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Funding new supply with Right to Buy receipts

Removing all restrictions on Right to Buy receipts would provide a timely boost to housebuilding, says Keith House

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Funding new supply with Right to Buy receipts, by Keith House

With the kids going back to school, domestic housing policy and supply are likely to remain on the examination list for our politicians returning to Westminster. Quite right too.

Ideological battles over housing tenure have blissfully taken a back seat from government in the past year as the pressure to deliver more new homes has taken priority. News that in the last quarter 40,000 new builds were completed shows that the trajectory for supply is moving forward, even if it still has a long way to go.

Yet there remain legacy policies that result in fewer new homes being built. One is the set of restrictions placed on councils from building new homes for rent under the Right to Buy policy, only allowing income from Right to Buy to fund 30% of new construction costs.


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These limitations are so tight that for some councils, the ability to use receipts now means cash sits in council coffers instead of being converted to bricks and mortar, let alone timber and factory build. Fifty councils, through Treasury advisors Arlingclose, made requests to the housing minister for permission to use Right to Buy receipts to acquire existing stock for shared ownership. This shows the level of desperation in some places to spend funds.

For the generation of 20 and 30-somethings trapped in private rent, when their parents were already able to buy at their age, this freedom from central control could be a small chink of light to increase their chances of ownership.

Yet this request on Right to Buy receipts is a distraction from the real priority that remains – to see more new homes built, regardless of how houses and flats will be occupied. Acquiring existing stock for shared ownership may be a short-term fix to get cash spent, but it won’t help with the bigger picture of increasing the nation’s housing stock.

Indeed, if councils rushed to the market to acquire existing stock this would be mildly inflationary in their local housing markets, exacerbating existing price ratio traumas.

“Meeting local need is the policy driver that matters, not old Treasury rules primarily aimed at blocking the supply of socially rented homes.”

How should government respond to this demand? The purist answer is simply to decline.

Remember ‘one-for-one’ replacement of social housing? Right to Buy income arrives from the social sector and should stay there.

Shifting rented stock for new eventual homeownership further depletes social housing stock at a time when even with accelerated delivery of new homes, many local authorities are struggling to make the viability case for Section 106 contributions for new homes for housing associations. Even where they can do so, the result is often a trickle of affordable rented flats or small houses.

But the pragmatic answer to the councils’ request must be a qualified ‘yes’ on the ‘every little helps’ principle. Even small new freedoms for councils will assist in meeting housing need. In the bright new world of a technocratic rather than ideology-based approach to policy, pragmatism works.

Far better, though, for a policy spring clean from the housing minister; simply removing all restrictions on the use of Right to Buy receipts for local authorities remains the tenure-blind answer to increasing supply.

Some councils would use this freedom to acquire existing stock for social rent. Some might take a shared ownership route. Some would partner with housing associations for specialist housing.

Others might seek diversity in local supply by promoting longer-term market rent of family homes. Almost all would do so through new build. Meeting local need is the policy driver that matters, not old Treasury rules primarily aimed at blocking the supply of socially rented homes.

A modest increase in housing supply from volume builders is a positive sign of progress. Britain’s housing crisis will only be solved by new build that is not challenged by absorption rates in local housing markets. That can only mean delivering homes for social and market rent and truly addressing the changing needs of an ageing population.

Is the government looking for a weak pass, or striving for a new grade nine in the Housing Policy GCSE?

Keith House, leader, Eastleigh Borough Council

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