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Extending Right to Buy to housing associations to cost £6bn, research claims

Extending the Right to Buy scheme to housing association tenants will cost £6bn over the next four years, research for the Local Government Association has suggested.

The claim came as the LGA criticised the National Housing Federation, which represents housing associations, for trying to strike a “secret deal” to voluntarily deliver the extension of the scheme.

Analysis by Savills for the LGA indicates that:

  • around 377,000 of housing association tenants (20%) will be able to afford to buy their own home and that 24,000 will take up this offer each year;
  • the majority of tenants taking up the Right to Buy (91%) will be purchasing their home for under £100,000;
  • the average national discount will be £63,271 per property, in London the average discount will be £95,533 and £52,431 outside;
  • around 1% (6,500) of council tenants are projected to purchase their council home every year over the next four years, up from 0.7% in 2013/14.

The LGA warned that “the offer must not be funded by forcing councils to sell-off their social housing, which would drive up rents and the housing benefit bill and lower the capacity of councils to build more homes and tackle waiting lists.

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“It is crucial that councils are able to retain 100% of receipts from the sale of any council homes to reinvest in the desperately needed homes across the country.”

The LGA also called on the Government to fund the policy by working with councils to build more homes on surplus public land.

The Association expressed disappointment that the National Housing Federation had "secretly attempted to strike a deal to voluntarily deliver the Right to Buy extension on the back of forcing the sale of council homes, and by its willingness to move away from providing the genuinely affordable homes the most vulnerable in our communities need”.

The LGA has demanded an urgent meeting with the Federation and ministers to ensure implementation of the scheme protects communities, councils and the Government "from any unintended consequences".

Cllr Peter Box, LGA housing spokesman, said: "We project around 100,000 housing association tenants are likely to take up the extension of Right to Buy up to 2020.

"Councils are ambitious to increase housebuilding across all tenures and support measures to help people into home ownership but this offer must absolutely not be funded by forcing councils to sell-off their homes. This could result in additional costs for the Government as more people move into the private rented sector and need housing benefit to afford higher rents.

“Councils should always be free to manage their assets to meet the needs of local communities and must retain 100% of all receipts to reinvest in new homes that our communities need and embark on large housing and regeneration programmes.”

Cllr Box added: "Rather than funding the sale of affordable homes by selling other affordable homes, councils can help the Government raise money by building more new homes. We could raise £13bn by developing surplus public sector land.

"This is more than enough to fund the Right to Buy extension over the long-term and would protect vital council investment in genuinely affordable homes crucial to investment in housebuilding, keeping rents low, and to reducing the housing benefit bill.”

The National Federation of ALMOs and the Association of Retained Council Housing have meanwhile expressed their disappointment to Government ministers over the lack of consultation in relation to the voluntary agreement to extend the Right to Buy to housing association tenants.

In a joint statement the two bodies said: “We understand that over the summer there has been negotiation between the NHF and Government on a voluntary agreement, the details of which are being put to housing associations by the NHF prior to submission of a formal offer to Government. These are all matters that impact on ALMOs and stock holding local authorities, and in which local councils have legitimate interests as strategic housing authorities.

“However stock retained councils and ALMOs have thus far been excluded from discussions that have apparently taken place between the Government and the housing association movement on this deal. Yet, under the deal, stock retained councils and their ALMOs are integral to the implementation of the agreement which is financially dependent on sale of high value council assets to compensate housing associations for the discount offered. The deal will also impact significantly on local authority allocation policies, nomination arrangements, and the disposal consents regime.”

The NFA and ARCH added: “The NHF offer includes commitment to one for one replacement of housing association homes sold, in exchange for full re-imbursement of the RTB discount. We welcome this commitment but we believe that local authorities as strategic housing authorities have a legitimate interest in both the location, tenure and mix of replacements (social rented, affordable rent, shared ownership and owner-occupied) that will be provided.

“Given councils are in effect being asked to fund the deal through disposal of their own housing assets, it would be wholly reasonable for the NFA and ARCH to expect ministers and the housing association sector to include some provision for full and proper engagement and consultation with stock retained councils and their ALMOs on the issues before any final ‘deal” is struck.”

Details of the two bodies’ concerns were set out in a joint letter to Communities Secretary Greg Clark. 

Together the NFA and ARCH represent more than one million council homes in England - a quarter of all people living in social housing, across 108 local authorities.

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