Right to buy - but not as we know it?

Our CEO, Philippa Jones, shares her ideas on achieving the objectives of the government's 'Right to Buy' extension and its impact on the supply of affordable homes.

With an unexpected Tory majority the government will now have to find a way to deliver their ‘Right to Buy’ manifesto promise – that will be fantastic news for some of our customers but it’s bad news in the long term for all those people in desperate need of social housing as it’s highly unlikely the homes lost will really be replaced.

Bromford’s social purpose is all about inspiring people to be the best they can be so ‘aspiration’ is what we do. The Bromford Deal sets out how we work with our customers to encourage them to use their Bromford homes as a springboard to a better life for themselves and their families.

The UK’s dysfunctional land and property market means home ownership is seen as a key route to social mobility and hereditary wealth. But for people on the margins of affording home ownership and without the underpinning financial stability, it can easily become a burden that may eventually lead to repossession and homelessness.

But since this high profile manifesto promise will have to be delivered somehow, I’m including here some ideas for achieving its objectives while limiting the damage to the supply of affordable homes.

Protecting the prospective purchaser

To avoid people over-committing themselves and running into difficulties later, there should be a financial assessment - possibly by the Department for Communities and Local Government (DCLG) Right to Buy (RTB) advisory agency - like that required for shared ownership buyers. Requiring this ahead of RTB applications would also reduce high administration costs for applications that have little chance of being viable. It might also help prevent predatory behaviour seen in the past from individuals or organisations offering to ‘help’ people buy their homes.

What happens to the homes?

Evidence from past RTB is that far too many of the properties sold, eventually end up in the private rented sector with higher rents (and a higher housing benefit bill), often poor management and lower standards of maintenance. It would be useful to consider ways of mitigating this risk through the legislation, possibly through enabling the housing association to buy back at an independently agreed fair value.

Number of affordable homes

If there is a big uptake of RTB, there will be a significant reduction in the number of affordable homes. Even if it was possible to fund one for one replacement, the lead time for developing new homes means it will inevitably be many years before the replacement homes are available.

But the maths of one for one just doesn’t work. Even with full and timely refund of the discount, the full market value of an existing social home is lower than the cost of buying land and building a new one. Our modelling shows that across our areas the replacement rate would be roughly three RTB sales funding two new homes. So in our case, we expect RTB to lead to an overall reduction in the number of affordable homes. Of course, without the refund of the discount the picture is much worse, with ten RTB disposals funding just one new home.

How will the discounts be funded?

Few now believe that the plan of funding this policy through sales of high value council homes can be made to work. So with no specific funding source apparent, it is essential that any legislation explicitly enshrines that funding the discounts is the responsibility of government.

Alternative approaches

Rather than extend the existing RTB to housing association tenants or increase the existing Right to Acquire discounts, the government could change the HCA rules so that rented homes could be converted to shared ownership without triggering grant restrictions. This would enable far more tenants to own a share in their home and we could then offer truly flexible tenure homes, promoting aspiration whilst providing a ‘safety net’ so that people could staircase down as well as up if their circumstances changed.

Another alternative route to home ownership that might work for more tenants would be to offer the RTB discount as cash towards buying an open market home, either outright or under a DIY shared ownership model. That approach could also work with the suggestion made recently by Jake Berry MP for the discount to be an equity loan which would then be recycled into more supply when the home was eventually sold on.

Conclusions

Extending the local authority model of RTB to housing association tenants is likely to benefit the few at the expense of the many. Even with full compensation it will reduce supply of affordable homes. However it is a manifesto commitment of a democratically elected majority government so let’s now focus our dialogue on ways of helping our customers into home ownership that won’t make it even harder for families in housing need to get a decent roof over their heads.

Read more views from Philippa on the election results, why housing associations need surpluses and why we haven't bid for the HCA programme.