Election 2015: Right to Buy pledge could undo HRA reforms
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Forcing councils to sell expensive homes to fund an extension of the Right to Buy (RTB) programme for housing associations would significantly undermine the 2012 housing revenue account (HRA) reforms, according to experts.
The Conservative Party, in its 2015 general election manifesto released this week, said it would introduce legislation compelling councils to dispose of the most expensive third of their homes as they become vacant.
It said that this would raise £4.5bn a year, which would fund discounts to housing association tenants buying their homes, as well as providing cash for local authorities to replenish their stock.
But Chris Buss, director of finance at London Borough of Wandsworth, said: “This is saying that they would redo the 2012 HRA settlement without looking at the impact of doing so.”
Those reforms ended central government subsidies to HRA accounts, allowing councils to keep their rental income and use it to fund their housing stock.
But Buss said that the RTB proposals would erode the business plans drawn up by councils following the reforms.
He said: “When we first did the deal back in 2012, we all made assumptions on rental income.
“If a third of those units now go out the door, then we have debt to fund with no rental income to finance it.”
A Conservative Party spokesman told Room151 that receipts from the council housing sales would be used to pay of local authority debts held against the sold expensive housing.
However, Steve Partridge, investment and finance director of affordable housing finance company QSH, told Room151: “In reality, councils are better off with the property yielding net rent than selling it and repaying the debt. This won’t completely wreck councils’ HRA business plans but it is another weakening of them, following the increase of discounts available on council RTB sales.”
Richard Harbord, former chief executive of Boston Borough Council, said: “Removing a third of expensive homes would, of course, make a big difference to councils’ account surpluses. It would have a negative effect and make it more difficult to balance the accounts – particularly as they would be left with the dross.”
Partridge added that, if implemented, the Tory proposals could force councils to consider building new affordable housing using models involving partnerships with pension funds, which do not require council financing. These would not be covered by the proposals to force councils to sell their stock, he said.
He also pointed out that a number of councils have already transferred housing stock wholesale to housing associations, implying a mechanism of central collection and redistribution would be necessary to make the arrangements work.
Buss added that the proposals were likely to put extra pressure on councils’ general funds, because a reduction in council housing will mean more has to be spent on temporary accommodation for the homeless.
Alongside the manifesto, the Conservatives released a table showing its assumptions on expensive property thresholds by region and property size (see below).
Conservative Party table of expensive housing thresholds
| Region | 1 bedroom | 2 bedroom | 2 bedroom | 4 bedroom | 5 or more bedrooms |
|---|---|---|---|---|---|
| North East | 80,000 | 125,000 | 155,000 | 250,000 | 310,000 |
| North West | 90,000 | 130,000 | 160,000 | 270,000 | 430,000 |
| Yorkshire and the Humber | 85,000 | 130,000 | 165,000 | 265,000 | 375,000 |
| East Midlands | 105,000 | 145,000 | 175,000 | 320,000 | 430,000 |
| West Midlands | 100,000 | 145,000 | 180,000 | 305,000 | 415,000 |
| East | 155,000 | 220,000 | 265,000 | 440,000 | 635,000 |
| London | 340,000 | 400,000 | 490,000 | 790,000 | 1,205,000 |
| South East | 165,000 | 250,000 | 320,000 | 495,000 | 755,000 |
| South West | 135,000 | 200,000 | 260,000 | 375,000 | 535,000 |
In London, for example, an expensive one-bedroom flat is defined as one costing more than £340,000, compared to one costing £80,000 in the North East.
Paul Dimoldenberg, leader of the Labour group at Westminster City Council, said minimum home values in his borough all exceeded the cap, meaning it would be forced to sell off all homes which become available each year.
He said: “The stark implications of this policy is that no local families will ever be rehoused in Westminster again as the council will be forced to sell off all its flats which come vacant. Only the rich will ever be able to live in Westminster.”
Simon Parker, director of think tank New Local Government Network, said: “Forcing councils to sell-off their highest value properties is simply bad policy.
“We need to make it easier for councils and housing associations to build more affordable homes, not undermine their ability to do so through a giveaway to a relatively small number of existing social tenants.”
Cllr Jim McMahon, leader of the Labour Group at the Local Government Association, said: “This is a half-baked, unworkable idea from the Tories which will mean less homes for working people.
“They say it will cost £4.5bn a year paid for from selling off expensive council homes, but these numbers just don’t add up.”
Photo (cropped): SecretLondon123 (Flickr)
