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Agent151: Right to buy – ‘the emperor has no clothes’

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  • by Agent 151
  • in Agent 151 · Resources
  • — 22 Jul, 2015

agent 151 520

Agent151 is a senior local authority finance director and s151 officer.

This government is busy tinkering with public sector housing policy. Now that the effects of that tinkering are becoming apparent, it is difficult not to conclude that the underlying agenda is both ideologically driven and harsh.  The reinvigoration of the right-to-buy (RTB) is one aspect of housing policy that illustrates this point rather neatly.

RTB is popular, and consequently mainstream politicians find it hard to muster the courage to speak out against it. However, the policy itself poses serious problems, and this has been recognised in Wales, where councils can make a case not to offer it if they have a shortage of affordable housing, and in Scotland, where the plan is to scrap it completely.

When the policy was mainstreamed under Margaret Thatcher in the 1980s, it was intended to reduce the size of the public sector housing pool and to create homeowners with a grateful allegiance to a Conservative government in return for their good fortune. Playing to the somewhat peculiar post-war British obsession with property ownership, thousands of properties were moved in this way from public to private ownership. Councils were not able to replace the housing stock lost, as the bulk of the receipt went to HM Treasury.

So what are the problems? The massive loss of housing stock from the public sector has created a supply issue for social housing in some areas. Indeed, now those very same RTB owners (or their successors, since many RTB owners cashed in their gain and moved away) are being targeted by councils seeking to buy the property back. Councils are also forced into buybacks because the RTB owners are blocking estate regeneration, and sometimes the payment of a premium to reluctant or canny owners is unavoidable. It’s enough to make a finance director’s eyes water.

In many areas the most attractive units have now been sold off, leaving only those units unlikely to hold their value in public ownership. Estate regeneration is further undermined by the fact that tenants moving back into a completed (and lovely) new estate bring with them a transferable accrued right to a discount that can bag them a brand new bargain. This makes it very hard to make the numbers stack up when planning the regeneration.

Over the years, many RTB owners have sold their property to buy-to-let landlords. There is a good deal of evidence that this can mean the standard of the property deteriorates below acceptable levels as the landlord seeks to maximise the rental yield, and this has a detrimental effect upon the quality of life for neighbours. Councils carrying out major repairs struggle to recover costs from RTB owners whose properties are affected, and the dispute can often drag on over many years.

Of course, RTB purchasers enjoy a huge discount from the state on the market value of the property. The argument in favour of this is that the discount effectively buys them out of their right to a state subsidised home-for-life, and thus is very cost-effective. The discount is up to 60% of the value of a house, and 70% of the value of a flat, although there is a maximum cap, which in London is now £103,900.

The commoditisation of a state tenancy in this way is questionable in itself. But that aside, the reality is that few tenants on low incomes can afford to purchase their home without assistance from wealthy relatives and friends, who become the real beneficiaries of the discount.

The last government’s efforts to reinvigorate RTB were very successful.  In 2013-14 there were 11,929 right-to-buy sales, according to the Department for Communities and Local Government, compared with 2,368 in 2012-13. Now the government is going to extend the right-to-buy to housing associations, with councils pencilled in to fund the housing association losses by selling off their best properties. This policy has been widely condemned by experts, and yet the political opposition to it has been feeble. The government is also eyeing the growing public sector stock of homes operated outside the housing revenue account for temporary accommodation and for other reasons, seeing it as an evasion of its flagship RTB policy.

We already have a housing crisis. We do not need to make it worse. This damaging policy must be exposed. The emperor has no clothes, I say.

Agent151 is a senior local authority finance director and s151 officer.

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    • Homes England agrees strategic partnership with two authorities
    • Soaring inflation and pay pressures to add £3.6bn to council budgets
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    • Government preparing to intervene in Nottingham City Council
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