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Time to sign up for RTB replacements Matthew Warburton - 22/06/2012

sign_dottedx300The deadline for councils to decide whether to take up the Government's offer to use RTB receipts to build new homes is fast approaching. Councils have until noon on 27 June to return signed agreements to the government. If there are any ARCH members which have not yet made up their minds how to respond, here are some points to consider.

The Government has high hopes that it can revitalise Right to Buy by hiking the maximum discount to £75,000. Publicity around this plan has already, it seems, attracted a big increase in applications in many areas.

That was to be expected, but it is too soon to tell how many of these expressions of interest will translate into successful purchases. Many applicants could drop out when they see the details of the price they will actually have to pay or, more likely, when they dip their toes into the frigid waters of today's mortgage market. Take up is likely to vary significantly among areas, dependent on local housing market conditions and the make-up of the council housing stock.

Consequently there is a high degree of uncertainty attached to the future flow of RTB sales and receipts, and to put together a successful replacement programme, councils have to find ways of managing this uncertainly. In many areas it will be impossible, within the constraints imposed by the government, to plan for one-for-one replacement, or anything like it. But partial replacement is better than no replacement at all for any council looking to meet housing need.

One obvious way to manage the uncertain flow of receipts is not to plan for a separate "RTB replacement" programme, dependent for its funding on a particular volume of receipts, and therefore vulnerable if those receipts fail to materialise.

Far better to plan for a new-build programme substantially supported through self-financing headroom, with RTB receipts contributing to a number of additional units which may or may not materialise without compromising the scheme as a whole. And, if the worst comes to the worst, open market purchases are always available as a way to spend an unexpected receipt bonus.

With a little ingenuity, any council should be able to find a way to use its receipts locally and avoid having to return them for use by the HCA, probably in another area altogether. It makes good sense for every council to sign the agreement, even if it still has to work out exactly how it is going to spend the receipts.


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