Summary
Following the 2015 General Election, the Government announced that it was seeking to extend the Right to Buy to tenants of housing associations. This policy, alongside others such as the 1 per cent reduction in social rents and a ‘pay to stay’ model which would charge differential rents according to tenant income, was likely to have a significant impact on housing associations. We therefore wanted to explore how their work and the services they provide might change, and what the impact might be for the wider social housing sector and the provision of affordable homes.
Shortly after our investigations began, a deal to implement the extended Right to Buy on a voluntary basis was reached between the National Housing Federation and the Government. We recognise that the voluntary deal is a way of delivering a key policy from the Government’s Manifesto whilst maintaining the independence of housing associations. However there remains much uncertainty in the wording of the agreement, for example regarding whether associations which voted against it are bound by its terms and the extent of the discretion to decline sales.
The extended Right to Buy is designed to increase home ownership and increase housing supply. We support these aspirations and the principle of giving people the opportunity to buy their own home. Despite this, we feel that there are unresolved issues and remain concerned that the Government’s policies could have a detrimental effect on the provision of accessible and affordable housing across all tenures, particularly affordable rented. We are also concerned that the extended Right to Buy could hinder the provision of specialist and supported housing schemes. Maintaining and protecting the provision of affordable housing in rural areas is also an issue that we believe needs to be addressed in order to protect our rural communities. The terms of the voluntary agreement allow for portable discounts to be offered in place of certain properties, but it remains unclear how this would operate.
We found that large numbers of homes sold through the statutory Right to Buy for council tenants had in a relatively short space of time become rental properties in the private sector. The private rented sector is often more expensive than social housing and the quality of homes can be much lower. Selling social housing assets at a discount, only for them to become both more expensive and possibly of lower quality housing in the private rented sector is therefore a significant concern. We believe that measures to restrict homes sold through the Right to Buy ending up in the private rented sector need to be explored.
The Government proposes to fund the Right to Buy discounts for housing association tenants with the proceeds from the sale of high value council homes. However we believe that public policy should usually be funded by central Government, rather than through a levy on local authorities.
The definition of ‘high value’ has not yet been announced, and we feel that this is long overdue and should take account of individual local circumstances. Irrespective of the methodology, the robustness of the funding model is extremely questionable. We have not seen evidence that the Government has fully costed the proposals and we call on it to do so as a matter of urgency.
The success of the extended Right to Buy will largely depend upon the homes sold being replaced and the housing supply maintained. We note the scale of the challenge of building more homes to meet demand, but seek more details from the Government of how it will meet its objective of at least a one-for-one replacement of the sold homes. In particular, factors such as the availability of land, the capacity of the building industry and the uncertainty of income from council home sales need to be addressed. We recognise the scale of the Government’s policies regarding Starter Homes and the new legal duty on councils to ensure provision of 200,000 new Starter Homes across all reasonably sized sites, but it is important that homes for affordable rent are built where the need exists, particularly as Starter Homes can now count towards satisfying the affordable housing allocation in section 106 agreements.
Housing associations have also been required to adapt to the Government reducing social rents by 1 per cent a year for four years. We found that this reduction in their income is significant and could impact on the pastoral services provided, and could also impact on both housing associations’ development capacity and the viability of supported housing schemes. The reduction has caused significant uncertainty in the sector. In the long term, housing associations should have the freedom to set their own rents.
We welcome the recent announcement that supported housing rents will be exempt from the 1 per cent reduction for a year while the Government reviews the situation.
We also considered the proposed ‘pay to stay’ policy and welcome the Government’s announcement that this will be voluntary for housing associations. The suggested thresholds should be reviewed and we would support housing associations having local discretion, should they choose to adopt the policy.
It is clear that the housing association sector is undergoing a substantial change. We would encourage the Regulator to adopt a framework that is based on risk rather than factors such as size, and that recognises the sector’s diversity. Regardless of how housing associations might change in future we believe that it is vital that they remain mindful of their social mission and philanthropic purpose.
The Government has ambitious plans to address the severe housing shortage and is seeking to do so by prioritising affordable home ownership. Nonetheless rented housing at full market rents and sub-market rents will continue to be essential to meet the needs of many in our society and should exist alongside other forms of housing.
© Parliamentary copyright 2015
Prepared 8 February 2016