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John Bibby

By John Bibby

With the political turmoil of the last few weeks, the Housing and Planning Act might feel a bit like ancient history. It might be tempting to try to forget the Right to Buy 2 policy as all just a bad dream.

It wasn’t. So let’s start with a quick recap.

This is the policy to extend the Right to Buy to housing association tenants and pay for it by forcing councils to sell their ‘higher value’ homes when the current tenant moves out.

No one currently knows what will count as a ‘higher value’ council home, but we do know that councils will be invoiced up-front for the amount of money that the government thinks they should be able to raise from selling homes. And they’ll work out how much councils owe based on a formula that is still to be published.

At the moment we have no reason to believe that the referendum result and arrival of Theresa May as the new Prime Minister will automatically put the skids on Right to Buy 2.

But there are three big reasons why political and economic uncertainty that the leave vote has prompted makes this the absolute worst time to implement it – and why her new government should think twice.

Starting a mass sell-off when house prices are uncertain

As Pete said in his recent post, no one can predict what impact Brexit – and the political uncertainty that’s followed the Leave result – will have on house prices. But you’d be a brave person to say it won’t make a difference at all.

This is bad news for the forced council sales policy for two reasons.

In the first place, unstable house prices will make it incredibly difficult for officials to model how much every councils’ homes are worth – and those values could be subject to big changes. This could mean that councils are invoiced for amounts they couldn’t possibly pay and it could mean they’re forced to sell off more homes than intended or jeopardise their business plans.

Secondly, if there is a serious fall in house prices, it could mean that councils are forced to dispose of homes when their value has just fallen through the floor. Although we didn’t agree with the forced sale policy, you could understand the government’s desire to unlock some of the value in council assets when prices were high.

If prices drop, they’ll just be forcing councils to sell homes off at a cut rate.

Shrinking the social stock when the health of the economy is uncertain

As with the point above, no one can predict what the impact of the referendum result is going to be once we get out of the immediate aftermath.

However, it would be foolhardy to pretend that there isn’t a risk of an economic shock.

If that happens – if we have an uptick in repossessions, evictions and homelessness applications – we will need every single council home we have.

It’s true that the government has committed to replacing every home that’s sold under the scheme, but even putting aside the question of what tenure replacements will be built as, building replacement homes takes time. The government has learned as much with its existing replacement scheme. It can take up to three years, at least.

If we see a sudden pick-up in homelessness we won’t be able to wait three years for a new home to be built so we can house people.

Encouraging people to buy their housing association home during price/economic uncertainty

The final reason that this is the wrong time to implement Right to Buy 2 focusses on the people who are supposed to actually win from the policy: housing association tenants themselves.

This is because, in spite of the big discounts that they can receive, the experience of the original council Right to Buy showed that it is still possible for tenants who have exercised bought their rented home to get into payment difficulties.

In fact, it’s not only possible, they are the most at-risk group.

In 2012, research by the Financial Conduct Authority showed that around one in 22 Right to Buy mortgagors had their home repossessed or a possession order made against it, compared to just one in 77 across all borrower types.

Infamously, one of the first council tenants to exercise the Right to Buy, who was even photo’d with then Prime Minister Margaret Thatcher, saw her marriage break down under the financial strain of high interest rates, was forced to sell up and ended up living in a mobile home.

Add the uncertain economic outlook on top of the latent risk to former social tenants and you have the potential for a frightening cocktail: of a wave of new mortgagors with bills that they might quickly not be able to afford.

We’ve been quite open about the fact that we think that Right to Buy 2 would be a bad policy at the best of times. But these are not the best of times.

The current uncertainty about the future of house prices and the economy could make it impractical to implement, could see us sell off public assets at bargain basement prices and whip away part of the housing safety net exactly when it’s needed.

Perhaps worst of all, it could give housing association tenants a massive incentive to become home owners at just the time the storm clouds gather.

The new government can and should scrap it.

Source: http://blog.shelter.org.uk/2016/07/three-reasons-brexit-makes-this-the-absolute-worst-time-to-implement-right-to-buy-2/

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