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Housing: MPs criticise 'right-to-buy' funding model Housing: MPs criticise 'right-to-buy' funding model
(about 11 hours later)
The way the government intends to pay for its plans to allow social tenants in England to buy their homes is "extremely questionable", MPs say. A scheme to give housing association tenants in England the "right-to-buy" their homes could reduce the stock of affordable housing, MPs have warned.
The Commons Communities Committee criticised the funding model for the right-to-buy scheme, which will see housing associations reimbursed for selling homes to tenants at discounts. Extending the right-to-buy from council house tenants to all "social housing" was a flagship Tory election policy.
MPs say it should be paid for directly rather than via council house sales. Those taking advantage of it will get a discount, to be funded by the sale of "high value" council houses.
Ministers say it will help create a million new homeowners by 2020. But the Commons communities committee says this could leave councils short of cash to replace sold-off properties.
The government says it is one of a number of measures that will see 400,000 new affordable homes built by 2020-21. It predicts a "substantial surge" of demand to buy homes from the 1.3 million housing association tenants in England when the new scheme comes into effect, leading to the risk that the policy will "stall" for lack of funds.
The extension of the longstanding right-to-buy scheme for council-house owners to housing association tenants in England was one of the Conservatives' main manifesto pledges at last year's election. 'Realise their dream'
Under the voluntary scheme, which is currently being piloted in five areas, housing associations will be expected to sell properties to tenants interested in buying them at a discount of £103,900 in London and £77,900 outside the capital. It also raises concerns that a 1% rent cut for four years imposed on housing associations would threaten their ability to build new homes and provide other services to tenants.
'Unresolved issues' The government says it wants to ensure "anybody who works hard and aspires to own their own home should have the opportunity to realise their dream".
Housing associations, which can reserve the right not to sell in certain circumstances, will retain the proceeds of sales and will be expected to build one new affordable property for every property sold on a national basis within a period of three years. But the Communities and Local Government committee says the funding model it is using, which will force councils to compensate housing associations with the money raised from council house sales, is "extremely questionable" and is effectively a "levy" on councils.
The government has said the scheme, a centrepiece of the Housing Bill currently going through Parliament, will be paid for by the sale of high-value council homes when they become vacant. It says the scheme should be funded by central government and questions how ministers are going to meet their target of replacing every property sold off with a new one.
The legislation envisages that local authorities make payments to government based on the value of their housing stock, on the expectation that more expensive properties would be disposed of when falling empty.
How will new scheme work?How will new scheme work?
Potential buyers must have been tenants for at least three years, the same as with council tenants.Potential buyers must have been tenants for at least three years, the same as with council tenants.
The government says that means up to 1.3 million housing association tenants will be eligible in England. Around 500,000 housing association tenants are already eligible for some discounts. So the new scheme will extend rights to a further 800,000 tenants, and increase the discounts available.The government says that means up to 1.3 million housing association tenants will be eligible in England. Around 500,000 housing association tenants are already eligible for some discounts. So the new scheme will extend rights to a further 800,000 tenants, and increase the discounts available.
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But critics have questioned whether this will be sufficient to reimburse housing associations, amid claims the scheme could cost more than £11bn if everyone entitled to buy their home took up the opportunity. There are also doubts whether associations will be able to replace homes on a one-for-one basis, given the lack of suitable land and bottlenecks in the planning system. Committee chairman Clive Betts said: "The fundamental success of this policy depends not just on whether more tenants come to own their home but on whether more homes are built.
In their report, the cross-party committee expressed concerns about what it said was a "levy" on local councils and urged the government to set out "fully costed" details of how it would be funded. "The government needs to set out in more detail how it will meet its target of at least one-for-one replacement of the sold homes, particularly given issues such as the availability of land, the capacity of the building industry and the uncertainty of income from council home sales."
'Detrimental effect' The scheme, which is partly designed to reverse the steady decline in home ownership levels in recent years, is currently being piloted in Norfolk, Oxfordshire, Surrey, Merseyside and a number of London boroughs.
'Portable discounts'
It will be phased in across the rest of England in due course, although it is voluntary - housing associations are not being forced to adopt it. The government is updating interested tenants on its progress here.
