Agenda item

The Government, with effect from 2 April 2012, amended the Right to Buy Scheme.  The change was implemented by the “Housing (Right to Buy) (Limit on Discount) (England) Order 2012” and Department of Communities & Local Government (DCLG) guidance for local authorities, referred to as “Reinvigorating Right to Buy and One for One Replacement, Information for Local Authorities” published in March 2012. The changes can be usefully grouped into: increasing the discount cap to £75,000; a new affordable home for each one sold statement; and a range of technical changes to how stock owning Councils calculate admin costs and proportion the proceeds between the Treasury and local Councils.  As Bath & North East Somerset does not own stock it is only the first point, the raising of the cap that is directly relevant. 

The Associate Director for Housing introduced this item to the Panel. He informed them that since being introduced over 2 million properties have been sold under Right to Buy (RTB), nearly 50% of the then total. The recession, tighter rules on discounts and the fact that the most desirable properties have been sold has caused the volume of right to buy sales to fall away considerably in recent years. In 2010/11 just 2,730 sales were completed nationally compared to 92,858 in 2003.

The Government’s Housing Strategy for England, Laying the Foundations (November 2011), included a commitment to “reinvigorate the Right to Buy”.  The change was formally implemented by the Housing (Right to Buy) (Limit on Discount) (England) Order 2012 and in March 2012 the DCLG published guidance for local authorities, referred to as Reinvigorating Right to Buy and One for One Replacement, Information for Local Authorities. The changes can be usefully grouped into three: increasing the discount cap to £75,000; a new affordable home for each one sold statement; and a range of technical changes to how stock owning Councils calculate admin costs and apportion the proceeds between the Treasury and local Councils.  As Bath & North East Somerset does not own stock it is only the first point, the raising of the cap that is relevant. 

The potential implications of these changes are two-fold for this Council.  Firstly, if the RTB scheme is reinvigorated there will be a further and increased loss of properties within the social housing stock.  However, even the DCLG predicted 250% increase in sales it is unlikely to have a significant impact on the existing stock.  For example over the last 5 years there have been 57 RTB sales.  An increase of 250% to 142 sales would equate to a loss of around 1.2% of the entire Bath & North East Somerset social housing stock over 5 years.  It should also be noted that over the last 5 years the Council has secured an additional 556 new affordable housing units for rent.

The second implication for the Council relates to capital receipts, which are received from RTB sales.  Given the high value of properties locally, the discount cap of £50,000 has been the limiting factor in all recent sales.  With the cap being increased to £75,000 the effective discount has been enhanced, thus reducing the capital receipt per unit.  By making some reasonable assumptions, such as all RTB sales being eligible for the maximum discount and using average sales figures it is possible to do some broad financial modelling on the effects of the increased cap.  These show that if the DCLG is correct and RTB sales are increased by 250% the capital receipt, based upon the past 6 years of data, would be increased by between 55% and 80%.  The exact figure is dependent upon the type & value of properties sold within that year.  Conversely should RTB sales remain unchanged then the capital receipt would be reduced by 30% and 38%.  On historic data RTB sales would need to increase by between 44% and 61% for capital receipts to be unaffected by the increase in discounts.

Councillor June Player asked why is Right to Buy necessary.

The Associate Director for Housing replied that it improves the sustainability of the estates that they are built upon and that it generates additional affordable properties.

The Chair on behalf of the Panel thanked him for the report.

The Panel RESOLVED to note the contents of the report.