What impact would an extended right to buy have on housing association development programmes?

Stephanie Canham

We all heard it – the promise in the Conservative Party manifesto to give housing association tenants the same opportunity to buy their homes that council tenants have and the Queen’s Speech promising a Housing Bill to achieve this.

The right to buy proposal is hugely controversial with many housing association publicly asserting their status as private - and usually charitable - bodies that should choose when they sell their assets.

The discounts that council tenants get under right to buy are high. Someone who has been a secure tenant of a council flat for three to five years gets a discount of 50% of the market value with a maximum of £103,900 in London and £78,000 out of London.

Discounts then increase by 1% for every year up to a maximum of 70%, but the financial cap never changes. A large number of housing association tenants already have right to buy with the same discounts as council tenants because they are tenants of stock transferred by councils to housing associations.

So, what impact would an extended right to buy have on housing association development programmes? While real assessment will have to wait until the bill emerges, for now:

  • We expect housing associations to be refunded the discount using money paid for by local authorities being made to sell of higher value void homes - also in the Housing Bill
  • There is to be one-for-one replacement in the same area - but by the same housing association? What if the housing association can’t develop because it has no private finance or there is just no land available? It seems likely that the refunded discounts will have to be handed over to someone who can replace
  • The government expects this extended right to buy to produce more development not less, but there is concern that development driven by right to buy receipts could replace other development not add to it
  • There is concern about the impact on loan covenants and business plans but the general view is that the impact will be manageable

What about the private developers? How will s106 schemes work? How will developers/land owners feel if their land value is depressed by planning obligations to provide affordable homes and those affordable homes are then sold by the housing association – at full market value if a discount is fully refunded, even if strings are attached?

It will mean mixed-tenure developments ending up more mixed than people expected. Housing management issues ought not to be overlooked in circumstances where right to buy purchasers promptly sublet, for example, which could well impact on the value and/or attractiveness of the overall development. Should the government be asked to limit subletting by right to buy owners, at least for a period?

There is no doubt the bill will be keenly scrutinised with many debates and amendments on its way through parliament, so watch this space.

Stephanie Canham is national head of projects and construction at law firm Trowers & Hamlins