Giving away council houses

Next June it will be 40 years since it was first proposed that council houses should be given away to tenants. It was too radical even for Margaret Thatcher, but there is always someone who will resuscitate a daft idea. This time it’s Paul Kirby, the erstwhile head of the No.10 policy unit.

You can read the maths on his blog. What you can’t do is find any notion that social housing has any value other than its sale price. Like right to buy (which presumably Kirby regards as a timidly unambitious policy), it ignores social housing as an asset: something that needs looking after and will serve future generations. I imagine that what annoys such pundits about the sale of the Royal Mail is not that it was done cheaply but that the buyers were forced to pay for it.

I also imagine that Eric Pickles would be happy to adopt Kirby’s plan, but for the moment his hands are tied. He’s doing his best, however, and in the last few weeks we have seen three further steps towards making the right to buy even more generous – to the buyers. First, in July, maximum discounts rose to £77,000 (£102,700 in London) and from now on will increase in step with inflation. Second, the maximum discount for a house, previously 60%, became 70% (in line with that for a flat). Third, this month, the government implemented what Eric charmingly calls ‘Flo’s law’, which sets a cap on the service charges that councils can impose on leaseholders, most of whom are in flats bought via the right to buy.

All of these undermine the asset value of social housing but the third actually shifts costs from the right to buy purchaser back to the local authority. When the original consultation took place last year, CIH, London Councils and others warned that, effectively, council tenants would have to subsidise major renovations in blocks of flats where there are leaseholders, in order to keep service charges within the new limits. However, this government increasingly treats the consultation phase of its proposals as it would the Royal Assent to legislation: an unfortunate requirement that delays the outcome but is otherwise unlikely to change it. Councils have been left to work out whether they should forego government subsidy so as to continue to be able to apportion service charges fairly, or whether they should partly absorb them into their housing revenue accounts (which means tenants subsidising neighbouring owners who have already been subsidised once via the discounts they received when they bought their flats).

Pickles can’t of course resist putting the blame for high service charges on councils and is ‘appalled’ by how they treat leaseholders. It’s also true that buyers can find themselves landed with massive charges when roofs or lifts are replaced, and immediately blame the local authority for charging them while tenants get the work for ‘free’. Pickles is keen to perpetuate this myth, even though achieving the Decent Homes Standard is government policy and, of course, tenants are paying for improvements through their rents.

What he doesn’t say is that, when people exercise the right to buy, no one warns them about long-term repairs costs. Councils are limited to telling buyers what service charges will be for the next five years, and must be careful not to obstruct the sale process. The government’s own web page for buyers who will be leaseholders restricts itself to mentioning the five-year service charge estimate, and only vaguely mentions the bigger charges that might come later. Of course, this dedicated government website, facebook page and leaflets are aimed at talking up right to buy, not reminding buyers of the costs.

It so happens that the folly of right to buy (that would also result in spades if Paul Kirby’s mad idea was ever implemented), was also beautifully illustrated this month. Harrow Council finds itself spending half a million quid leasing back 35 former council homes, sold at discounts of up to £100,000, so that it can provide temporary accommodation for the homeless. Councillor Glen Hearnden was quoted in Inside Housing as saying:

‘We lose twice with the government scheme, we lose the property from our stock and then we pay to rent it back. It all adds up to our residents suffering. It feels like we are fighting the fires caused by an overheating housing market whilst the government is stood on our hose pipe.’

Paul Kirby doesn’t so much want to stand on the hose as cut off the water supply. Naturally, his proposal to give away council homes is also given the hard sell:

‘I would say to both left-wingers and right-wingers, it’s not often that any politicians get the chance to do something dramatic to sort out poverty overnight, especially in a way that costs the tax-payer a lot less. Given that both Left and Right can win from this proposal, they only lose by doing nothing, leaving all that money tied-up in the 4m homes, the poor still poor and the welfare bill climbing every year. So why not do it? Unless, either of them has got a better idea?’

Monimbó is not so immodest as to speak for the whole of the ‘Left’, but I do suggest that, to see many better ideas than his, Paul Kirby could read through Red Brick.

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