Blog: Justified criticism of Right to Buy extension

John Perry CIH
John Perry

The Public Accounts Committee (PAC) was right in its criticism of the extended right to buy, says CIH policy adviser John Perry.

“We are not talking about a ‘back of an envelope’ calculation - there is no envelope at all.”

Thus spoke Meg Hillier MP, chair of the Public Accounts Committee (PAC), in introducing the recent report on the financing of the new right to buy. As a former journalist with Inside Housing, Ms Hillier knows her stuff, but reading the report it’s obvious that she wasn’t the only one concerned that the government can provide “little information” on the potential impact of the scheme, nor is this criticism confined to opposition MPs.

The committee says that the government’s impact assessment doesn’t comply with its own rules for what an assessment should cover, to which the response was that the details have still to be decided. This argument might be more convincing if there were some detail, but all we know is that the cost will be covered by a levy on councils, based on their assessed ability to sell ‘higher value’ council houses. No one knows what the effect on individual councils will be, so when Camden last week claimed it would lose £150 million per year, the response from an opposition councillor was that the figures were “made up”. Of course they were, as so little information has been provided that the best that councils can do is second guess the government.

Last year, the Chartered Institute of Housing attempted its own calculation of the effects of the policy and concluded that there could be a shortfall between the money generated through sales, and what is required to build replacements and pay for the discounts on right to buy properties sold by housing associations. Now there is another danger, not identified by PAC: given recent evidence that there might be low take-up of the new right to buy, forcing councils into selling more high-value homes (and making bigger payments to the Treasury) could simply lead to council tenants - in effect – funding the government’s other housing programmes, now focused largely on homeownership.

This would, of course, be an injustice in itself, since council tenants and potential tenants would effectively be helping housebuyers who are wealthier than they are. But it would also be the nail in the coffin of the self-financing settlement for council housing, which is barely four years old.

Having been rescued from a ‘subsidy system’ that saw councils pay across over £700 million from their rental income to government as recently as 2011/12, they could be plunged into a new and more costly ‘negative subsidy’ arrangement where council asset sales pay the cost of subsidies for starter homes. And the Housing and Planning Bill gives the government the power to set the payment at any level it likes, and to increase it year-on-year. Doesn’t this make a nonsense of the promise by the then-housing minister, Grant Shapps, that the April 2012 settlement was “a reform intended to endure for the long-term”?

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