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A challenging offer Matthew Warburton - 18/05/2012

house_4_sale_300On 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 away.

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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