Housing associations and the Right to Buy Contents

Conclusions and recommendations

Background and the voluntary deal

1.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. (Paragraph 16)

2.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. (Paragraph 19)

The Right to Buy

3.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. (Paragraph 25)

4.While recognising the Minister’s intentions, we believe that the issue of full reimbursement [of the RTB discount] is of such importance that it should be clearly reaffirmed, in the Bill or elsewhere, to safeguard against any future policy changes. (Paragraph 27)

5.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. (Paragraph 33)

6.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 Orr and from housing associations 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. (Paragraph 33)

7.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. (Paragraph 34)

8.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. (Paragraph 36)

9.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. (Paragraph 39)

10.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. (Paragraph 42)

11.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. (Paragraph 44)

12.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. (Paragraph 46)

Council home sales

13.We believe in the principle that public policy should usually be funded by central Government, rather than through a levy on local authorities, especially as [in this case] the impact of this levy will fall only on some local authorities, yet will be applied nationally. (Paragraph 49)

14.We believe that it is essential that definitions of ‘high value’ must not be based only on regional levels but take full account of local circumstances by being agreed in consultation with the local authority rather than through a blanket national approach. The definitions are long overdue: ideally, they should have been published at the time of the voluntary agreement. (Paragraph 50)

15.We believe [increasing housing supply] will only be possible if the Government works with individual local authorities to determine what the local housing needs are and how best to achieve the aim of increased supply. Local authorities are best placed to understand their communities and know where specific pressures exist, and they must have the ability to act in the interests of their residents. Councils also need to be able to retain sufficient funding from the sales if they are to build new homes to replace those sold. (Paragraph 50)

16.If only councils which have retained some housing stock will be required to make the payment to fund the RTB discounts, then the effect on communities and the financial risk for local authorities will be far greater in some areas than others. This is another ground for our belief that a national policy should be funded nationally. (Paragraph 53)

17.We fear that councils will be exposed to the risk of properties not becoming vacant at the expected rate and of sales income being lower than anticipated. Housing markets can fluctuate throughout a year due to factors beyond a council’s control, and we are concerned that this policy will make it harder for local authorities to plan prudently. (Paragraph 54)

18.The Government’s figures for the anticipated costs of the three policies of the Right to Buy extension, the replacement of sold council homes and the Brownfield Regeneration Fund, and its explanation of how they will be funded should have been published some time ago, preferably when the voluntary agreement with the NHF was reached. The Government should now publish these as soon as possible. (Paragraph 58)

19.The Government should be clear about how the extended RTB will be phased in and what the eligibility criteria will be. (Paragraph 60)

20.We support the objective of encouraging local authorities to manage their assets more efficiently, but are sceptical that forcing councils to sell financially and socially valuable properties is a sustainable funding source for the RTB. (Paragraph 63)

21.The evidence we received from local authorities, both in London and in other parts of the country, is that councils do not always have large reserves of available land with which to deliver housing. However across the public sector there is land available and we support giving councils the powers to enter into partnerships and other appropriate arrangements to use land held by public bodies to build affordable housing to increase supply. (Paragraph 66)

22.More work should be done to encourage all public bodies, not just councils, to make surplus land available for housing and bring it into productive use. Ministers may need to overhaul the Treasury’s value-for-money rules to create the right incentives. (Paragraph 66)

Building new homes

23.The need for new starts to keep pace with planning permissions underlines the challenge of building new homes, including ensuring at least one new home built for every RTB sale. (Paragraph 69)

24.The Government should publish more details on how it will achieve its objective of at least one-for-one replacement of sold homes, and address factors such as the availability of land, the capacity of the home building industry, including the shortage of skills, and the uncertainty of income from council home sales. (Paragraph 69)

25.We do not believe that there is a single solution to the housing crisis in this country and we acknowledge the scale of the challenge. (Paragraph 71)

26.The capacity of the home-building industry nationally is of cardinal importance: we intend to monitor it, and will launch an inquiry into it in due course if this seems useful. (Paragraph 72)

27.We believe that if the policy of RTB is to realise its objective of increasing social mobility, the tenure and rent levels of the replacement stock is of fundamental importance. The Government must take steps to ensure that the homes built to replace RTB and council home sales meet the needs of local communities and have a tenure mix that reflects local circumstances. (Paragraph 77)

28.Home builders will understandably seek to build the products with the highest return, and we are concerned that the Government’s policy should not lead to fewer truly affordable homes to rent being built. There is a finite amount of money available from developers to deliver affordable housing, and the duty placed on councils is likely to mean that building Starter Homes could be prioritised over other types of affordable housing. Local authorities will be under pressure to satisfy their legal obligations, and this could make negotiations with developers extremely difficult and could undermine Local Plans. Starter Homes should not be built at the expense of other forms of tenure; where the need exists, it is vital that homes for affordable rent are built to reflect local needs. The definition of affordable housing should better reflect individual and local circumstances. (Paragraph 80)

29.We urge the Government to review the period of time over which the [Starter Home] discount would operate. (Paragraph 81)

30.We note the emphasis on Starter Homes and the possible consequences for levels of affordable housing. Starter Homes will suit some people, but not all. We are particularly concerned that the requirement to include them in the homes that can be provided for through s106 agreements could change the balance of affordable housing and could put it out of reach for people on low or unstable incomes. Starter Homes should be built in addition to homes for affordable rent where the need exists locally. (Paragraph 83)

