Is the Government about to perform a u-turn on extending the right to buy to housing association tenants?

two keys. concept to real estate

two keys. concept to real estate

The Conservative Party manifesto commitment to extend the ‘Right-to-Buy’ to housing association tenants was one of the most eye catching policy moments of the general election; re-igniting the debate about the original policy and its lasting impact on social housing and social mobility. The consensus appears to be that, despite any benefits arising from the sales themselves, more could have been done by successive governments to ensure the social housing which was sold was adequately replaced. So the focus has been on whether funding the extension of this right to 850,000 housing association tenants who might qualify (according to the National Housing Federation) by forcing councils to sell their high valued housing stock as they become vacant, could square this circle. Many believe not. That includes the Institute of Fiscal Studies who believe the government’s record (on its promise since 2012 to replace the stock ‘one for one’) has been “less than impressive”. While others have taken a more principled view asking how can the Government force independent businesses – many of whom are charities – to sell off their assets; indeed some have spoken about taking the Government to court over this issue.

But what are the Conservatives are actually proposing? No one has pressed them on the detail. We have assumed the worst. That much treasured and historic social housing assets like the Peabody estates will be put up for sale and will be lost forevermore to the public realm.  The Conservative manifesto seems very clear: “We will extend the ‘Right to Buy’ to tenants in Housing Associations.”  But that clarity is smudged somewhat in the No.10’s briefing pack published alongside the Queen’s Speech last week. Yes, in his introduction the Prime Minister repeats the manifesto pledge. But take a look at what is said inside where it refers to extending “Right to Buy levels of discount to housing association tenants”; suggesting that what the Government is actually proposing is to reform the existing housing association ‘Right to Acquire’ scheme by making it more attractive to tenants by bringing it closer in line with the “Right to Buy” by offering identical, and much higher, discounts that are on offer to council tenants. This would follow in the footsteps of the legislation passed in the last parliament which reduced the qualifying period (for tenants) for both schemes from five to three years.

So, what is the significance?  Well, that lies in the remaining differences between the two schemes, notably that the ‘Right to Acquire’ already applies to charitable housing associations (as well as non-charitable associations) and that it only applies to properties built (or refurbished) and supported by government grant (or properties transferred to a housing association from local councils) after 31 March 1997.  Enabling the government to potentially side-step any legal challenge – as Parliament has already agreed the principle that independent and charitable associations can be forced to sell their (government supported) asset; and ruling out the sale of historic housing association properties. While that leaves the possibility of a legal challenge on the adequacy of the policy to compensate housing associations to replace sold housing stock. The courts are unlikely to see their role as second-guessing government policy (as opposed to its legality) given that it is has made clear that replacing the stock will be provided for.

There is also the possibility that the government could do this without resorting to primary legislation. The details of the ‘Right to Acquire’ are set out in secondary legislation and the discounts are prescribed via a Ministerial written order. This would be welcomed in the Government Whips Office as the House of Lords – where Conservative peers are in the minority – may cause problems – like with the failed attempt in 1980 to include housing associations within the original ‘Right-to-Buy’ legislation However, the Government appears to be indicating otherwise; is this because it has other changes up its sleeve that requires primary legislation or does it realise that splitting the legislation – with council high valued sales being take forward in primary legislation – might just frustrate and antagonise Parliament, given the two policies are intrinsically linked. The House of Lords’ ability – even with manifesto commitments under the Salisbury Convention – to revise legislation, could mean the government conceding ground say for example introducing a ‘cost floor’ – a value below which homes would not be sold – or government funding guarantees on stock replacement.

So what has happened to cause this change of direction? Well first we have to consider that this was always the intention, and that the apparent shift just reflects that the language of politics is somewhat different to the language of policy.  Note that David Cameron and the Conservatives are still referring to ‘extending the Right to Buy’ – a sound bite which is easily understood by the public.

A number of press reports including from the Independent on Sunday claim that Whitehall sources say the Tories rushed out the announcement in the run up to the election when they believed the ideas could be shelved or watered down in any coalition with the Liberal Democrats or other parties.

Then maybe the threats coming from the housing sector as to possible legal action and opposing voices even among the Tory supporting press has given the rise to fears that support among the government’s slim parliamentary majority could fall away?

Alternatively, could it be that the new Secretary of State for Communities and Local Government, Greg Clark supported by a sceptical Treasury (it has been said George Osborne is none too keen, and sees the new social mobility fund as a better way to increase home ownership among social renters) are gently steering the manifesto commitment into calmer waters, so they can concentrate their efforts on ‘bigger fish’ like the Northern powerhouse strategy and increasing housing supply?

Now if increasing the attractiveness of the ‘Right to Acquire’ rather than extending the ‘Right to Buy’ is indeed what the government is up to, let’s be clear on a few things.  First, this is still a significant offer from government to housing association tenants – increasing the available discounts which can currently range from between £9,000 to £16,000 to a maximum of £77,900 or £103,900 in London under the ‘Right to Buy’.

Second, there are still some tricky issues still to be addressed; notably the issue of stock replacement. And in recent weeks, London Mayor and Conservative MP, Boris Johnson has made clear that it would be the “height of insanity” if sale proceeds are used to fund house building in areas where the shortage of housing is less acute (than London).  And finally, regardless of the approach eventually taken by the government, there is still a valid position in opposing the policy.

But the number of housing association tenants who might qualify, and who might take up the offer (two very different things) is likely to be significantly lower than that 221,000 tenants estimated by the National Housing Federation who might qualify, and could afford the mortgage; primarily because homes built before 1997 (which excludes roughly 0.9 million of 1.7 million housing association properties) and in small rural communities are protected and only self contain properties can be sold under the ‘Right to Acquire’.  Indeed, we have not seen a deluged of applications from the additional 550,000 housing association tenants who have a preserved ‘Right to buy’ (as they were former council tenants). While their number has quadrupled since 2010-11 when the government successively increased the tenant discounts the number of sales in 2013-14 still only amounted to 4,421; a figure which is dwarfed by the voluntary sales made by housing associations.

Nonetheless, housing associations (and councils) are finding it a distinct challenge to increase housing supply to the levels needed to meet demand. Before the election David Cameron claimed that progress made by the coalition government meant that housing supply would hit the 200,000 milestone in 2017. Why risk that?

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