4The Right to Buy
25.The extension of the Right to Buy to housing association tenants is a priority policy for the Government and was included in the Conservative Party’s manifesto for the 2015 election. The merits of the policy have been debated during the passage of the Housing and Planning Bill and we will not repeat the arguments. We support an increase in home ownership and the principle of giving tenants the right to own their own home, provided that the homes sold under the Right to Buy are replaced on a one-for-one basis and housing continues to be delivered across all tenures to meet the country’s housing needs. We also want the concerns identified in the research we commissioned to be addressed.
Compensation
26.The Housing and Planning Bill, which had its First Reading on 13 October 2015, contained provisions to give effect to the voluntary agreement. However some uncertainty remained since the Bill provided that “The Secretary of State may make grants to private registered providers in respect of Right to Buy discounts” and that these grants “may be made on any terms and conditions the Secretary of State considers appropriate.”10 This did not entirely reflect the agreement published by the NHF, which stated that housing associations would receive compensation for the full amount of the RTB discount and with only the agreed terms and conditions attached. When we asked about the wording of the legislation, Mr Orr explained “If there is full compensation, then the sales will happen and the agreement holds. If there is not full compensation and, for whatever reason, the Government change their mind about doing that, then the agreement will fall.”11 Brandon Lewis MP, Minister of State for Housing and Planning, assured us that the Government is “determined to make sure we deliver that extension of Right to Buy, and that means we need to deliver on our side of the bargain, which is making sure those housing associations do get the full value and full compensation for the discount on those homes.”12
27.Given that the Government has made a public commitment to reimbursing housing associations the full amount of the RTB discount, the language of the Housing and Planning Bill could be clearer. If housing associations do not receive the full amount of discount given to the tenant, then their ability to build new homes will be severely compromised, and their status as independent organisations undermined as the agreement would not be upheld. Tony Stacey, Chief Executive of South Yorkshire Housing Association, described for us the challenges his organisation would face when replacing a sold property. South Yorkshire’s average new build cost is around £125,000, while the average value of their stock is £80,000.13 If South Yorkshire and other housing associations are to build at least one new property for every home sold through the extended RTB, then at the very least they should recover the full value of the home sold. The voluntary deal offers housing associations flexibility in how they replenish the housing supply following a sale, but this flexibility would be undermined if the public commitment to full reimbursement were reneged upon. The Minister argued that the language used in the Bill was normal Parliamentary drafting.14 While recognising the Minister’s intentions, we believe that the issue of full reimbursement is of such importance that it should be clearly reaffirmed, in the Bill or elsewhere, to safeguard against any future policy changes.
Exemptions and the portable discount
28.The voluntary deal outlines circumstances in which housing associations would have the discretion not to sell. However when explaining examples of exemptions, it states “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.”15 We received a large number of submissions from housing associations arguing that specialist properties should not be treated in the same way as more mainstream homes (see for example Broadland Housing Association16 and CESSA17). The submission from G15 explained that many specialist homes have been built to suit very specific needs of residents, and that as a result they are often both in short supply and more difficult to replace if sold.18 We support the discretion afforded to housing associations by the deal but believe that there is a need for explicit exemption of some forms of housing from RTB. In particular, supported housing and specialist support properties should not be subject to the extension.
29.We heard from witnesses such as David Montague from L&Q Housing and Ian McDermott from the Sanctuary Group19 that in the event of housing associations declining to sell particular properties, housing associations would offer a portable discount. However we were concerned at the impact on supported housing schemes. Diana Kingdon, Chief Executive of Greenoak Housing Association, told us that her organisation voted against the voluntary deal because it did not explicitly exempt specialist housing:
“We do not see why we should be giving a portable discount for people who are in the most suitable housing for them at the current time with the support that they need. The concern is that they could be persuaded by family members to move out of somewhere where they do have adequate support.”20
30.The Government is seeking to promote home ownership and improve the overall supply of housing in the country. We are concerned that including specialist and supported housing in the extended Right to Buy will affect the availability of such housing to those in need.
