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Right to Buy pledge could make housing associations 'unfundable'

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Experts have voiced doubts that Conservative proposals to extend the Right to Buy to housing association tenants could create the promised housebuilding bonanza

Yesterday, the Tories unveiled their 2015 general election manifesto, which said that stock sold by councils to fund the programme would be replaced by new homes on a one-for-one basis.

However, experts quickly poor cold water on the idea and rejected claims the policy would provide a boon for housebuilders.

Richard Petty, head of affordable housing at property consultancy JLL, said the policy could backfire on the government by damaging the ability of housing associations to increase output.

He said: ‘They rely on private finance to build now, not government grant. The huge loans they carry are just big mortgages, and they require security in the form of homes, the rents they produce and their underlying market value. 

‘If that security has to be sold off to tenants at big discounts, there is a real risk that associations will become unfundable.’

Others pointed out that only one new affordable home has been built for more than every five sold under the existing Right to Buy scheme since the coalition improved discounts available to council tenants. This was despite a previous promise by former housing minister Grant Shapps that the homes would be replaced on a one-for-one basis.

Overall, 1.88 million council homes in England have been sold under the Right to Buy (37% of the total stock), while local authorities have built just 345,000 homes over the same period, according to figures from the Department for Communities and Local Government.

Ruth Davidson, director of policy and external affairs at the National Housing Federation, which represents housing associations, said that the money raised under the proposals could be used to build a million new shared ownership homes ‘open to everyone, not just the lucky few already well housed in secure social homes’.

‘This is yet another uncosted, unfunded and unbelievable pledge’

Labour’s housing spokeswoman, Emma Reynolds, said: ‘This is yet another uncosted, unfunded and unbelievable announcement from the Tories.

‘Having exhausted the magic money tree, the Tories now want people to believe that they can magic up billions of pounds a year from selling off a few council homes. Last year that raised just over £100 million, while this policy costs £4.5 billion a year.’

The Conservative manifesto also confirmed that the party proposes to press ahead with plans to fund 200,000 “starter homes” by removing the requirement for developers to provide funding for affordable housing and pooled infrastructure contributions.

  • 1 Comment

Readers' comments (1)

  • Ben Derbyshire

    The good news is that the Housing Crisis has reached the headline of election manifestos for all the main parties. The bad news is that the politics result in an investment to buy votes, not solve the problem.
    The Tories' proposed right to buy for housing association tenants is yet another demand side initiative that will fuel private debt and fail to add to the housing stock just as the right to buy local authority homes has not lived up to the promised re-investment in new ones. The arithmetic just does not stack up.
    Worse than that, the danger is that the initiative will seriously undermine the ability of Housing Associations to borrow and develop new stock as institutional investors take fright at the diminution of the asset.
    It's hard to avoid the suspicion that Governments resents housing associations for building up surpluses out of the Housing Benefit pot.
    Surely we can do better than this? At The Housing Forum, we would like to see a housing minister at the cabinet table backed up with a decently funded (not emasculated) department. Then we might begin to see a properly joined up plan for increasing the supply and improving the affordability of housing.
    At the London Society debate last night, #CantPayWontStay, the point was forcibly made that we cannot expect to see an end to the affordability crisis until we start to see government investment in homebuilding and that to do so will bring significant economic as well as social benefits. A civil society must provide for social and intermediate housing in reasonable proportion to the local demand.
    Ben Derbyshire
    Managing Partner, HTA Design
    Chair, The Housing Forum.

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