The extension of the Right to Buy (RTB) to housing association
tenants is to be funded by the compulsory sale of local authority
housing assets. However, it would appear that local authorities are
to be nothing more than interested spectators to the voluntary deal
that seems to have been struck between the government and the
National Housing Federation (NHF) - details of which are currently
being put to housing associations.
Although housing association boards are being given a
ridiculously short six days in which to respond to the deal on
offer, in sharp contrast to stock retained councils, they are at
least being consulted!
Paragraph 4 of the NHF offer document says: "In line with its
manifesto commitment, we anticipate the government would put in
place arrangements to manage the financial costs of the policy to
ensure that the cost of sales does not exceed the value of receipts
received from the sale of high value council assets". Given that
the government have not yet honored the promise, made in announcing
the manifesto pledge to extend the RTB, that the government "will
consult on whether to cap expensive properties by region or by
smaller housing market areas", this seems to be putting the cart
before the horse!
Until that consultation is completed, the government cannot be
clear on the value of receipts that would be generated by the sale
of "high value council assets" or whether this will be sufficient
to cash flow the take up of RTB by housing association tenants.
The Prime Minister, in launching the manifesto pledge to extend
the RTB, said that the policy would be funded by raising
£4.5billion pa from the compulsory sale of "high value" council
housing as it became vacant. Based on the threshold caps published
so far, our recent survey of members clearly indicates that it's
unlikely that this will generate sufficient receipts to keep pace
with the expected early demand from housing association tenants
eager to take advantage of the significant RTB discounts on offer
and also fund the commitment to replace both the housing
association and local authority homes sold on a one for one
The danger for local councils is that, once the deal is struck
with housing associations, the government will simply adjust the
formula on sale of high value assets to lever in sufficient funds
from local councils to subsidise the cost of extending the RTB to
housing associations, forcing councils to sell more of their assets
to pay over the receipts to the government.
All this is rather ironic in that under the proposed deal it
states "The government recognises that there is a case for housing
associations to have greater control over their assets" … but this
will mean the government effectively taking back control of stock
retained councils' assets, laying waste to the principles of
self-financing and the 30 year Housing Business Plans and Asset
Management Strategies carefully developed by councils in
consultation with their tenants under the self-financing regime
introduced in 2012.
Also hidden in the offer document (paragraph 15) is a promise
that the government would implement deregulatory measures to enable
housing associations "to convert vacant properties from social or
affordable rent into other forms of tenure" and "give housing
associations greater control over who they house" - presumably allowing
housing associations the option of avoiding the four year one
percent per annum reduction in social rents by converting to market
rent and pick and choose their tenants to best suit their own
The document also calls for the government to examine whether
Section 106 and Large Scale Voluntary Transfer (LSVT) agreements
impose too many restrictions on housing associations. The document
ends by saying that, if implemented, the deal "would have the
potential to transform how housing associations operate, liberating
them to operate more commercially …" all achieved by funding the
deal through the sale of publicly owned local authority assets.
This begs the question as to whether this constitutes a breach of
State Aid rules.
Let's be honest and say that if the NHF and the government
strike a voluntary deal on this basis it will be good business for
most housing associations. I'm sure that when RTB for council
housing was first introduced in 1980 most councils would have
settled for a similar deal that would have seen them have the RTB
discounts reimbursed 100% by someone else and keep 100% of the
capital receipt from the sale of council housing.
ARCH argues that the government should not sign up to any deal
with the housing association sector based on funding the extension
of RTB by forcing councils to sell high value assets. The
government should first fulfil the Prime Minister's promise to
consult stock retained councils on the details of how much funding
is to be levied from local authorities, both collectively and
individually, to pay for this policy and how that funding is to be
ARCH Chair, Cllr Paul Ellis, has written a joint letter with the Chair of the NFA
(National Federation of ALMOs) to the Secretary of State calling
for formal consultation on these points before the government sign
up to any voluntary deal with the housing association sector.
Read The NHF's An offer to extend Right to Buy discounts
to housing association tenants.
Read the ARCH and NFA Chair's joint letter to the
Secretary of State.