1.The Department has presented Parliament with little information on the potential impacts of the legislation required to implement this policy. The Department’s published impact assessment does not provide a detailed assessment of the full impact of extending the Right to Buy to housing associations and the sale of higher-value council homes or detailed information on the financial implications of this policy. While the Department says that key details—such as the definition of a high-value council home—will be set out in secondary legislation, the practical effect of legislating in this manner will be to limit Parliamentary scrutiny of what is proposed. The importance of proper scrutiny of the Department’s proposals is underlined by the concerns raised by expert stakeholders that this policy would lead to those in need of social housing suffering greater overcrowding. Equally, concerns have been raised about how the policy may have particular impacts in different areas, notably in London and in rural areas.
Recommendation: The Department should publish a full impact assessment containing analysis in line with the guidance on policy appraisal in HM Treasury’s Green Book, to accompany the proposed secondary legislation, setting out the:
2.It is not clear how this policy will be funded in practice, or what its financial impacts might be. The Department’s intention is for this policy to be fully funded by local authorities, but it was unable to provide any figures to demonstrate that this would be the case, with the risk that additional funding from central government will be required. More widely, an even bigger risk will fall on those local authorities required to sell housing stock to fund the policy, as those assets will in effect be transfered to central government. But the Department did not appear to have a good understanding of the size of these risks, or to have any plans for mitigating them.
Recommendation: The Department should, by the time of the Autumn Statement in 2016, publish a full analysis showing how this policy is to be funded, provide a clear statement of where financial and other risks lie, and spell out its contingency plan if its policies prove not to be fiscally neutral.
3.The commitment to replace homes sold under this policy on at least a one-for-one basis will not ensure that these will be like-for-like replacements as regards size, location or tenure. Experience of the reinvigorated Right to Buy for council tenants, introduced in 2012, shows that meeting such one-for-one replacement targets can be difficult: achieving that target will require a five-fold acceleration in housing starts and acquisitions from current levels. Moreover, replacement homes can be in different areas, be a different size, and cost more to rent. Neither do they need to be new homes: under the Department’s rules, local authorities are allowed to buy existing homes from the market, which can include former council housing they have previously sold at a discount under the Right to Buy. Where new homes are built in different areas, or are let at higher rents or sold as Starter Homes, the Department’s policy of extending the Right to Buy could mean a long-term reduction in homes for social rent in some areas.
Recommendation: The Department should publish data on where replacement homes are built, what size and type of tenure they are, and when they are completed (not merely started) for:
4.Increases in the value of discounts available under Right to Buy have increased the risk of abuse. Risk of fraud has existed since the Right to Buy was established in 1980. But increases in the level of discounts since 2012 from £30,000 to some £100,000 (after adjusting for inflation) have increased the risk of abuse. In 2014 the Audit Commission estimated Right to Buy fraud had increased five-fold to reach £12.3 million per year. In addition to fraud, Right to Buy discounts attract third party funders, who in return for helping those entitled to the discounts to buy their home, may subsequently claim a share of the discount or even ownership of the property. Local authorities have sought to vet Right to Buy applications to mitigate these risks, but already report finding it difficult to cope with expanding workloads since discounts were increased in 2012.
Recommendation: The Department should write to us within six months:
Prepared 26 April 2016