The Housing Bill: Mind the gap

Originally posted on May 4 on Inside Edge 2, my blog for Inside Housing

What is the difference between ‘high’ and ‘higher’ value when it comes to the forced sale of council homes?

The two letters were added to the Housing and Planning Bill in a government amendment in the House of Lords last month. The government argued that the switch would help areas facing the highest housing pressure – inner London boroughs plus places like Harrogate, Oxford and Cambridge – that would all have ‘a high proportion of their stock defined as “high value”. The minister, Baroness Williams, said she could ‘confirm absolutely’ that it would not be used to raise more money.

But new analysis by Shelter suggests that the shift in the Bill to a levy on ‘higher value’ sales could mean councils having to sell 23,500 homes a year, six times more than under the previous ‘high value’ thresholds.

Essentially Shelter is arguing that the shift from ‘high’ to ‘higher’ is about raising more money. ‘High value’ sales would have raised only £1.4bn a year, according to a previous Shelter report. That tallies with analysis by the CIH suggesting that sales would raise between £1.2bn and £2.2bn.

That £1.4bn is less than a third of the £4.5bn a year the Conservatives said they needed to pay for Right to Buy discounts, pay off outstanding debt on the council houses, build replacements and contribute to a Brownfield Regeneration Fund. Raising the full £4.5bn would mean that an average of £26m a year to be paid by each council with housing stock.

However, the shift from ‘high’ to ‘higher’ will have differential effects. Councils with the highest number of council homes and the highest turnover rates would only have had to sell a few of them under the ‘high’ value threshold for their region but will have to sell far more under a ‘higher’ value threshold for each authority.

There could be a massive difference for some councils if this analysis is correct: Birmingham would facing having to sell 1,190 homes a year rather than 53 and raise £145m; and Sheffield 1,010 rather than 44 and raise £120m. More expensive parts of London would still be badly affected but cheaper outer London boroughs would be bit much worse. Sara Mahmoudexplains more of the detail on the Shelter policy blog.

In contrast, expensive areas would be less disproportionately affected, especially those with less council housing and lower turnover rates. That applies especially to London but Tory MPs in other expensive places also raised the issue in Tuesday’s Commons debate. As North Cornwall’s Scott Mann put it:

‘The initial announcement that councils would be made to sell off such housing caused concern in Cornwall, because the county has a high level of coastal communities where properties have, through no fault of their own, increased significantly in value in recent years. The selling off of high-value council assets would have resulted in a reduction in the number of homes available to people on low or modest incomes, and would likely have increased second-home ownership. That would have been bad not only for local families, but for local communities, as families would have moved to urban areas, thereby bringing about a decrease in local trade.

‘The Government’s Lords amendment 53 replaces the term “high value” with the term “higher value”, which will introduce a much more local approach, as housing prices differ from area to area. A council house worth £400,000 may have been deemed worthy of selling off, given that that figure is very high compared with that for a council house in an inland urban area. Without protection, communities could suffer.

‘Local people in coastal communities should not be restricted from access because of where they grew up. I am therefore very pleased that the Secretary of State and Baroness Williams acknowledged concerns about the issue and made changes accordingly to give more freedom to local authorities over how they classify their higher value council homes.’

Tories including Kensington’s Victoria Borthwick and Bath’s Ben Howlett also welcomed the change to ‘higher’ following talks with housing minister Brandon Lewis. In the Commons debate, Lewis confirmed as much as he rejected Lords amendments giving local authorities more discretion over sales:

‘The Government have listened carefully to the arguments made by hon. Members when the Bill was last debated and the contributions of all those in the other place. We have amended the Bill to ensure that local authorities are not disproportionately affected by the plans. The definition of higher value and the types of properties to be excluded will be set out in regulations and therefore subject to further parliamentary scrutiny.’

He added that councils would have more flexibility over replacement homes:

‘We want to ensure that we give local authorities with particular housing needs the opportunity to reach bespoke agreements with the Government about the delivery of different types of new homes in their areas. If local authorities can demonstrate, for example, a clear need for new affordable homes, they should be able to make a case for such an agreement, subject to value-for-money considerations and evidence of a strong track record on housing delivery.’

All homes sold will in theory have to be replaced on a one for one basis (two for one in London) under the Bill. But councils will need no reminding that ministers made the same promise about the reinvigorated Right to Buy and have not delivered. Or that the Bill as un-amended  in the Commons includes nothing to ensure that replacements will be ‘like for like’ or in the same area: that every new ‘affordable’ home could be a starter home as things stood going back to the Lords.

It’s also far from clear to me what the relationship will be between the levy and actual sales. In theory, the levy means councils can choose to raise the money elsewhere. In practice, what happens if they have to pay the levy before they sell the homes?

It could be that the government has the answers to some of these questions. Lewis has (so far only on Twitter that I’ve seen) challenged the basis of Shelter’s analysis and says the government has drawn in 16 million pieces of data on how the new system will work.

However, with the Bill at its final stage in parliament, the government has still not published anything about how the sales levy will work. The only ‘official’ figures on the thresholds came in a Conservative press release published during the election campaign that has since been deleted from the party’s website.

Given that, it can hardly be surprised if other analysis fills the gap. As I blogged last month, the less money is raised from expensive areas the greater the shortfall between sales and what they are meant to pay for. Logically that has to mean either more forced council sales in other areas or more rationing of the housing association Right to Buy sales or direct funding from central Government.

So which is it?