31.We received much evidence on the challenges of building new homes in rural areas and meeting the existing housing need, and we are concerned that an extended RTB might worsen the situation. Broadland Housing Association, which operates in Norfolk, outlined the challenges for people wishing to buy a home and for those wishing to build:
“Mean house price in Norfolk in 2013 was £191,453. Average earnings were just £22,324. The ratio of house prices to incomes was 8.6 and the average household income required for an 80 per cent mortgage was £43,761… [When building new homes] Exception sites are difficult to secure and frequently rely on the goodwill of local landowners. The reality must be that many landowners, whilst keen to help house local people, will be reluctant if social landlords cannot guarantee their long-term retention as affordable rent homes…There is a huge danger to local rural economies if potentially low paid employees cannot find suitable affordable housing locally.”21
32.Diana Kingdon from Greenoak also described how RTB could affect rural housing supply: “what we fear is, having identified these sites, which are often provided either free or at agricultural values, that land will not be made available if there is a risk of Right to Buy. Unless they are excluded, there will always be a potential risk”.22 Similarly, Stephen Hills, Director of Housing for South Cambridgeshire District Council told us that:
“we have done an awful lot of really good work around rural exception sites. Often, there is a philanthropic aspect to landowners bringing those sites forward at all. Once they found out that the Right to Buy could apply, we have been hearing that they are thinking of withdrawing that land, because they want it to be affordable housing for local people in those rural communities. When they hear that it might be sold into the market, some of them potentially are going to withdraw the land.”23
33.Dr Mary Taylor, Chief Executive of the Scottish Federation of Housing Associations, told us that ‘pressured area’ status had been used in Scotland to protect areas where demand was already outstripping supply.24 We believe that people in rural areas have a right to access affordable housing and that, given the challenges of building new housing, we welcome the discretion that rural communities and specialist supported housing have in the voluntary agreement. A formal exemption for rural areas would help reassure landowners who are considering providing land for rural housing that the supply of land for new homes would not be affected and they did not have to rely on the discretion of housing associations to preserve the land for local use in perpetuity. We would define ‘rural locations’ as per the terms of Section 17 of the Housing Act 1996 to reflect the existing exclusions under the Right to Acquire. Provision of land for rural housing is important, and every care should be taken not to discourage landowners from releasing land. We also acknowledge the confirmation from David Orr25 and from housing associations26 that restrictive covenants on specific sites and properties built using charitable funds would take precedence over the extended Right to Buy, but believe that to avoid confusion or possible legal challenges, these should be explicitly exempt from the extended RTB.
34.While the portable discount might mitigate the impact of extending the RTB to rural properties, the practicalities are unclear. Ian McDermott, Chief Operating Officer of the Sanctuary Group, told us that “we have stock in national parks, for example, which was built with covenants around selling. Those will not be for sale, but we will be offering portable discounts to those residents.”27 However given the size of national parks, tenants could find themselves having to travel many miles to find a suitable property that is available. It is unclear to us how the portable discount will allow tenants the RTB given that they will have to move extended distances to exercise this right.
Geographical variances in impact
35.We note the finding from our commissioned research that the take up of the RTB varies in different areas. Sales under the statutory RTB for council tenants were initially highest in smaller, rural districts and areas where owner-occupation levels were already high. Given that such areas often have higher property values and the discounts available through RTB, it is likely that this pattern will be replicated for the extended RTB. We are therefore concerned that in such areas the provision of social housing would be reduced. This would be particularly harmful for rural communities if local people were not able to afford to continue living there. The Rural Housing Alliance and the Rural Services Network explain:
“The extension of the Right to Buy to Housing Association tenants would make this situation very much worse by reducing current supply and future delivery and in some cases lead to the complete lack of affordable housing in the parish. In so doing it will remove the opportunity for those on low incomes to live in rural areas, undermining the social and economic viability of rural communities. In short resulting in the … exile of these people from their families, roots, shared history and each other.”28
36.The challenges of high-value property and a limited supply of land in rural areas can also be seen in large cities, especially in London. The disproportionate impact of the extended RTB also applies to more urban communities. Our commissioned research also found that RTB sales varied significantly within cities. The research cited a study of RTB sales in Edinburgh which showed that the most affluent council estates experienced most tenure change as a result of RTB. Less popular areas and tower blocks in the city, on the other hand, experienced high and increasing concentrations of deprivation. Another study identified the range with 82 per cent of the existing stock in popular areas in Edinburgh sold through RTB since 1980, compared to just 3 per cent in the larger and more deprived council estates in the city. Geographical variances in the expected take-up of the extended RTB are a cause for concern as they could change the nature of social housing in some areas, severely limiting its provision in others.
