15 May DCLG published the final arrangements for reinvestment of Right-to-buy
receipts. Councils are invited to enter into agreements with
the government to use "additional" receipts to fund new affordable
rented homes. Signed agreements in relation to receipts in the
current quarter have to be returned by 27 June.
There are two conditions: receipts must be used within 3 years and
must constitute no more than 30 per cent of the spending on such
homes within that period. This represents a significant improvement
on DCLG's original proposal that receipts had to be used within 2
years - a condition that most ARCH members would have found very
tough to meet.
There has, however, been no change to the proposal to charge
councils a punitive 4 per cent over base rate of interest on
receipts which are not reinvested for the period they are retained
by councils before being returned for use by the HCA. This
gives councils a strong incentive to decide quickly either to
commit to reinvestment or to return the receipts straight
These conditions lay down a big challenge to councils intending to
sign agreements. The impact of the increased discounts and
re-promotion of Right to Buy is difficult to predict, so,
consequently is the volume of future receipts. Many councils have
not undertaken new building for rent for some years, and need to
gear up and reacquire forgotten skills. The 30 per cent limit will
require most councils to consider the provision of housing at
affordable rather than social rents, or a mix of the two.
Nevertheless, it is a challenge that councils need to accept, make
the best of, and if necessary argue through the drawbacks with DCLG
afterwards. If councils decide that the government's conditions are
too hard to meet, two things are likely to happen. The first is
that councils will lose effective control over where "their"
receipts are reinvested - there are no guarantees that the HCA will
use them to fund local housing association provision.
The second is that the government is likely to conclude that the
loss of rented housing through Right to Buy is not of great concern
to many councils and that councils are not much interested in
reasserting their role as providers of social housing. Unfair or
not, any such conclusion would be a setback for local government
and for housing.
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