Homes for votes

So does the ‘buccaneering’ Conservative plan to extend the right to buy to housing association tenants stack up?

I was on 5 Live earlier talking about the big idea in today’s Tory manifestoand as usual only got to say half of what I wanted to say. The package beforehand was interesting: tenants from a housing association estate in the Old Kent Road were enthusiastic; but people on an estate in Dartford where the homes were long ago sold off could see the consequences as housing benefit ends up going to private landlords.

I argued that it’s a great idea in theory: if you can help people buy their own home and have enough money to build replacements, why not do it? In practice though, we’ve never come close to achieving this. The government promised one for one replacement for council homes sold in 2012 but the rate so far is one new home started for every 11 sold.

Extending the right to buy to housing associations was meant to be part of the original right to buy in the 1980s but dropped because it was too expensive and because so many associations are charities who have to use their assets for charitable purposes. If Margaret Thatcher couldn’t make it work then, how will David Cameron make it work now? If it’s such a great idea in England, why is Scotland ending the right to buy in 2016 and Wales consulting on doing the same?

In his previous guise as housing minister, Conservative party chairman Grant Shapps told the 2012 CIH conference that extending the right to buy to housing associations would cost billions and was not viable in the current climate.

What’s changed since then is the big new idea (or reheated old idea from Policy Exchange) of selling ‘expensive’ council homes to generate the money to pay for it . The Conservatives claim there are 210,000 homes worth in the top third of homes in their area. Selling 15,000 of these at an average of £300,000 each as they become vacant would raise £4.5 billion a year.

But that would have to pay for four different things: discounts of up to £100,000 per home for housing association tenants; repaying the debt on the housing association homes sold off; repaying the debt on the council homes sold; and creating a £ 1 billion Brownfield Regeneration Fund.

The National Housing Federation estimates that there are 1.4 million households who have been housing association tenants for at least three years (the minimum to qualify for the right to buy). Around 550,000 of these already have the preserved right to buy. That leaves 850,000 eligible for the new scheme, of whom 221,000 earn enough to be able to afford to buy.

Much would clearly depend on how quickly ‘expensive’ council homes could be sold and how quickly association tenants would take up their new right. The lower the former and the higher the latter, the harder it will be to build replacements. I’ll blog in more detail about this another time but it’s very hard to see how these sums can stack up and the track record so far on one for one replacement inspires zero confidence.

That’s as far as I got on 5 Live but there were lots of other less obvious points I wanted to make.

From a local authority point of view, the Conservative manifesto plan envisages forcing them to sell the most expensive third of their homes of that type in that region as they become vacant. This looks like a recipe for the end of council housing in central London but eventually selling off the stock in the most expensive part of each region as it becomes vacant.

In addition, only some councils have housing stock, so selling their homes to pay for discounts elsewhere would raise all kinds of issues. Take someone in Southwark who’s been on the waiting list for years. When a council home finally comes up will they be told ‘sorry, we’ve got to sell it to pay for a discount in Surrey’? Would the legislation be enforceable within local authorities’ duties towards their communities? It’s only three years since councils signed legal agreements with the Treasury to buy out their debt under self-financing that the new policy undercuts.

And what happens in rural areas? In Cornwall, for example, council homes in villages, especially anywhere near the coast, are bound to be ‘expensive’. Even if the sales proceeds were enough to fund replacements (they won’t) restrictions on land supply and sewage capacity will make it impossible to build them. Goodbye rural social housing.

From a housing association point of view, the questions are better known. Are discounted sales legally compatible with charitable aims? If right to buy sales happen quicker than the money comes in from council stock sales, what will that do to cashflows? What will lenders make of the fact that many of their clients most valuable assets could be sold with no guarantee of replacement? As was pointed out on Twitter earlier, ‘buccaneering’ is a good way to describe forcing other people to sell things that don’t belong to you.

Two stories in Inside Housing today illustrate the scale of the potential problems. Pete Apps reports warnings that the policy could affect association’s ability to borrow and push some into insolvency. Heather Spurr reports that it could raise real questions about the classification of housing association borrowing as ‘private’. The Conservatives deny this and will probably see most warnings from the sector as self-interested scaremongering. However, an extra £60 billion of debt added to the public balance sheet would be quite an unintended consequence.

And then we come to social housing as a whole. Even if replacements are possible, they will be at ‘affordable’ rather than social rents. Selling ‘expensive’ homes will cost more in housing benefit in the long run. And the benefit cap, reduced to £23,000 elsewhere in the Tory manifesto, will make it impossible to house anyone on benefit across whole swathes of the country.

Finally, there are any number of better things to spend £4.5 billion on than discounts for people who are already housed. Build a million shared ownership homes, says the NHF. Build 300,000 social rented homes, say many others. If you want to help people into home ownership, then invest in new homes, sell them at a discount to tenants but retain an equity stake that can be recycled when they move on. Whatever your preference is, forget political gimmicks that just boost demand for the homes we already have. Build more homes.

Except that, as Alex Marsh argues on his blog, all these objections may be beside the point. The political gimmicks are the whole point of this policy. Get more votes.

Originally published on Inside Edge 2, my blog for Inside Housing