LGA calls for Right to Buy reform
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The government faces a call to reform the Right to Buy programme amidst claims that local authority housebuilding cannot keep pace with the sale of council homes.
The Local Government Association called on government to make the reforms as part of September’s spending round. Right to Buy (RTB) sales, the LGA claimed, continue to “dwarf” the number of new homes councils are able to build under current rules.
Judith Blake, housing spokesperson for the LGA, said RTB enabled many families to achieve “the dream” of owning their own homes, but it “urgently” needed reform.
“Current arrangements are restricting councils from being able to replace homes being sold under the scheme. This loss of social rented housing risks pushing more families into the private rented sector, driving up housing benefit spending and rents, and exacerbating our homelessness crisis.”
Ramping up the pressure on Whitehall, Blake called for government to allow councils to retain “all RTB receipts”.
2nd Housing & Regeneration Finance Summit
October 31, 2019, County Hall, London
The receipts are a contentious issue. Currently, councils are permitted to spend only 30% of receipts on either new build housing or acquisition of existing property. They must also spend the money within three years. If councils fail to meet the deadline they must return the money to central government with a 4% interest payment.
However, government opened a consultation on Right to Buy in August last year with a view to introducing reforms. A consultation document acknowledged that local authorities were unable to build enough properties to “match the pace of sales” or meet a commitment that every home sold would be replaced.
“It is clear that local authorities need to increase their rate of delivery of new homes if they are to match the growth in sales,” the consultation document said.
The LGA argued the current call for reform comes despite councils building 2,560 new HRA homes in 2018-19, the highest annual number of new builds since 1992. However, the LGA added that RTB saw 11,833 homes sold in 2017-18, with 70,000 sold over seven years. Councils built just 11,300 in the same period.
The consultation proposed that the government lift the cap on spending receipts to 50% of build costs and extend the deadline for spending to five years. The government also floated the idea of ending the practice of using receipts for property acquisition.
Meanwhile, a government pilot in the West Midlands to extend Right to Buy to housing association tenants appears to have hit a block.
A recent Freedom of Information (FOI) Request dated 3 July revealed that only £10m of an earmarked £200m had been allocated to fund Right to Buy discounts.
The pilot began in August last year with expectations that 3,000 homes would be sold. The FOI statement reveals just 181 homes have been sold so far. The FOI said central government was monitoring sales.
There have been other efforts to ease the way for councils to build more homes. In 2017 then chancellor Philip Hammond announced the provision of an additional £1bn of borrowing for housebuilding in “areas of high affordability pressures.”
However, in October last year then prime minister Theresa May announced the end of the borrowing cap on Housing Revenue Accounts (HRA). Some reported estimates said the policy change could result in up to 10,000 new council homes.
The LGA’s RTB plea comes despite changes to HRA borrowing. The association’s press statement said: “Last year the government acted on the LGA’s call to give councils the freedom to borrow to build new homes by lifting the housing borrowing cap, a key barrier in local authority housebuilding.
“Council leaders are now calling on the government to go further and use next month’s spending round to refer the RTB scheme, which is restricting councils from replacing homes sold.”
