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Back Office: Left to their fate
Published 19 October 2023
The demise of right to buy will have a devastating effect on council budgets
Farewell, right to buys – may you rest in peace. Although the final obituaries have yet to be written, it’s plain that right to buy transactions are breathing their last.
In 2008/09, councils sold barely 2,800 council homes priced at £234 million, net of discounts. That compares with 12,000 homes sold for £934 million in the previous year and almost 270,000 for nearly £3 billion in the peak year of 2003/04. Overall, 440,000 council homes have been sold for the huge sum of almost £17 billion since the onset of the Labour government in 1997.
Factors influencing the rapid fall in right to buys are widely known. Sale discounts on market values have been slashed, falling house prices have discouraged tenants from buying, arranging a mortgage has become more difficult.
Also widely appreciated is the damaging impact on the supply of social housing. The 440,000 reduction in council housing has been only offset in part by development of 150,000 new social rent homes by housing associations during the past 12 years.
It’s no wonder there’s not enough affordable rent homes.
Goodbye golden goose
What’s less widely appreciated is the devastating impact of the right to buy collapse on government and local authority housing budgets.
They’ve come to rely on the right to buy golden goose for so long that its passing will cause serious difficulties.
For the government, the collapse has undermined its support for new social housing. Since 2004, around £4.5 million of the £6 billion right to buy receipts have been siphoned off to fund social housing grant for housing association development.
That source of grant funding is now coming to an end leaving a hole in the government’s support for the Homes and Communities Agency.
Given the government’s straitened circumstances, it’s hard to see how the agency can continue to dish out billions of pounds to associations. Maybe its best chance will be to cut its cloth, reverting to the Housing Corporation’s original role of funding refurbs of derelict or difficult-to-repair housing.
Even then, it still might have to become an appendage of Peter Marsh’s Tenant Services Authority.
So far as housing associations are concerned, they’ll need to follow the example of London & Quadrant Trust and the Places for People group and learn how to develop without grant funding.
If they don’t, local authorities will be able to do it without much difficulty.
Remember the ALMOs
If the right to buy collapse is bad for government and housing associations, it’s equally dreadful for local authorities.
They’ve been able to use more than £4 billion of right to buys to invest in homes during the past 12 years, partly making up for insufficient major repairs allowance handouts from the government.
Particularly affected are local authorities with arm’s-length management organisations (ALMOs) undertaking Decent Homes investment.
Their bids for government backing were worked up in anticipation of fat right to buy receipts. Now, those receipts are much thinner than expected, driving a coach and horses through their business plans.
Worst affected are ALMOs launched in rounds three, four and five at a time when the right to buy boom was still raging, particularly ALMOs at such authorities as Nottingham City Council and Wolverhampton Council. Like the HCA, these authorities cannot expect the government to bridge the funding gap in their ALMO business plans created by the right to buy collapse.
Instead, projected Decent Homes investment plans will have to be slashed or spread out over a longer term, condemning tenants to years of living in poor housing.
As so often, it’s the worst off who suffer from the mistakes of ministers and mandarins and their army of consultants.
Sebastian Taylor is a journalist.
