Homes everyone can afford

Today’s election hot topic is the Conservatives' proposal to extend right to buy to housing association tenants.

SHOUT was set up because we believed that someone needed to make the particular case for building more homes for social rent.  That’s not because we think social rent is the only tenure which matters.  We said in our Manifesto last year:

Our vision is of a country that is at ease with its housing self, where each of the three main tenures stands on an equal footing and no tenure is seen as inferior or superior to others. Our vision is a country where the three main tenures are the tenure of choice for those who live in them.”

Our Manifesto also recognised that Right to Buy in the council sector has become an established part of the landscape, and is supported, in principle, by many people who share our core beliefs in the importance of social housing and the need to build more.  The problem is less Right to Buy itself, than that, since its inception, governments of all parties have failed to ensure that homes sold are replaced by new social homes.   Since 1980, just 18 new council homes have been built for every 100 sold.  When the current Government made Right to Buy discounts more generous, it made an explicit promise that all homes sold would be replaced.  In fact, the replacement rate has dropped, to less than 14 per 100, because of the way the value of a sold property is shared between the buyer, the Treasury and the former council owner.  At best, this shows that good intentions about replacement are very difficult to put into practice.

Lots of other people commenting today about how Right to Buy might work for housing associations are making strong points, including critical differences between housing associations and councils – that the former are private sector organisations, often charities, and that most of the cost of building housing association properties does not come from state grants or borrowing, but lending from the private sector or from the reserves they have accumulated.   Housing associations aim to ‘operate commercially, but with a social purpose.’  Part of that commercial business model is based on having sound business plans, based on certainty about their assets, in which their bank lenders, as well as they, have an interest.  That all starts to go wrong if they end up having to sell properties, not knowing in advance which ones or when.

We’re confining ourselves to two points, one of principle, and one of practice. 

First, the main reason why most people who don’t currently own a property, but would like to do so, can’t buy, is that property is too expensive, not that they are renting a property which they are not permitted to buy.  They can’t afford to buy, have no choice but to rent in the private sector, but the rents are so high that they can’t afford to save for a deposit.   Doubtless some housing association tenants too would like to become home owners.  They have every right to do so.  But, compared with private renters on similar incomes, they have a better chance of buying a property, since their lower rents should enable them to save more.  Many housing associations also offer homes for outright and shared ownership.  Gentoo have recently launched their Genie scheme, as another way of helping people become home owners.

Second, it doesn’t seem to us the sums add up.  The proposal involves requiring all councils which still own housing to sell properties which are towards the top end of values (in all tenures) in their area.  The Conservatives say selling 15,000 council homes a year in this way would yield £4.5bn, which would pay for three things – replacing the council homes sold, replacing housing association Right to Buys, and a fund to help get housing build on brownfield sites.  Really?  This assumes average sale proceeds of £300,000 per property.  Only in London, according to the Halifax, is the average home (of all kinds) worth more than £300,000. In the north, where the average value is around £130,000, how many council properties are there likely to be which would come anywhere near £300,000 in value? In any case, many councils have, over the years, been quietly selling such properties as they have which are unusually valuable, precisely so they can build more social homes elsewhere, as this example from Southwark illustrates.

If you are not a housing geek, it is also easy to miss a crucial point about the replacement proposals, which is that the social rent homes sold by housing associations (to tenants) and councils (on the open market) would be replaced by affordable rent properties, at up to 80% of market rents.  So, even if our scepticism about the likely proceeds of selling higher value council homes is misplaced, and the policy washes its face financially in the short term, the taxpayer will face a growing tab over the medium to long term for additional housing benefit.

Wouldn’t it be a lot simpler, and cost the taxpayer far less, just to build more social rent homes? They would provide, in a genuinely affordable way for residents and the taxpayer, both for people whose circumstances and preferences are to rent indefinitely, and for those who have aspirations to buy, but need to progress in their careers and save for a deposit before they can do so.  Back in the 1950s, a policy like this, spearheaded by Harold Macmillan, didn’t serve the Conservative Party too badly, as they won three general elections in a row.

Showing 2 reactions

Please check your e-mail for a link to activate your account.
  • Jonathan Davis
    No it wouldn;t help at all. Building more never anywhere bought down house prices. All it will do is make more rentiers. Obviously.
  • Chris Blackburn
    I appreciate that Shout is a broad church, and that you might be trying to avoid treading on toes here, but when the CEO of the NHF says that “of all the daft ideas I’ve heard…. This is the daftest”, I would expect something more robust. It’s a blatant attack aimed at crippling the Social Housing sector (whilst conveniently buying a few more votes at no expense to the Tories) which needs to be vigorously repudiated by everyone who recognises the value of Social Housing to the community. Frankly, this doesn’t cut it.
    UPDATED October 2016 Capital Economics report: Building Social Rent homes
    SHOUT Supports ending the Housing Crisis in a Generation