Tenants’ awareness of financial and maintenance responsibilities
37.We heard more than once that tenants who had bought their home through the original iteration of RTB had not always been made sufficiently aware of their maintenance or financial obligations. The Scottish Federation of Housing Association told us that many purchasers had not realised that they would be liable for the repair and maintenance costs previously included in their rent.29 Jenny Osbourne, Chief Executive of the Tenants Participation Advisory Service, described a “psychological shift”30 for tenants when they had to become responsible for things previously covered by their rental payments. Home ownership is usually beneficial, but we noted with concern the written submission from the Joseph Rowntree Foundation:
“Home ownership is not a guaranteed route out of poverty. There are 4.5million people in poverty that own outright or with a mortgage. JRF’s research suggests above-average overall poverty rates amongst those who enter home ownership from social renting, a pathway suggestive of the Right to Buy.”31
38.The Government’s aim is to increase social mobility by extending the RTB and prioritising home ownership. However home ownership may not be the best option for everybody: tenants who are considering buying their home must have made available to them the full extent of their prospective financial and maintenance responsibilities to help them make an informed decision. The Affinity Sutton Housing Association submitted evidence which suggests that those considering buying their home are not always in the strongest financial position:
“Our 2015 resident survey shows few could afford the costs of meeting their aspirations. While 15 per cent said they were very likely to buy their home through RTB, 40 per cent of these are in receipt of housing benefit, 52 per cent are in arrears and 35 per cent are not in work.”32
39.We therefore argue that associations should build measures into the RTB purchase process to support and advise tenants of their financial options, the implications of these options and the likely commitment going forward, and enable them to make an informed decision. This support and advice ought to be independent and its quality should be monitored. We welcome the work undertaken on this as part of the pilot scheme and we look forward to seeing the results from the pilot housing associations.
RTB fraud
40.We were also concerned by the possibility of RTB fraud. RTB fraud can occur in different ways, such as the tenant misrepresenting their circumstances (for example regarding the length of their tenancy to get an increased discount or attempting to purchase a property whilst not using it as their main residence). Other examples of RTB fraud include a third party purchasing a home on behalf of the tenant to take advantage of the discounts available. The NHF told us that:
“A report from the London Boroughs’ Fraud Investigators’ Group showed that there has been a sharp increase in cases of Right to Buy fraud, with cases in London more than doubling in the last year. This raises significant concerns that some tenants are being exploited by people who want to take advantage of the opportunity to purchase property at a substantial discount. It is essential that robust measures are introduced to prevent this both to protect tenants and to protect the taxpayers’ money that is funding the discount.”33
41.When we asked the NHF Chief Executive about RTB fraud, Mr Orr told us:
“This is one of the areas that needs to be part of the continuing conversation that we are having with Government and officials, in DCLG and elsewhere…There is a proper concern about the potential for fraud and for bad behaviour, and that is one of the areas that we will have to look at. I do not have a complete answer to the question, at this stage.”34
42.We welcome the NHF’s acknowledgement of the issue of Right to Buy fraud and the commitment to work with Government to address it, and expect the NHF and Government to issue a joint statement in due course setting out the steps they have agreed on. We believe that measures to tackle RTB fraud must be put in place as soon as possible.
