LGA: Right to buy discount rate ‘unsustainable’

2 Feb 18

The rate at which right to buy discounts have been handed out in the past six years has sparked a social housing ‘firesale’, the Local Government Association has warned.

LGA analysis of government figures, released today, showed council tenants have received £3.5bn in RTB discounts since 2011-12, which is rendering the scheme “unsustainable”.

The umbrella group is calling for councils to be allowed to set RTB discount rates locally and receive full sale receipts to reinvest in new homes.

It said council leaders are backing its and the cross-party Treasury select committee’s calls to abolish the cap on the amount councils can borrow to invest in new and existing homes

Judith Blake, LGA housing spokesperson, said: “For RTB to work, councils must be able to replace every home sold.

“Councils must be allowed to set RTB discounts locally, retain RTB sale receipts in full to replace sold homes, and be given the freedom to borrow to build new affordable homes and play a lead role in tackling the country’s housing shortage.”

In April 2012 the government increased the size of discounts, which the LGA analysis showed had increased the average discount by 132% to more than £60,000 in 2016-17.

“Selling council homes at a discount of nearly half price has led to a social housing firesale that threatens the future of the scheme,” Blake said.

Currently, councils only stand to receive a third of RTB receipts, with the rest going to central government.

The LGA says this hampers councils' ability to build replacements homes as they are also prevented from borrowing enough to make up the shortfall.

This has meant that councils have only been able to replace 20% of homes sold since 2011/12, contributing to a shortfall in social rented housing, the LGA analysis said.

Between 2011 and 2017 RTB sales have increased by 409% - this exponential rise in sales was triggered by the average price of discount jumping from £26,000 in 2011/12 to £60,000 in 2016/17, the LGA said.

The Charted Institute of Housing warned that the government urgently needed to increase funding in affordable housing because more than 150,000 homes for social rent had been lost in five years.

The number of social homes lost is expected to reach 230,000 by 2020, the CIH calculated, based on the assumption RTB sales continued at the current rate.

An MHCLG spokesperson said: “Right to buy is giving people who aspire to own their own home the opportunity to do so, and more than 80,000 households have used the scheme since it was reinvigorated in 2012.”

The MHCLG also point out that the commitment was never that every right to buy sale be replaced, only additional sales that were above the original forecasted baseline.

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