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Lord Mackay of Ardbrecknish: It may be helpful if, before I address the amendments before the Committee, I try to explain as briefly as I can how the new scheme will work and which properties it will apply to. The right is subject to various exclusions and applies only to properties provided in the future with public money. We have already debated that to a certain extent. The new right does not extend to any existing housing association property. A similar scheme for existing properties was introduced on 1st April this year. But participation by housing associations in this is voluntary. We have already agreed a set of proposals for the voluntary purchase grant scheme. We have based this primarily on the same rules as the proposed statutory grant, although we have agreed certain additional exceptions, reflecting the fact that investment decisions were made before the scheme existed. Housing associations are able (and will still be able) to dispose of particular property subject to approval by the Housing Corporation, without the use of grant.

Where a tenant purchases a property under the statutory purchase proposals (or under the analogous voluntary proposals) he will be required to pay the full market value of the property less a discount. In England this will be a fixed sum of between £9,000 and £16,000 depending on the location. In Wales it will be a fixed percentage or rate. The sums have to be established by secondary legislation. That discount will be paid in the form of government grant to the housing association, so that the housing association will receive the full market value. Once any loans or other legal obligations have been settled, the balance will be kept in a ring-fenced fund to be used to acquire or build further property in the locality.

This is an important feature and one which has often been overlooked in discussion. It means that, in effect, the housing association will have the resources to acquire a property at full market value. In almost all cases, where the property has been partly funded by loan, the association should be in a position to re-finance the loan component when another asset is acquired. Those who have criticised the proposals on the basis that in some areas it will be expensive to acquire replacement properties, should recognise that in those

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areas the market value received by the housing association will be correspondingly high--equivalent to the price of replacement property.

The provisions of the Bill mean that any properties built, acquired or renovated without public money will automatically be excluded from the right to acquire. We have already discussed that. Property renovated by housing associations out of their own resources will not be liable to statutory acquisition. Similarly, properties built on free or cheap land which, as a result of this effective subsidy do not require grant, will be outside the provisions.

I now address a matter which occurs later in the Bill and is a matter which I understand we shall not discuss this evening. I shall not comment on the rural aspect this evening. However, there are powers in Clause 17 to enable the Secretary of State to provide other exemptions, adaptations and modifications to the right to buy provisions in Part V of the 1985 Housing Act. We have already confirmed that the following exceptions will apply: first, the types of supported group developments for the physically or mentally disabled, or the elderly which are excluded from the existing right to buy; secondly, supported housing schemes for special needs accommodation--we have still to define the details of this--and, thirdly, properties where the attributable private debt is more than the market value.

Various proposals have been made this evening about further exemptions. Our position is that we wish to promote home ownership and to establish a clear statutory right. The statutory purchase grant scheme has been introduced so that in the future tenants of registered social landlords will have the same kind of right to buy their own home as do secure tenants of local authorities now. We do not think it is right to introduce a whole raft of additional exceptions which would apply only to those tenants who are now being given the right to buy for the first time.

This group of amendments would limit the number of tenants who will be able to benefit from the schemes. I do not think that noble Lords will be surprised to learn that I am not happy with any of the amendments.

Given the background that I have portrayed, perhaps I may now move to the amendments. Amendment No. 60 in the name of the noble Baroness, Lady Hamwee, would restrict the right-to-buy to tenants of housing association stock which had been produced with at least 20 per cent. public money. The amount of housing association grant paid on a scheme varies by region. At current rates it varies between about 40 per cent. and 70 per cent., but some schemes may receive less HAG; for example, if cheap land has been provided. The noble Baroness's amendment would, therefore, reduce the number of tenants eligible to purchase their homes.

We do not believe that there is a need for this amendment. Registered social landlords will be required, as I explained, to use the sale receipt to provide replacement property for social renting, regardless of the original amount of grant. The benefit of any contribution from reserves or donations in homes which are sold will, therefore, be retained in social housing. I believe that that is an important point which

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I hope allays the fear which I suspect underlies many of the amendments that the quantity of social rented housing will be reduced. In fact, the scheme we have devised prevents that by ensuring that the money is ring-fenced to be recycled into either new build or purchase for new social renting.

The figure of 20 per cent. appears to be an arbitrary one. I believe that it would be difficult to justify it to tenants who would not be too interested whether the contribution was 19 per cent. or 21 per cent.

Amendment No. 62 in the name of the noble Lord, Lord Berkeley, initially puzzled me a little. I have explained that there will be categories of housing which would be exempt--for example, sheltered accommodation which has common rooms and the like used largely but not exclusively for the elderly. As I have already explained, these current developments will be covered in secondary legislation.

However, I listened to the noble Lord. He seemed to be considering examples where there were community facilities, perhaps in housing which was not designed specifically for the groups that I have mentioned. I am sure that he approves of our decision about the specific groups of sheltered accommodation of the kind that I have mentioned.

His fears seemed to concern general social housing which had some community facilities built in, if I understood him correctly. Those community facilities may well add to the value of the individual dwellings, which would be reflected in the purchase price. If the community facilities remain, as I presume they will, in the registered landlord's ownership, they will still be available to the remaining tenants and to any new tenants who become owner-occupiers. Therefore, I hope that his fears on this point are groundless, especially against the background of the exemptions that I have already outlined.

Amendment No. 65 in the name of the noble Lord, Lord Williams of Elvel, would exclude properties where either the cost of provision or the private loan debt was greater than the open market value. Amendment No. 72 in the name of the noble Lord, Lord Berkeley, seeks to introduce a cost floor so that discount will not reduce the receipt below the market value.

Under the purchase grant scheme, the landlords will always receive the full market value of any property they sell. Even if this is less than the development costs, public subsidy will generally cushion them against loss. On the second point, I have already announced that landlords will have a discretion about selling where costs are greater than the outstanding private debt. But, like the other exceptions, this will be included in the regulations amending Part V of the Housing Act 1985, rather than on the face of the Bill. While I know that it only answers one aspect of the concerns of the noble Lord, Lord Williams, I hope that he will be satisfied by my assurance on the point.

Amendments Nos. 66 and 75 from the noble Baroness, Lady Hamwee, would exclude properties where essential repairs were to be carried out in the following three years. My noble friends Lady Gardner

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and Lord Hamilton commented on the issue. The exemption of excluding properties where essential repairs were to be carried out in the following three years does not apply to the traditional--if I may call it that--right to buy which has been operating successfully for the past 16 years. I see no need for the exemption in the new scheme. Registered social landlords will be required to provide tenants with an estimate of any service charges they will have to pay for repair costs in the first five years of their lease. The social landlords will not be allowed to charge more than the estimate. I hope that protection will help to allay some of the fears of the noble Baroness and my noble friends.

Turning to Amendment No. 78 from the noble Lord, Lord Williams, we have already made sure that landlords--

Lord Williams of Elvel: I am sorry to interrupt the Minister. Although I agreed to the grouping of Amendment No. 78 with these amendments, quite properly, it trespasses on rural areas. I should be grateful if the Minister could restrain his comments because many Members of the Committee would like to take Amendment No. 78 with amendments on rural areas with which we shall deal later.

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