RTB administration
43.We recognise that provision of advice to tenants and measures to tackle fraud may create an administrative burden for housing associations. Red Kite Community Housing, many of whose customers have an existing RTB as Red Kite is a Large Scale Voluntary Transfer (LSVT) organisation (see para 52 below), told us that between 2011 and 2016 they had 315 applications from tenants wishing to purchase their property, but only 132 were sold. They argued that “The administration of RTB can be frustrated by multiple requests for valuation by tenants who never then exercise their rights. This is an unnecessary cost and waste to housing associations and should be discouraged”35. Similarly, Eileen Patterson, Director of Housing Services at the Fold Housing Association in Northern Ireland told us:
“We do have a number who will register an application and then not proceed, and there are administrative costs associated with it, because we have to carry out a survey to get market value, and we have to calculate the discount. But within our scheme, we do charge a valuation fee towards the administration costs. That is refunded if they exercise the Right to Buy and it goes through. Associations can set that limit; it is a very arbitrary figure in Fold. We charge £100. It does not cover our costs, but it goes some way towards it. If the application proceeds to sale, we then refund that.”36
44.To offset the administrative burden and reduce the number of speculative enquiries, housing associations should be able to follow the practice in Northern Ireland and charge a set nominal administration fee for property valuations and other administrative work, to be refunded on completion of the sale. Such a fee should be set at a level which reflects the costs incurred.
RTB homes in the private rented sector
45.It is clear that a significant number of properties sold under the statutory RTB are now in the private rental sector. In August 2015 Inside Housing published an analysis based on Freedom of Information requests to 91 councils, which found that almost 40 per cent of ex-council flats sold through the statutory RTB were now in the private rented sector.37 There is a similar pattern in Scotland; Dr Mary Taylor from the Scottish Federation of Housing Associations explained that:
[Many of the properties sold through RTB ended up] “in the private rented sector at rents approximately 50 per cent higher than social rents for the exact same properties, in worse conditions. That has impacted on our ability to manage the assets of social landlords, and on the public purse in terms of the housing benefit bill, and has constrained access for aspiring tenants and for those needing to move.”38
46.We note also the finding from our commissioned research of increased housing benefit costs of over £1,000 per year per claimant in the private rented sector rather than in social housing (see para 11); this disparity will be even greater in London where rents are higher. Selling social housing assets, only for them to become both more expensive and possibly lower quality housing, seems to run counter to the Government’s objectives for RTB. In addition to concerns over the increased costs to the public purse as a result of increased housing benefit payments, we heard that communities were likely to become increasingly fragmented.39 We believe that measures to limit homes sold through the RTB ending up in the private rented sector should be explored and ask the relevant stakeholders to investigate such measures as a provision that any RTB home re-sold within ten years should first be offered to local housing associations and the local authority, who could choose to buy it at market price, and a restrictive covenant requiring a minimum period of owner-occupation.
10 Housing and Planning Bill, Clause 62 [Bill 75 (2015-16)]. All citations of the Bill are of the text agreed by the Commons at Third Reading on 12 January 2016.
11 Q8
12 Q285
13 Q57 [Tony Stacey]
14 Q285
15 National Housing Federation, An offer to extend Right to Buy discounts to housing association tenants, October 2015, Chapter One, para 2
17 Church of England Soldiers’, Sailors’ & Airmen’s Housing Association Limited (CESSA HA) (RTB003)
19 Q71
20 Q120 [Diana Kingdon]
22 Q135 [Diana Kingdon]
23 Q146 [Stephen Hills]
24 Q212
25 Q11
26 Q71
27 Q71 [Ian McDermott]
30 Q57
34 Q59
36 Q218 [Eileen Patterson]
37 ‘Revealed: 40 per cent of ex-council flats now rented privately’, Inside Housing, 14th August 2015
38 Q205
39 Q32 [Jenny Osbourne]
© Parliamentary copyright 2015
Prepared 8 February 2016