It’s doubtful that the Tories imagined that they would have to implement the extension of “right to buy’ to Housing Associations given that they did not expect to win a majority. If they had been in a coalition with the Liberal Democrats again they would have been unable to push through the proposal given Libdem opposition to it. Perhaps this explains the lack of detail available. They don’t appear to have thought it through, even by the lamentable standards of their housing policy. (Download a PDF here rtb2 or read on below)

Prior to the election the Tories said that they expected that the forced sale of Council homes of ‘high value’ would mean 15,000 sales per year. This was supposed to raise £4.5 billion a year which would be used to

  • compensate Housing Associations for the difference between the discounted sale price of each of their homes and the value if there was no discount.
  • build a replacement Council home and
  • contribute to a £1 billion fund for building on Brownfield sites (expected to produce, miraculously 400,000 homes with just £2,500 subsidy each!)

According to the property analysts Savills this would mean an average price of £300,000 each, whereas the average Council house was worth £208,000, an average it should said skewed upwards by London prices.

In fact, in response to a freedom of information request, the Department of Communities and Local Government (DCLG) has admitted that it has no estimate of the number of Council homes likely to be sold under this back of a fag packet legislation. It is, of course, difficult to estimate anywhere because you can’t predict when a tenant dies or leaves and such a property is likely to become vacant.

The Financial Times yesterday reported that Savills’ analysis carried out for it has estimated that only 5,500 ‘high value’ homes a year are likely to be sold; nowhere near 15,000. Most of the money raised – £2.5 billion out of £3.2 billion  or 78% – would be raised by sales in London where the percentage of ‘high value’ Council homes varies from 63.4% in Kensington & Chelsea to 17.1% in South Bucks.

If 78% of receipts are raised in London this poses the question of whether they would be distributed nationally or used locally. Based on the table produced by the Tories and published by Inside Housing before the General Election (see below) the threshold above which councils have to sell their ‘high value’ stock when they become vacant, some areas would have very little, or even no stock at the level of these thresholds. For instance the prices shown for the South West would mean that no homes in Swindon would have to be sold off. So where would the money to compensate HA’s come from?

There’s another problem as well. Patricia Hollis in the House of Lords raised the question of where does the compensation come from in areas where there is no Council housing stock. It certainly can’t come from such local areas since there is nothing to sell.

If the receipts are distributed nationally then given the fact that 78% would be raised in London, local authorities in London would be unlikely to able to compensate HA’s there, never mind build replacement stock themselves. That’s why there has been raised the demand (from the Mayor and others) that receipts in London should be ring-fenced for London. If that were done though then there would be little money to distribute to other areas.

The fundamental question remains unanswered. What will happen if Council House sales are too low to compensate HA’s? It would certainly increase the chances of a legal challenge from HA’s if they were not compensated 100%, on the grounds that this would be, in the words of one HA head, sequestration.

What would the government do? The chances of it meeting the gap with money from the Treasury are non-existent, especially since the Chancellor is proposing to outlaw the government spending more than it raises in any one year. It’s unlikely to be able to find any more money to give to HA’s when it is under extreme pressure to find £12 billion savings in the benefits budget.

This is likely to mean that neither HA’s nor Councils will be able to build replacements, certainly not at the level of one for one, so the outcome of this policy will inevitably be a decline in the number of ‘social homes’ owned by Councils and HA’s. In London it will tend to reinforce the tendency towards ‘social cleansing’; driving ‘social tenants’ and the poor out of London. Hence this policy will make the housing crisis worse.

We shall see exactly what the details of the Bill will be when the government publishes a consultation document. However, they are likely to be hoist on their own petard. Ill thought out policy will catch any government out. The problem is that the social consequences will be disastrous. That’s why a campaign to throw out the Bill is critical.

Martin Wicks

June 15th 2015

Threshold at and above which Councils will have to sell homes when vacant

  1 bedroom 2 bedrooms 3 bedrooms 4 bedrooms 5 or more bedrooms
North East £80,000 £125,000 £155,000 £250,000 £310,000
North West £90,000 £130,000 £160,000 £270,000 £430,000
Yorkshire & Humber £85,000 £130,000 £165,000 £265,000 £375,000
East Midlands £105,000 £145,000 £175,000 £320,000 £430,000
West Midlands £100,000 £145,000 £180,000 £305,000 £415,000
East £155,000 £220,000 £265,000 £440,000 £635,000
London £340,000 £400,000 £490,000 £790,000 £1,205,000
South East £165,000 £250,000 £320,000 £495,000 £755,000
South West £135,000 £200,000 £260,000 £375,000 £535,000