Housing associations taking part in the scheme will be expected to sell properties to tenants interested in buying them at a discount of £103,900 in London and £77,900 elsewhere.
The government is committed to building 400,000 new affordable homes by 2020-21.
Under the the Housing Bill currently going through Parliament, local authorities make payments to government based on the value of their housing stock, on the expectation that more expensive properties would be disposed of when falling empty.
Ministers say that the sums raised from selling "high-value" council homes will pay not only for "right to buy" discounts, but also for the construction of cheaper social housing to replace them and a new £1bn Brownfield Regeneration Fund to support building on derelict land.
But the committee's report quotes estimates from the Chartered Institute of Housing which suggest that the sale of high-value homes will raise only £1.2bn - £2.2bn a year of the £4.5bn needed.
The committee warns that the amount raised from the sale of vacant council homes will vary across the country, depending on property prices.
It warned that a large number of properties sold through the existing right-to-buy scheme had quickly been put on the rental market and that it might be necessary to limit the ability of housing association tenants to become private sector landlords.It warned that a large number of properties sold through the existing right-to-buy scheme had quickly been put on the rental market and that it might be necessary to limit the ability of housing association tenants to become private sector landlords.
It also called for safeguards to protect the amount of affordable housing in rural areas, including allowing housing associations to offer tenants "portable discounts" to purchase an alternative property to the one they live in where it was difficult to replace.It also called for safeguards to protect the amount of affordable housing in rural areas, including allowing housing associations to offer tenants "portable discounts" to purchase an alternative property to the one they live in where it was difficult to replace.
Clive Betts, the Labour MP who chairs the committee, said the success of the policy should be judged on how many new houses were built and not whether more tenants ended up owning their own home. 'Pet project'
"We are concerned that there are a number of unresolved issues with the government's policy which could have a detrimental effect on the provision of accessible and affordable housing, particularly affordable rented property," he said.
"The government needs to set out in more detail how it will meet its target of at least one-for-one replacement of the sold homes, particularly given issues such as the availability of land, the capacity of the building industry and the uncertainty of income from council home sales."
The scheme, which is partly designed to reverse the steady decline in home ownership levels in recent years, is currently being piloted in Norfolk, Oxfordshire, Surrey, Merseyside and a number of London boroughs.
'Realising a dream'
The Local Government Association said councils could be forced to sell a minimum of 22,000 homes depending on how the government defined "high-value" and that the government should, instead, look at ways of freeing up public land for new homes.
"Councils want to help the government shift spending from benefits to bricks and support measures to help people into home ownership but we agree with the committee that the right to buy extension to housing association tenants should absolutely not be funded by forcing councils to sell off their homes," said the LGA's housing spokesman Peter Box.
The Department for Communities and Local Government said more details about the sale of vacant council houses would be set out in due course but the principle of using them to pay for new house building was the right one.The Department for Communities and Local Government said more details about the sale of vacant council houses would be set out in due course but the principle of using them to pay for new house building was the right one.
"There are billions of pounds locked up in local authority housing assets. It is only right that when they become vacant they are sold enabling the receipts to be reinvested in building new homes and supporting home ownership through right-to-buy," a spokesman said."There are billions of pounds locked up in local authority housing assets. It is only right that when they become vacant they are sold enabling the receipts to be reinvested in building new homes and supporting home ownership through right-to-buy," a spokesman said.
He added: "Anybody who works hard and aspires to own their own home should have the opportunity to realise their dream."He added: "Anybody who works hard and aspires to own their own home should have the opportunity to realise their dream."
Labour housing spokesman John Healey said: "Government policies should be funded by government, not a cash-grab from councils forced to sell off their own housing to pay for right-to-buy discounts.
"Unless the legislation is changed, ministers will force cash-strapped councils to pay for their pet policy project."
The Labour government in Wales is planning to abolish right-to-buy entirely while in Scotland it will be phased out by August. A separate scheme exists in Northern Ireland.The Labour government in Wales is planning to abolish right-to-buy entirely while in Scotland it will be phased out by August. A separate scheme exists in Northern Ireland.