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Cllr John Moss is a councillor in Waltham Forest.

The Housing Minister, Gavin Barwell, has indicated that he is open to looking at how the new Right to Buy scheme, introduced in 2012, is working – provided any changes lead to the building of more homes. This is an opportunity to make the system simpler, generate more sales, and increase the number of homes built. But we have to bury the idea that one-for-one replacement is required.

The new Right to Buy scheme started in April 2012 and, together with reforms of the hyper-convoluted Housing Revenue Account system, this has opened the door to a significant increase in home-building by Councils. Indeed, the soon-to-be-retired head of Housing in my own Council, Waltham Forest, described the two together as “an absolute game-changer” in terms of new council home building.

However, Councils have been slow off the ground – maybe they expected Labour to win in 2015 and the scheme to be scrapped? And the rules around what receipts a Council actually gets and how they use that funding, create additional barriers to getting projects going. There are several “clawbacks” from the gross receipt and what a Council is then left with can only be used to fund a maximum of 30 per cent of a project’s cost. Finding the remaining 70 per cent has been a problem both for low value areas where the rents can’t justify borrowing and in high value areas where land and build costs are higher. The one per cent rent cut which came in from April 2016  also didn’t help as this squeezed any surpluses Councils might have had in the Housing Revenue Accounts, as well as reducing the income a Council might have hoped to get from any new homes.

However, the obsession with replacing homes sold one-for-one is a red herring. The homes sold are occupied, nobody else can live there. The ones built are empty and available to house people currently in temporary accommodation or on waiting lists. Not selling a home under Right to Buy doesn’t preserve “stock”, it preserves stasis. Nobody moves. Even if the occupying household moves out, they need a home somewhere else, so there is no net gain in the number of people housed. So, we should aim to build more homes with Right to Buy money and not regard it as a failure if one-for-one replacement isn’t achieved. (Though I demonstrated a couple of years ago, that in London, the cash raised was probably enough to build two homes for every one sold!)

The first and easiest thing to do would be to raise the percentage of funding for a new homes project which can come from Right to Buy receipts. If a Council cannot fund projects because they can’t make them work at 30 per cent, the money goes back to Treasury, with interest, but only after three years. That will then be passed to the HCA and, eventually, find its way to other house-builders, probably at a lower multiple, but will we ever be able to say and how long will it take?

If we want new homes more quickly, raise the percentage to 50 per cent and let Councils build. OK, if a Council has £300,000 of Right to Buy receipts, that would originally have generated £1m of investment and will now only generate £600,000. But at least it will be used and used more quickly. But what if you could get the Council pot up to £500,000 so there was no reduction in investment?

The way to do that is to reduce the clawbacks, particularly the “repayment” of HRA debt. As we are running a national deficit, in part to fund central Government grants to Housing Associations and regional government to fund house-building, it’s pointless to demand debt repayment from Councils. Let them keep this money, provided it goes to build more homes. Some of the other clawbacks are also entirely administrative and if they weren’t taken, the administrative cost would go as well.

The rent Councils can charge could also go up to whatever the Local Housing Allowance figure is for the home built and possibly be exempt from the one per cent rent cut.

And what if Councils could generate more cash from more sales? The highest value areas generate the lowest number of sales because even with a £104,000 discount, few Council tenants can afford to buy a £500,000 one bedroom flat in Kensington or Westminster. So, why not drop the arbitrary cash cap and instead allow a lower maximum percentage discount? It may sound perverse to suggest that giving buyers a bigger discount would generate more cash, but one sale is better than no sales, just as one new home built is better than no new homes built.

Currently, you “earn” a 35 per cent discount on the value of the home if you have been a tenant for 5 years, with a maximum discount of 70% after ten years, (gaining seven per cent per annum). But the cash cap applies. There are plans to reduce the initial period to three years. What if the initial discount were reduced to 25 per cent and the extra amount you could gain were to grow at five per cent per annum for five years – until it reached 50 per cent – but this figure applied to the whole value of a home without a cap? Then more cash could be raised from both lower value sales where the total cash discount is below the cap and from higher value sales which now happen, which would not have done so before.

Some other things the Government should also do to prevent RtB homes being “recycled” back in to rental homes would be to bar the home from any Housing Benefit claim and ban them from being rented out for ten years. Right to Buy purchasers should be expected to be doing it as a way of accessing low-cost home ownership. Not as a way to become landlords.

And finally, the scheme cooked up between the Government and Housing Associations to “compensate” Housing Associations for the full value of discounts given to tenants buying from them under Right to Buy, by forcing Councils to sell off “high-value” vacant homes, should be scrapped. Right to Buy receipts are a valuable source of funds to build new homes. Housing Associations can do it if they want to, without the need for Government support, and some already do. The Government should simply tell them that if they don’t, any grants they receive from the Government in future will instead be loans, with interest payable.

10 comments for: John Moss: A chance to boost Right to Buy sales

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