Cllr John Moss is Chairman of Chingford & Woodford Green Conservative Association, a councillor in Waltham Forest and a former Parliamentary Candidate.
Councils across England have sold several thousand properties under the new Right to Buy which started in 2012. Many of them haven’t built a single home with the money and have simply handed it back to the Treasury, with interest, after three years of it sitting in their bank accounts doing nothing.
This is because of regulations covering what councils can do with the money they receive. The most onerous of which limits the percentage of funding for a new home that can come from Right to Buy receipts to just 30 per cent of the total cost. So, a £200,000 build cost needs £140,000 to be found from other sources. George Osborne’s one per cent cut in all social rents from 2016 made this even harder to achieve – because rising rents were helping to bridge that funding gap – and several plans were shelved as a consequence.
This is all because of a perceived political imperative that the home sold has to be replaced. That’s nonsense. The one sold has somebody living in it, it can’t be occupied by anybody else. So even if you had to sell three properties to build one, that one is a new, additional property available to house somebody.
But what if you could sell one home and build two with the money?
- Sell one property under Right to Buy. Almost everywhere there is an affordability problem and even with the maximum discount, you will probably have enough cash to build a new one.
- Find a piece of council land where two properties can be built, like an old unused block of garages or a bit of infill land on an existing estate (all those shelved projects!)
- Build one to sell at build cost + 10% (low-cost home ownership anybody?) retaining an equity stake equivalent to the land value, but charging no rent on that.
- Use that cash to build the second home and rent that one out.
What is really good about this idea is that those regulations can be changed in weeks. This doesn’t need legislation, it just needs political will. This could be in place by April 2018, old plans could be dusted off and this could give London Conservatives a huge boost for the elections next year.
The buyers of those low-cost homes should be entitled to buy the remaining equity with their own version of Right to Buy. They should build up a discount over time which is applied each time they buy an additional share. As the value of the retained share will be rising relative to the value of a home, not just a piece of land, councils will do very well out of this…