No sensible council will borrow to build much-needed new homes as long as the rules insist they must often be sold at a loss.
Should political dogma be set aside in respect of Right to Buy while we face the current housing crisis? Many will point to the success of Margaret Thatcher’s flagship policy through the years in giving people a step onto the housing ladder. A step into home ownership brought with it some early evidence to support the claim that it would engender pride and community cohesion. Before the advent of the Decent Homes Standard, you could walk round many ‘council estates’ identifying the sold ones by their new front doors, double glazing and neat front gardens.
Unfortunately, a generation on, the opposite seems to be true. While there are still those who buy and look after their council homes, these folk are not in the majority. It is now more likely that when you walk around the estate, the houses that are looking tired and uncared for and have the unkempt gardens are in private hands.
What has become evident is that the private-rented sector has increased steadily over recent years. Also, that the Housing Benefit bill has increased dramatically. You would think it would be obvious to everyone concerned that the two things might just be connected. But no, we seem to spend our time trying to eradicate the symptoms and not the cause.
As David Orr, chief executive of the National Housing Federation, so rightly pointed out recently, one of the fundamental aims of the last reinvigoration of Right to Buy was that there would be a new home built for every one sold. The figures clearly demonstrate that this is not being achieved. He called for the government to safeguard the country’s social housing for future generations, pointing to the increasing numbers wanting a home.
So where did it all go wrong?
CIPFA has advised that a local approach should have been taken to Right to Buy, especially on discounts. The increase in London discounts confirms our view that the blanket approach was wrong even if it was easier to understand. Imagine the disappointment of northern tenants who are promised a £77,000 discount, only to find their property is only worth £80,000 so their discount is nowhere near that level. And then the London tenant who finds that even with a £102,000 discount, they cannot afford to buy their home. We need to find another way to make this work for all.
No sensible authority is going to borrow money to build new houses, only for them to have to be sold without a guarantee that they will get their money back. But this is what the current Right to Buy means. So could this be why councils are not yet building homes in sufficient numbers?
The government’s insistence on taking a share of the sale price needs to alter. For example, in Wigan last year, over 60% of the cash we received for selling 126 homes went to Whitehall, with only £16,000 coming to Wigan from each sale – hardly enough to build a garage let alone a house.
What could be done? If you must have a blanket discount, then use a simple percentage of the value as a maximum discount. That would reflect local circumstances and yes, even save having to keep changing things each year to reflect inflation.
Also, guarantee that no new house can be sold at less than the cost of building it, so giving local authorities adequate time to ensure the investment is paid off.
Remove the rules and bureaucracy around the pooling of receipts and allow councils to keep the whole of the sale price. Then, with the certainty of the guarantee, new build will happen. And, a bit of special pleading, let arm’s length management organisations use the Right to Buy receipts. We can bid for Homes and Communities Agency money, so why not let us compete with registered providers for the use of our council’s receipts?
So the political rhetoric that dogs Right to Buy needs to change. Why not adopt the localism approach? Why not give councils longer leads and challenge them to ensure that provision of social housing continues and hopefully grows. It was done with self-financing, now is the time to do it with Right to Buy.
Ken Lee is chair of CIPFA’s housing panel and business development director at Wigan and Leigh Housing
