OK Brandon, let’s see the evidence

The right to buy has become a big issue again. The new Housing Minister, Brandon Lewis, has taken a bullish stance, as reported widely in the newspapers yesterday, for example here and here.

The new controversy follows endless reports about Councils being unable to meet their housing responsibilities due to the lack of new social lettings becoming available, and a particular story from Harrow in outer London which illustrated the perverse outcome of councils selling homes under the right to buy only to rent them back as private rented dwellings to meet urgent needs. Harrow estimated that it was now spending half a million pounds renting back homes it has been forced to sell. The Council loses twice – selling an asset at a huge discount from its true value – now over £100,000 in London – then paying over the odds to get it back again. This is true now in many council areas and is a huge waste of money.

Lewis claimed that ‘every additional home sold is now being replaced with a new affordable home for a new social tenant’ and that ‘Critics of right to buy are enemies of home ownership’.

There have always been two major criticisms of right to buy, and neither is about the principle that tenants should be allowed to buy. The first is that large discounts are totally unjustified and unfair. Council tenants get pilloried for being subsidised when they are not, but these new home owners get a subsidy/gift of £100,000 or more without a word of criticism. In fairness, why does the Government not give everyone who wants to own a home £100,000, why is it restricted to social tenants? The answer is that the policy is not about promoting home ownership: the ‘rejuvenated’ right to buy is just one of many Government policies aimed at getting rid of social rented housing altogether.

Government gives people £100K! Policy a great success!

It is also not about promoting home ownership in another way – as illustrated by the Harrow example. Increasingly right to buy purchasers take their discount then either become a private landlord themselves or sell on to the many private landlords waiting in the wings wanting to snap up flats for letting. It is estimated that a third of London sales go this way. Of course, privately-let flats on estates are much more expensive than social rents if they are let to people on housing benefit – so the taxpayer pays again. Frequently they are over-occupied by sharers and become a source of nuisance to neighbours. And in some cases Councils have no option but to lease them back to meet their own needs. What folly!

Lewis’s assertion about replacement needs a specific challenge. The Government never releases real evidence to show how its claim about replacement stacks up but commentators are united that it is nowhere near one for one replacement. However, as with any policy brought in by Grant Shapps, there is a trick. Lewis’s comment refers to replacing the ‘additional’ homes being sold – ie the increase due to the change in policy – rather than the total homes sold. And the other trick is that the replacement homes are at ‘affordable rents’ – at up to 80% of market rents – not ‘social rents’.

It’s not one for one and it certainly is not like for like.

There is plenty of previous Red Brick commentary on RTB – just search in the box near the top of the page – for example Monimbo’s excellent article here.

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4 Responses to OK Brandon, let’s see the evidence

  1. Iain Sim says:

    In response to a tweet from @righttobuy who were celebrating over 2800 give aways, or should I say sales, I asked how many had actually been replaced. Much to my surprise I was bullishly told that the 2800 sales has allowed 3700 new homes to be built as replacements. With discounts up to 75% it is truelly amazing that the resultant capital receipts can actually fund 900 or so additional homes. I know there must be a clever formula somewhere, but it doesnt seem to add up?

    • Iain – thanks for the comment.

      @righttobuy is a Government twitter account so each tweet is paid for by you and me….

      As usual, smoke and mirrors are employed to obscure the figures. The official figures show – between April and June 2,845 council owned properties were sold, a 31% increase on the same quarter last year. This brings the total number of homes sold under the ‘reinvigorated’ (ie even more heavily subsidised) right to buy to just under 22,500.

      Then they say: ‘Receipts from additional sales are now being recycled into building new affordable homes. In the last quarter councils received £211 million, and started work on 675 new homes, bringing the total number of replacement homes started to almost 3,700.’

      The Shapps promise on ‘one for one’ replacement only referred to the ‘additional’ sales generated by the higher discounts, not all sales. Tricky customer, Grant. But CLG website claims that the extra subsidy ‘quadrupled’ annual sales from 2,638 to 11,238 and there have been 22,500 sales in total since the policy came in.

      So, on their own logic, the ‘additional’ sales are around 17,200. I don’t know the veracity of the 3,700 figure or whether it is genuinely ‘additional’ starts or just starts that would have happened anyway. But even if they are all additional, the replacement rate is 3,700 to 17,200 which is about between one in four and one in five.

      So claims about replacement are just codswallop.

      If anyone can improve the calculation, please just make a comment.

      Steve

      • Iain Sim says:

        Many thanks for that Steve, sadly just another missuse of statistics and mis-information that we should expect by now.

  2. More taxpayer subsidising private racketeers, govt enabled.

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