Extending the right-to-buy scheme to housing association tenants could undermine the UK’s public finances, according to an assessment of the Conservative party’s flagship policy by the Institute of Fiscal Studies.
The independent tax thinktank warned that selling off housing association homes would “represent a significant giveaway … potentially billions of pounds over the next parliament” and would “worsen the UK’s underlying public finance position”.
It said given the “less-than-impressive record” of delivering replacement social housing under the existing right to buy, “there is a risk that these policies will lead to a further depletion of the social housing stock – something the proposal explicitly seeks to avoid”. It also called into question a series of financial assumptions made by the Conservatives about how much would be raised from sales.
In 2012, the right-leaning Policy Exchange group, which first proposed selling off more expensive social housing stock in 2012, estimated revenues in the region of £160,000 per property. But just three years later, the Conservative proposal assumes revenues of £300,000 per property. “It is not clear why the expected revenue per property is so much higher,” said the report’s authors, Daniel Chandler and Richard Disney.
The Conservatives have also assumed that about 15,000 high-value council properties will become vacant each year, and their sale would help fund subsidies to housing association sell-offs. This suggests a natural turnover rate of 7% a year as tenants die or quit their homes, yet Policy Exchange had previously said the turnover rate would be only half that level.
Brandon Lewis, minister for housing, said: “Since Conservatives reinvigorated the Right to Buy for council housing in 2012, we have helped 33,000 families into home ownership and boosted council house building to a 23-year high. Our plans to extend the Right to Buy to housing associations will similarly boost social housing construction and reduce housing waiting lists. In Scotland, Labour and the SNP voted to abolish the Right to Buy, and Labour now plan the same for Wales. Labour and the SNP are the enemies of aspiration and would kick hard-working people off the first rung of the housing ladder.”
The 2012 Policy Exchange report was authored by Alex Morton, who later joined the Downing Street policy unit and is understood to be the special adviser behind the Conservatives’ right-to-buy proposals.
Selling off the best council stock would also risk heightening social division, the IFS said. “Sales of expensive local authority properties would reduce the availability of social housing in the most expensive areas, thereby creating clearer divisions between areas where richer and poorer households are located.”
But the IFS said home-ownership rates would be likely to rise under the policy, and it might also facilitate an increase in social housing construction.
The IFS did not put a figure on the cost of right to buy, citing the “considerable uncertainties” surrounding the revenues that could be raised from sales of expensive properties, the costs of right to buy discounts and the cost of replacing sold properties. “These reflect genuine difficulties in predicting the effect of the policies and a lack of detail in the Conservative party’s announcement,” the report said.
An estimated 1.3 million housing association tenants will be offered the right to buy their home, with subsidies increased to £103,900. “There is an upfront cost associated with this policy, because the government would compensate housing associations for having to sell their assets at a discount so they receive the full market price. An increase in right-to-buy sales would amount to a substantial giveaway to a relatively small number of households,” the IFS said.
The National Housing Federation has estimated up to 221,000 households could afford to exercise their right to buy, at a total cost of £11.6bn. But the IFS said this represented “an upper bound on the total cost”.
In some London boroughs, housing stock will be decimated as councils are forced to sell their most expensive homes. “Local authorities where housing is very expensive – say, some London boroughs – may be required to sell much of their social housing, but then struggle to replace it with properties with the same number of bedrooms,” the IFS said.
The National Housing Federation spokesman, Henry Gregg, said: “This report from the IFS confirms that extending right to buy to housing associations and selling off council properties risks reducing the number of affordable homes available for future generations. We should be concentrating on ending the housing crisis and building more homes to help the millions of people stuck in private rented homes and the three million adult children living with their parents.”
New figures from the Department for Communities and Local Government underline the decline in social housing and the rise of private renting. It showed that in 2001, 13% of homes were rented from the council and 7% from housing associations. By 2014, this had fallen to 7% from councils, but risen to 10% from housing associations. Over the same period, the numbers renting privately had doubled from 10% to 20%, outstripping the total who are renting social housing.
Meanwhile, it has emerged that councils are paying up to £4,000 to private landlords to accommodate homeless families because of the shortage of social-housing stock.
