3Background and the voluntary deal
13.The Government’s commitment to extend the Right to Buy to housing associations was spelt out in its manifesto. However it was not universally welcomed. Some associations were in favour of extending the RTB, for example David Montague from L&Q Housing described to us the “great deal of overlap” between the objectives of his organisation and the Government’s.2 However other associations had concerns, as shown in the evidence from the Radian housing association which operates in southern England:
“Radian’s experience of the RTB introduced in the 1980s was a significant loss of homes. The environment was more benign then for developing new homes, with higher grant levels and no rent regulation enabling the organisation to continue growing. If the level of sales in this iteration is similar it is likely the number of affordable rented homes we have available will decline in an area of high demand.”3
14.The National Housing Federation (NHF) highlighted a number of issues that would need to be addressed in order to avoid undermining the supply of affordable housing. Among the issues it raised was the importance of independence for association boards and the ability to manage their own assets. The NHF also stressed the importance of ensuring that sold properties were replaced quickly, and argued that this would be far harder to achieve in some places, such as rural areas with land and planning restrictions and in communities where property values were either very high or very low.4
15.The NHF proposed the voluntary agreement in an attempt to avoid the proposal to legislate in the Housing and Planning Bill. The Federation worked with ministers to create an arrangement which it felt would preserve the independence of housing associations and give them the flexibility to make the deal work for their local areas. The Chief Executive, David Orr, explained:
“We have been opposed to the imposition of a statutory Right to Buy for housing associations and remain opposed to the imposition of a statutory Right to Buy for housing associations. The reason that we had the conversation with the Communities Secretary and others, and made the offer that we made and have now reached the agreement that we have reached, is because, as an organisation, we believe that it is absolutely fundamental that boards should be the primary decision makers in organisations, not Government. A statutory Right to Buy would have imposed an obligation on housing associations to sell assets that would have been determined by Government, rather than by the board of the organisation. A statutory Right to Buy would have required independent private social enterprises to do something whether or not they wanted to do it because the Government thought that they should do it. We think that is the wrong relationship between sector and state.”5
16.We believe that in the circumstances a voluntary agreement was the best way forward for both the Government and the NHF, and that this decision was taken in order to preserve the independence of housing associations, as explained by David Orr in his evidence.
17.Key features of the voluntary agreement are:6
- The RTB will be extended to all housing association tenants7 with discounts at the same level as the statutory RTB.
- All sales will be at open-market value and the Government will compensate the housing association for the full value of the discount.
- The presumption is that tenants will purchase the property in which they live. However housing associations will have the discretion not to sell the home under particular circumstances. These circumstances will be similar to, but not limited to, the exclusions under the existing Right to Buy and Right to Acquire, such as;
- where the property in question is particularly difficult to replace (such as in certain rural areas);
- if the property is integral to the operation of a service provided (such as sheltered accommodation); or
- if the property was built with exclusively charitable funds.
18.Under the terms of the agreement a housing association’s discretion is not clear-cut:
“In discussion with the Government, this offer includes some broad circumstances where a housing association could exercise discretion to decline a sale…This does not mean that a housing association would automatically decline to sell the particular property in these circumstances but these are examples of where the case to do so is likely to be clear. There may be other limited circumstances where it would be reasonable for a housing association to decline a sale.“8
19.The default presumption is that sales would proceed, rather than that the circumstances listed above would be automatically exempt. The voluntary agreement contained no absolute or partial exemptions, only examples of possible scenarios when a sale might not proceed. It is unclear from the voluntary agreement whether individual housing associations will be able to create their own criteria for exemptions or to judge each sale on a case by case basis. The voluntary agreement did not address the issues caused in areas with very high property values or where there was limited land available for new development, although these might be included in the circumstances in which a housing association might be able to refuse a sale. Whilst the general principles are understandable, there is a considerable lack of clarity on the detailed implementation. It is important that all the provisions of the deal are spelt out, including the circumstances in which housing associations have the right not to sell, as detailed in the agreement.
20.Other features of the deal are:
- Housing associations will be able to offer a portable discount to enable tenants to purchase an alternative property from either its or another association’s stock.
- If a housing association chooses to exercise discretion and decline a sale, an alternative property will be offered to the tenant.
- If a tenant is unhappy with the alternative property offered, or with the time taken to process a sale, they will be allowed to appeal to the Regulator to arbitrate.
- Measures will be put in place by the Government to ensure that the cost of the sales does not exceed the income from the sale of high value council homes.
21.The agreement also covers the replacement of homes sold under the extended RTB:
- Housing associations will reinvest the receipts from sales in the delivery of new housing supply.
- All properties sold under the extended RTB will be replaced on the basis of at least one-for-one. New homes must be delivered within three years, but the target will be two years.
- The Government will pay full compensation for RTB discounts direct to housing associations. 70 per cent will be paid on completion of the sale and the remaining 30 per cent when there is evidence of a start on site or acquisition.
- Housing associations will have flexibility over the type, tenure and location of replacement homes, in order to use receipts to respond to market pressures and local housing need. They can replace the sold homes with Starter Homes, shared ownership or other part buy and part rent models.
22.The voluntary deal also included a commitment from the Government to review the regulatory burden on housing associations and to reform the disposal and asset management regimes to smooth delivery of the policy.
23.In order to meet Parliamentary timelines and the publication of the Housing and Planning Bill, housing associations were given only a little over a week to tell the NHF whether or not they supported the voluntary agreement as an alternative to statutory enforcement of RTB. Inside Housing reported the outcome of the votes as 323 housing associations backing the proposals, 37 voting against, and 11 associations formally abstaining; 213 did not reply. The ballot was secret, and the NHF did not release details of how individual associations voted. However, the NHF did announce that the 323 members who voted in favour of the voluntary agreement owned a total of 2.26m homes, which represented 93 per cent of the total housing association stock.9
24.The voluntary agreement was proposed by the NHF and the Government agreed to it on the basis that it had support from the whole housing association sector. Those associations which voted against the agreement may therefore be expected to comply by its terms, but this has not been stated explicitly. It remains uncertain therefore how the voluntary agreement will be enforced for the 261 associations which did not vote in favour of it.
2 Q70 [David Montague]
5 Q3
6 National Housing Federation, An offer to extend Right to Buy discounts to housing association tenants, October 2015
7 This would only apply to tenants living in a social or affordable rented home.
8 National Housing Federation, An offer to extend Right to Buy discounts to housing association tenants, page 2, fifth bullet point
9 ‘RTB deal vote result announced’, Inside Housing, 3rd October 2015
© Parliamentary copyright 2015
Prepared 8 February 2016