It’s time to call time on the right to buy

Given reports of the difficulties councils face in replacing houses they are forced to sell, shouldn’t the right to buy be curtailed before it does even more damage?

A survey by the LGA reports that four out of five councils are finding it hard to replace on a one-for-one basis the houses they’ve sold through right to buy. There is a range of obstacles. For nearly three-quarters, the biggest problem is that they can’t finance enough replacements from the capital receipts they’re able to keep. There are various reasons for this and the arrangements are complex, and this is why the LGA is calling for the restrictions to be dropped in an amendment to the Deregulation Bill now going through parliament. The government is of course unlikely to accept this amendment, because it would prevent them getting a share of RTB receipts to help bring down debt. But what’s more important, a tiny reduction in debt or ensuring that the RTB doesn’t result in a loss of rented housing stock?

One of the virtues of the UK Housing Review, extolled in Red Brick on various occasions, is that it provides the data on which we can take a long-term view of policies like RTB. The 2013 edition showed that, across Britain, RTB sales since 1980 had reached over 2.5m homes. It also showed that total receipts from those sales were slightly under £50bn. In other words, the RTB has been a prolonged fire sale in which houses and flats have been sold at an average price of only £20,000. This might be excellent value for buyers, especially when many of them later sell the property to a private landlord, but it represents dreadful value for the public sector. Even if more recent sales are likely to have produced higher average receipts, it’s hardly surprising that a combination of high new build costs and being forced to share the receipts with the Treasury means that one-for-one replacement is extremely hard to achieve.

We all know what the consequences have been, and one of the most important has been the impact on social rented stock. Back in 1981, across Great Britain this stood at over 6.5m dwellings (councils and associations added together). It’s now fallen to 4.8m, even though we’ve been building an average of 35,000 new social rented homes per year over the intervening 33 years. In other words, successive governments’ building programmes have made up less than half of the loss in stock: it’s hardly surprising that we’ve got such a huge backlog of housing need.

Supporters of RTB will of course protest that the houses haven’t been ‘lost’ they are still there. And even if they hadn’t been sold, the tenants who bought them would likely have used them for the rest of their lives in many cases. Both of these points are true, but the failure to reinvest means that we now have a much smaller social stock to meet the needs of those on low incomes (quite apart from the ambition we might have had to continue catering for middle-income households in social housing, as was the case before 1980).

Ending the right to buy may not be an election winning strategy (although it seems to have done no harm in Scotland). But three reforms would curtail its worst effects. One would be to restore maximum discounts and other safeguards to what they were before 2010. This would be a perfectly reasonable move, given current demand for social housing. The second would be to ensure that all receipts are used for new building, if necessary dedicating part of the HCA’s budget to the (possibly fairly small) grant that would be needed to top up the receipt. Of course, Red Brick would add to this a third reform – that borrowing controls on councils should be eased or preferably removed.

An indication of the potential that would be released by fairer rules is given by other responses to the LGA survey. They confirm replies to a recent one by ARCH which show that councils are currently planning to build 4-5,000 houses per year. LGA suggest the potential with different rules could be extra output of 48,000 units over five years. There is now a run of studies in the two years since council housing became self-financing that point to the extra capacity waiting to be unleashed. If the government’s review of the role of councils in housing supply, confirmed this week, doesn’t take up this challenge, will Labour’s Lyons Review?

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4 Responses to It’s time to call time on the right to buy

  1. Pingback: OK Brandon, let’s see the evidence | Red Brick

  2. Pingback: The slow demise of social rented housing | Red Brick

  3. Single Aspect says:

    >house< 🙂

  4. Single Aspect says:

    Agree with most of that but would like to see national mandatory space and other standards in place before one more council is built. Unfortunately the coalition is going the other way.

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