31.The Government should publish annual figures on new homes built, specifying how many homes in each local authority area were sold under, and built using the proceeds from, Right to Buy, and what tenures the new homes are. Without these figures, it will not be possible to ascertain whether or not the extended Right to Buy is a success in terms of adding to the stock. (Paragraph 84)

The 1 per cent rent reduction

32. We are concerned that the 1 per cent rent reduction could impact on housing associations’ ability to provide services which help people find work and get new skills, in addition to their development programmes and delivery of new homes, while recognising that it will also mean a reduction in rent payments for some tenants. (Paragraph 91)

33.It is important that housing associations which generate surpluses apply them to delivering new housing. (Paragraph 96)

34.The costs of supported housing are different to those of more mainstream providers. Their income should not therefore be treated as comparable; nor should the same measures be applied without exemptions. (Paragraph 98)

35.The Government should consider returning supported housing rents to the pre-Summer Budget rent agreement of CPI plus 1 per cent annual increases. We welcome the announcement of 27 January 2015 that supported housing will be exempt from the 1 per cent rent reduction for 2016/17 while the Government carries out a review. (Paragraph 98)

36.We believe that before the Autumn Statement 2016 Government should provide some certainty over rent levels post 2020, to assist long-term business planning and increase investor confidence. In the long term, housing associations should have the freedom to set their own rents, recognising that tenants’ ability to pay rents will be limited by the future application of Local Housing Allowance rates to Housing Benefit and Universal Credit claimants living in social rented housing. The Government is committed to deregulating the housing association sector: freedom for housing associations to set the rents for their tenants should be the next step, since housing associations understand their tenants and the local market and are best placed to set fair rent levels. (Paragraph 99)

Pay to Stay

37.We welcome the news from the Minister that pay to stay has been revised as part of a package of deregulation so that it would be voluntary for housing associations. (Paragraph 103)

38.We believe that housing associations which choose to adopt pay to stay should have the discretion to set thresholds and taper mechanisms at levels which reflect local circumstances. However, we note that while it is clear that without some form of taper pay to stay may act as a disincentive to hard work, a graduated scheme would be difficult and costly for local authorities and housing associations to manage. In particular, the fact that information provided by HMRC will never be up to date means that there will always be over- or under-payments of rent. We note the serious concerns that have been raised about the household income thresholds, and ask the Government to keep them under review. (Paragraph 105)

The HCA and regulation

39.The Committee welcomes the commitment by the Government to deregulate housing associations and return them to the private sector. Housing associations’ strength is their independence and diversity. We encourage the Government to fully recognise housing associations’ status as private bodies. (Paragraph 106)

40.It is essential that balance between deregulation and provision of assurances to the lending community is achieved. Deregulatory measures should not weaken the assurances provided by the regulatory framework put in place by the HCA to protect private investments and allow development to take place. In this context, we endorse the conclusions reached by our predecessor Committee in the last Parliament in its report on the HCA’s Regulation Committee, in particular conclusions 3, 4 and 5 relating to financial viability ratings and the case of Cosmopolitan Housing Association. (Paragraph 108)

41.The HCA must satisfy itself that its regulatory framework can take account of the multitude of different organisations that are encompassed by the term ‘housing association’. Smaller providers, such as almshouses, and larger, much more commercialised organisations place very different requirements on the Regulator. The Regulator should therefore adopt a framework based on judged risk rather than more arbitrary factors such as size. (Paragraph 110)

42.The role of the Regulator should be clarified especially with respect to monitoring the replacement of homes sold under RTB. The appeal process for tenants who are refused the Right to Buy should be spelled out so that all parties can follow an agreed process. (Paragraph 111)

43.The HCA should explain how it plans to meet its responsibilities for supporting development of the new homes to be built as part of the policy, particularly in light of concerns over the availability of land and capacity in the construction industry, while taking into account the different needs of different areas. (Paragraph 112)

The future

44.We will continue to monitor the impacts of ending lifetime tenancies. (Paragraph 114)

45.We believe that all housing associations should remain mindful of their social mission and not sacrifice philanthropy in pursuit of surpluses. (Paragraph 115)

46.We believe that the tenants of housing associations should have a say in how their provider delivers services and be able to hold them to account. As well as having the potential to deliver savings, tenant involvement can provide social dividends such as more cohesive communities. (Paragraph 117)

47.If mergers proceed, they must spread good practice, rather than spreading existing failings to more residents. The priority for mergers must be to deliver on housing associations’ social purpose, through improving services and enabling the building of more affordable homes. Increasing surpluses and saving money cannot be the sole motivator, and the Regulator and NHF have a role in ensuring this does not happen. (Paragraph 119)

48.The Government has ambitious plans to address the severe housing shortage and is seeking to do so by prioritising affordable home ownership. We welcome their efforts to increase the supply of new homes and the increased funding to tackle the housing crisis. However it remains important to not lose sight of the need to deliver homes that are truly affordable. Home ownership is the aspiration of many, but homes for affordable rent must still be provided for those who cannot afford to, or do not want to, buy a home. 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. (Paragraph 120)

© Parliamentary copyright 2015

Prepared 8 February 2016