Plans to revive the Right to Buy in housing could exacerbate the North/South divide. Politicians should consider introducing a 40% discount limit with no cash cap
The Margaret Thatcher legacy seems to live on and she continues to divide the nation. We have reports of northern cinemas being empty for the latest Meryl Streep blockbuster, while southern cinemas are scheduling extra showings. Then we have the revelation that, as prime minister, Mrs T was urged to abandon Liverpool to a ‘managed decline’
And, of course, in housing, David Cameron announced at last October’s Conservative Party Conference that he was breathing new life into Thatcher’s great vote winner, the Right to Buy.
The Tories’ David Davis and Labour's Frank Field have, this week, jumped on the band wagon by pointing out how RTB might divide social housing. They launched a report from the Institute for Public Policy Research think tank that called for the right to be extended so that one million tenants in housing associations could be given similar opportunities.
In truth, Right to Buy has never gone away since its introduction in 1980. It has changed over the years, with Tory governments trying to stimulate it and Labour governments – never having the courage of their convictions to repeal it for fear of loosing votes – doing everything they could to make it unattractive, particularly in London.
The consultation on its revamp introduces a twist with a desire to see a new dwelling for every one sold. Why? Firstly, to stem the reduction in social housing – so there is some learning that, like it or loathe it, there is a need shown by the millions on waiting lists. Secondly, there is a desire to stimulate housebuilding – exhibiting a belief that we can build our way out of current financial difficulties.
So do the proposals past muster? Well, in the North of England properties might sell at around £80k (or less) and now produce receipts of around £50k. These proposals would see this reduce to around £30k, so lenders might well – even under Basel constraints – take a punt on the improved loan-to-value ratio while they will not touch something that is nearly twice that at the present time.
But, in London, with prices ranging from £100k up to £1m, the £50k cap on discounts to tenants means that lenders will nearly always be faced with larger loan-to-value ratios – so borrowing might be more limited.
On the replacing, however, those lucky northern authorities that might be selling their properties are going to be finding it extremely hard to have enough funding from the sales to replace on a one-for-one basis. Perhaps the odd mobile home might be produced. Whereas down ‘souf’ if they do sell, then re-provision is less of problem. In fact, one might look at a three-for-one ratio.
So is there any answer to this conundrum? Well yes. It might actually lie buried in the Impact Assessment that was issued along with the consultation. One of the options was for the discount level to be set at a maximum of 40% with no cash cap. This seems worthy of further consideration.
It would stimulate sales around the country as the loan-to-value ratio is reduced for all and it would leave most authorities with a fighting chance of either building a replacement or working with a housing association to achieve this as they often have more funds available.
But can politicians understand that a reduction in the discount level accompanied by a removal of the caps is actually is the way to breathe new life into RTB, or will they be fixated on discount percentages that were originally 50% and then increased to 60%?
The information from the Department for Communities and Local Government suggests that the actual discounts currently given work out in practice at about 25%, so this proposal to go to 40% is a significant hike and one that might just produce national sales and replacement rented homes, thus avoiding yet another divide.
So, if there is a North/South divide, this could be made worse in social housing by the current proposals either by design or by accident. There is an alternative that seems less decisive, but is it politically acceptable?
If not, perhaps Scotland has got it right in calling for a referendum on separation. Might the North want to be thinking of doing the same? Now, where was my passport for my next trip out of Wigan?
Ken Lee is chair of the CIPFA Local Authority Housing Panel and director of resources at Wigan and Leigh Housing Company
