there are now fewer council houses than housing association properties and the Right to Buy has a shrinking pool of potential purchasers.
But here is the puzzle. According to the government’s own figures the average market value of Local Authority properties sold under the right to buy in 2010/11 was £103,970. The average capital receipt was £77,470 and the average discount was £26,510 per property. But under current Treasury pooling rules 75 per cent of the capital receipt has to be returned to the Treasury for redistribution to receipt-poor areas. Any increase in discounts leads to a reduction in receipts. Let’s say the average receipt drops to £50,000 - that leaves only £12,500 to be re-invested in housing. Even under the affordable rents’ programme, which these receipts will be funding, the average level of grant is around £32,000 so how does a receipt of £12,500 build a new home?
This raises a whole series of questions. Is there to be another source of subsidy to ensure one home is built for every sale? Will Treasury rules be changed to allow for all of the receipt to be retained? Will receipts be ring fenced both to housing and to the local authority? Has the government carried out any financial modelling to see what level of discounts will generate sales?Lots of questions and few answers at this stage.Even if the number of sales increased tenfold, which seems optimistic to me, we would still only achieve fewer than 40,000 sales per annum, so where does Grant Shapps come up with the figure of 100,000 new homes every year?
Sorry to be cynical, but unless the Treasury is willing to relax the current rules on capital receipts this looks like another of those populist conference soundbites that will be quietly buried within a few months.
Have your say
You must sign in to make a comment
Colin Wiles writes about
affordable rents,
Big Society,
Boris Johnson,
cih,
cpre,
David Lawrenson,
David Orr,
Ebenezer Howard,
Germany,
grant shapps,
house prices,
housebuilding,
housing crisis,
housing strategy,
housing supply,
Iain Duncan Smith,
kate barker,
London,
national trust,
NFU,
NPPF,
planning,
Policy Exchange,
Private rented sector,
riots
Readers' comments (8)
JeanH | 04/10/2011 9:49 am
I am fed up of hearing the term 'affordable rent'. I live in social housing on a secure rent, if I had to pay the 'affordable' rate, I would be out on the street because I could not afford it, and as I have a pension, I would not be entitled to HB. I was born on this estate, and now have my own flat, so all those people who tell me to move, I say why should I. This whole area was lived in by working class families until the mega rich landlord, started moving tenants out and selling the property to the wealthy. He would have done the same on the estate where I live. He wanted to knock them down, but was not allowed to as it is listed building, so he leased them out to a a HA. The HA is now renting out at Affordable or market rate, and it is far too much for my income. These flats were purpose built for social housing. And, most of the tenants on this estate work. We are not all scum
Unsuitable or offensive? Report this comment
F451 | 04/10/2011 10:02 am
Again, good points, but when will IH stop posting them for us to answer and start getting the Minister to answer them instead.
Unsuitable or offensive? Report this comment
Melvin Bone | 04/10/2011 10:43 am
Have all the minute details of this proposal been released yet?
Has the legislation been laid before the House?
HAs there been a green papaer on it?
No. At the moment it's just conference guff. So do not over analyse it until the paperwork is put forward.
At the moment you are wasting your breath.
Oh. Colin. Can you look up 'paragraphs' in a dictionary for me. Thanks
Unsuitable or offensive? Report this comment
F451 | 04/10/2011 11:25 am
According to the Chair of the Conservative Party - I'll not name her as to do so is controversial - the definition of paragraph is:
"the efficient collection of words to express a statment that is far better expressed now we have a Conservative led Government than when it was Labour. Under Labour paragraphs were far more expensive, and most of them were wasted or ineffective. Current Government paragraphs would be even better were it not for the compulsory inclusion of partial Liberal sentances, but even so, things have really improved. Conservatives are now using paragraphs across Europe, and other countries are following our lead. This has made a massive difference to how we are viewed by our partners and resulted in a freeze on the use of words, and the planned use of words. This conforms to our own manifesto commitment to cut words, or at worst remove one old word for each new word introduced. The paragraph initiative has been properly costed, and indeed is producing a surplus, which we are reinvesting on new punctuation, which is allowing real growth in business."
Hope that assists you Melvin.
Unsuitable or offensive? Report this comment
Melvin Bone | 04/10/2011 11:28 am
Not really.You need to paragraph it.
Basic rules of the English language.
I'll forgive you if English is not your first language though.
Unsuitable or offensive? Report this comment
Colin Wiles | 04/10/2011 9:53 pm
Melvin - apologies, the original had paragraphs but something went wrong. I have amended it.
Unsuitable or offensive? Report this comment
Mel Finucane | 17/10/2011 10:45 am
Stop nit picking the grammar - the points raised on the proposal are all valid - even if 100% receipts are retained for reinvestment within the originating authority area, the discounted receipt will not be sufficient to provide one for one replacement and the new affordable rent tenure is not a like for like replacement in any case. Promoting the right to buy is NOT a reasonable solution - if these tenants can marginally afford to buy and wish to do so - incentive grants to purchase on the open market (funded I suggest by s106 developer contributions negotiated appropriately - from new build sites in the LA area). Make them repayable on the death of the 'qualifying' tenant thus available for re incentivising another in the future. Link it as a free equity loan and you've inflation proofed it a bit too if you want tho this dilutes some of the incentivising factor as the bigger carrot is something for free - especially when it is the family members who stand to gain who encourage the 'marginal' purchasers to buy! Joint applications for the RTB from grandchildren for example were an illustration of case in point - who on the open market ever buys with their granma? (as a housing advisor in the mid 80's I saw lots of these combined purchases go horribly wrong and the result was some very sad granmas being evicted by the grandaughters BF or the like!)
Promote movement within the existing stock - please don't sell it Minister!
Unsuitable or offensive? Report this comment
F451 | 20/10/2011 5:50 pm
I take it Shapps has still not come forward to explain how his promises may add up?
Unsuitable or offensive? Report this comment