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Voluntary right to buy research produced

Last week long-awaited research into the original pilot schemes operating a "scaled-down" version of the Voluntary Right to Buy (VRTB) was published. Andy Lane has been following the developments of this policy since the 2015 General Election and puts the research into its appropriate context.

Background

The Government's 2015 Election Manifesto included a clear commitment to extend the right to buy to housing associations:

"As the party of home ownership, we want to go further and faster – and this manifesto sets out our plan. At its heart, a clear objective to build affordable homes, including 200,000 Starter Homes which will be sold at a 20 per cent discount, and will be built exclusively for first time buyers under the age of 40. At the same time, we will extend our Help to Buy Equity Loan scheme, introduce a new Help to Buy ISA, extend the Right to Buy to Housing Association tenants and make sure that, when it comes to planning decisions, local people are in charge."

The National Housing Federation (NHF) brokered a deal with Government in October 2015 to revise these plans and for any right to buy extension to be "voluntary", so ostensibly allowing for the independent and private nature of housing associations to be preserved and respected1, albeit with regulatory oversight2.

Part 4 of the Housing and Planning Act 2016, which received royal assent on 12 May 2016, provided for the funding of discounts offered to housing association tenants under the VRTB, and the contribution to the same by means of local housing authorities being required to sell higher value properties. It also, at s66, dealt with the aforementioned regulatory oversight and in particular stated:

"(1) The Regulator of Social Housing must, if requested to do so by the Secretary of State, monitor compliance with the home ownership criteria.
(2) "The home ownership criteria" means criteria, specified in the request, that relate to the sale of dwellings by private registered providers to tenants otherwise than in exercise of a right conferred by an Act."

Much of the statutory detail will be found in regulations yet to be produced.

The NHF have since their deal been working with Government on a pilot scheme (5 different associations3) with a view to establishing appropriate guidelines to ensure a smooth running of the VRTB process4.

The Pilot Schemes

The research published this month – "The Pilot Programme for the Voluntary Right to Buy for Housing Associations: An Action-Learning Approach" - was carried out by the Centre for Regional Economic and Social Research (Sheffield Hallam University). The aims of the research are clearly set out therein as being:

"...to identify lessons from the pilot programme, to assess the implications for the operation of the national roll-out of the scheme and to estimate future take-up and demand for VRTB through statistical modelling."

In terms of take-up however, page 73 of the report had to concede:

"...there are as yet insufficient households who have completed the RTB process in the pilot programme to enable a robust assessment to be made of the future level of take-up among eligible tenants."

The 5 associations had excluded between 15% and 67% of their properties from the pilot - 972 VRTB applications were processed by 3 November 2016, with 415 offers of discount and 81 completions (they were allocated a maximum of 600).

Applications were mostly for 2 or 3-bedroom properties, with 75% being in respect of houses. More women than men were the lead applicant, though the profiling data has the obvious caveat that each association had their own features.

Caution as to the lessons learned from the pilots to date and their application to a wider, rolled-out, scheme were also given, though it was felt important to highlight the need for associations to be clear at the outset as to which properties they would be excluded from any VRTB (not least because the pilots were not operating any portable discount, which would be present in any final scheme).

The research further warns of the additional significant demands on staff of VRTB, a possible increase in preserved right to buy applications, the need for associations to have up to date information on their stock and their tenants, and managing applicants' expectations (not least in their view as to the value of their home - early "indicative" valuations may be of assistance here).

Interestingly, one of the key lessons of the pilot schemes identified to date was:

"VRTB presents an opportunity that should be grasped to address some of the problems that emerged with the statutory RTB scheme, for example restricting sub-letting to avoid rapid transfer of properties into the private rented sector, introducing overage clauses, and fraud prevention and proof of eligibility measures that offer greater protection against abuse of the scheme."

Further revision of plans

In early November last year the Government presaged a "slow down" in its VRTB plans. Hilary Davies, the Department for Communities and Local Government's (DCLG) head of VRTB implementation, said5:

"The Brexit vote has made us think about timing and is leading to a delay in the process. The new government is supporting Right to Buy, but you can imagine what is at the top of their to-do list currently."

In the Autumn Statement on 23 November 2016 the Chancellor of the Exchequer announced a large scale regional 5-year pilot of VRTB6. This was of course the second pilot scheme exercise, and confirmed the delay in a national roll-out originally expected in autumn 2016.

Conclusion

The Government still appear keen on the notion of extending the right to buy, and the forthcoming White Paper on Housing may provide further evidence (and detail) of this. Whilst it may not be as high up the "shopping list" as previously, it is unlikely that it will go the same way as the now abandoned pay to stay proposals. What its final form will be is however still open to debate, not least because of real doubt as to the final cost and funding of any extension.


Footnotes:
1On 30 October 2015, the Office for National Statistics (ONS) announced that registered housing associations in England would be reclassified from Private Non-Financial Corporations to Public Non-Financial Corporations for the purposes of the UK National Accounts, with the effect that their debt will now appear in UK public sector net debt. The ONS had concluded that such associations should be reclassified given that legislation provided the Government with significant influence over matters such as the disposal of their social housing assets. The Government has taken steps, via the introduction of new legislation, to de-regulate aspects of the housing association regulatory framework to ensure that they are ultimately 'rereclassified' as private sector bodies.

2 The agreement was based on 4 key principles – (1) Right to buy discounts for housing association tenants: housing association tenants would have the right to purchase a home at Right to Buy level discounts – subject to funding for the scheme. (2) Board control over which homes to sell: housing associations will have the final decision about whether to sell an individual property, with the presumption that they will sell a tenant their current home where they can. (3) Full compensation: housing associations will get the full market value of the properties sold, with the value of the discount funded by the Government. (4) Flexible one for one replacement: nationally, for every home sold under the agreement a new affordable property would be built, thereby increasing overall supply. Some housing associations may not be able to build at a ratio of one for one, or in limited circumstances have to rely on acquisitions or bringing empty homes back into use, but it is expected that this will be balanced by others delivering to a higher ratio and that, nationally, the target will be met. The type and location of replacements will be flexible, according to their needs.

L&Q, Riverside, Saffron, Sovereign and Thames Valley Housing were the 5 invited to participate and started accepting applications in January 2016.

4The qualifying period was 10-years, rather than the RTB 3-years, as a housing association or public sector tenant.

5Speaking at the National Housing Federation's Smaller Housing Associations' conference in London on 3 November 2016 (as reported in "Inside Housing").

6Allowing 3000 housing association tenants, out of a total of 1.3 million, to purchase their homes.