‘Right to Buy’ receipts and central government dictats – the impact in Swindon

Download a PDF here enhancedrtb

The country’s housing crisis is reflected by, amongst other things, the number of households on the housing waiting lists: more than 1.8 million nationally and over 15,000 in Swindon. Instead of tackling the shortage of ‘social rent’ homes the coalition government has introduced a series of policies which will lead to a decline in their number. One of these is the ‘enhanced right to buy’ scheme.

The new ‘right to buy’ (RTB) offers an increased discount on the price of a home. There is 35% off the price of a house if the tenant has lived there 5 years and 1% off for each year thereafter, up to a maximum of 60%. For flats it’s a 50% reduction for five years and 2% for each year above that, up to a maximum of 70%.

The government said that  the new RTB would enable ‘one for one’ replacement of those homes sold. However, when pressed by people in the sector who pointed out that the maths didn’t add up, they admitted that receipts “will not be large enough to fund ‘one for one’ replacement in some areas, and we are not requiring Councils to do so”. So the government accepted, and didn’t appear bothered by the fact, that this policy would lead to a reduction in the number of scarce Council homes available in some areas at least.

 

Swindon was one such area. The Council originally estimated that for every 30 homes sold under the new RTB, they would only be able to build 7 to 9 homes. So for every 30 sold we would lose more than 20.

We have now seen the figures for sales in 2012-13 and up to September 9^th of this year. In 2012-13 40 homes were sold. With the bigger discount the receipt for the Council was only £1,830,320 of the £3,735,000 value of the homes. However, after the government took its very large cut, the Council ended up with only a quarter of the receipts, £450,000. In other words it received on average only £10,500 for each home sold.

The level of discount can be seen in the Appendix below. For 2 and 3 bed houses it was more than 50% on average. So a 3 bed house valued at £98,207 sold for £48,867. A 2 bed house worth £90,500 sold for £42,100. Of those homes sold, three quarters of them were 3 and 4 bed houses; 44 out of 62 homes sold over the last 18 months.

Although these are small numbers, reflecting the high level of poverty amongst Council tenants, they still have an impact on the waiting list. The greatest shortage of available homes, in relation to what people on the list qualify for, are one bedroom properties. However, there is also a big shortage of family homes and the loss of 3 and 4 bedroom properties worsens that shortage.

The ‘localist’ government imposes central commands 

Earlier this year Rod Bluh complained that the “era of localism” produced “some of the most serious centralisation of power to date”. This is another example. Instead of allowing Councils to use the money from these sales as they see fit, the government has imposed a dictat on them. In order to spend the money to build new homes the Council has to agree to two conditions, or else the government will rob us of the receipts from the sale of our homes. Without agreeing to this ultimatum the Council will have to hand over what little receipts it has from the sales.

Under the new Housing Finance system (‘self-financing’) we were supposed to have bought ourselves out of the old system by making a contribution to the national housing debt (the £138.6 million ‘debt’ which was imposed on Swindon). Yet the government dictat means that the Council is barred from building Council homes with Council rents from RTB receipts. The government insists that Councils can only use receipts to build homes with its ‘affordable rent‘[1]  (i.e. up to 80% of private market rents). It cannot even use all the receipts on each home. It’s only allowed to use them for a maximum of 30% of the cost of each home built. So to use the £450,000 in a house building programme it would have to find the other 70% (£1,050,000) from its own resources or by borrowing.

Some Councils have refused to accept these conditions because they know that ‘affordable rent’ is in reality unaffordable for many people and because they will have to use scarce resources to build a small number of homes with rents which are not affordable.

Local MP Robert Buckland has admitted there is “an acute social housing shortage” in the town, as elsewhere in the country. RTB makes that shortage worse and the dictat that “affordable rent” can only be used means that we will not have genuinely affordable homes to replace those few that could be built. The impact of the new RTB underlines the need for RTB to be abandoned[2]. With more than 15,000 households on the waiting list we cannot afford to lose any of our stock, we need more, not less.

As galling as it is to have the government rob us of these receipts Swindon should not meekly accept these terms. In the final analysis it would mean tenants paying for homes which are unaffordable when we need more Council homes, with Council rents, if the housing crisis is to be addressed. We believe that RTB should be abandoned, but so long as it remains, Councils should at least have the right to use the money as they see fit, rather than have a central government dictat imposed upon us.

Martin Wicks

September 23^rd 2013

Appendix

 

Year	No of RTB Sales	Market Value	RTB Receipts	Discount allowed	Average RTB Sale   price	Average discount
2012-13	40	£3,735,000	£1,830,320	£1,904,680	£45,758	£47,617
2013-14	22	£1,989,000	£819,870	£1,169,130	£37,267	£43,142

 

2012-13	No of RTB sales	Average Market   value	Average RTB receipt	Average discount
1 Bed Flat	3	£53,333	£31,133	£22,200
2 Bed Flat	3	£81,667	££51,233	£30,433
2 Bed House	4	£90,500	£42,110	£48,390
3 Bed House	29	£98,207	£48,867	£49,340
4 Bed House	1	£120,000	£72,000	£48,000

 

2013-14	No of RTB Sales	Average market   value	Average RTB receipt	Average discount
1 Bed Flat	1	£55,000	£27,500	£27,500
2 Bed Flat	5	£71,000	£49,700	£21,300
3 Bed Flat	1	£85,000	£59,500	£25,500
2 Bed House	1	£92,000	£51,520	£40,480
3 Bed House	14	£100,143	£55,865	£44,278