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Extending the RTB: Deal or no deal? 02/10/2015

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 basis.


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 Business Plans.


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 raised.


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.

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