Government throws more money at the housing market – to benefit home buyers
Through Help to Buy and other schemes the government is already spending twice as much on private housing – mainly through loans and guarantees – as it spends on building affordable rented homes. Not content with that, it’s now planning to spend £10 billion more – to help probably fewer than 150,000 housing association tenants buy their homes, with average grants of more than £60,000 each over the next five years.
Worse, the stock of rented homes will be affected in several different ways. First, when tenants buy, although there is a promise of replacement it seems likely that few if any of the new homes will be let at rents similar to the old ones. Second, whether homes sold in London can be replaced there at all, given land shortages and building costs, is still not resolved. And third, housing associations will have to be compensated for the discounts that tenants receive. To pay for these, local councils are to be forced to sell any homes in the top third of property values in their area, as they fall vacant. So in addition to losing over 12,000 homes annually through the current right to buy, councils will have to sell as many as 7,000 more each year, with sales concentrated on their most popular stock.
With no details yet available on how high-value areas will be defined, we can only speculate on the effects, but however the scheme is configured the outcome will be drastic for many councils and people on their waiting lists. Shelter suggests that Kensington and Chelsea will be the worst hit – having to sell nearly all its council houses – while several other London boroughs would be badly affected, along with places such as Cambridge, Warwick, Epping Forest and St Albans (all having to sell more than 40% of their council housing as it falls vacant).
Not surprisingly, councils were up in arms at the ‘voluntary’ agreement which housing associations made with the government last week, which gave much more detail and various concessions on the right to buy scheme, without casting any further light on how high-value sales will work for councils. For example, a key question is whether, when homes fall vacant, existing council tenants will still have a right of transfer, as they do now. This is something which the government has encouraged, so as to allow tenants to move for work, to get child care or for other reasons. The problem is that this would cut the numbers that could be sold off by half, probably meaning that the sales proceeds wouldn’t be enough to compensate housing associations for the cost of the new right to buy.
Either way, none of the independent commentators can get the government’s figures to stack up. In its election manifesto, it claimed high-value sales would provide sufficient money not only to replace the houses sold, but to compensate housing associations, enable them to replace houses the houses they sell, and still leave enough for a new £1 billion ‘Brownfield Sites Regeneration Scheme’. This now looks like a highly improbable set of commitments.
Given the promises already made to associations, local authorities are rightly concerned that it is their housing and their tenants who will bear the brunt of any shortfalls. Government has form in this area, because at the time it ‘reinvigorated’ the right to buy for council tenants three years ago, offering discounts now worth as much as £103,000, it promised all the extra houses sold would be replaced. Roll forward three years, and they have managed to replace only one in nine.