“Legislation will be introduced to support home ownership and give housing association tenants the chance to own their own home” - Queen’s Speech 27 May 2015.
So now we have it with the publication on 13 October 2015 of the Housing and Planning Bill (which in this respect applies only to England), or at least sort of. This excerpt from the Queen’s Speech reflected the Conservative manifesto commitment which went on to say “We will fund the replacement of properties sold under the extended Right to Buy by requiring local authorities to manage their housing assets more efficiently, with the most expensive properties sold off and replaced as they fall vacant”.
The extension of the Right to Buy was therefore coupled with another policy relating to the disposal of “the most expensive” Council housing. The Bill does not quite do either job in the way anticipated in the manifesto.
The furore surrounding the RTB extension led to a hardening of positions of those for and against the policy. In the House of Lords an amendment was made to the Charities (Protection and Social Investment) Bill which stated that “the Charity Commission shall ensure that independent charities are not compelled to use or dispose of their assets in a way which is inconsistent with their charitable purposes”. This was intended to negate the extension, but of course not all housing associations are charities.
Meanwhile various statements from the Conservatives made it clear that they were determined to push this policy through. Behind the scenes the NHF was formulating an offer for a voluntary Right to Buy (vRTB) deal. The offer was announced on 24 September and accepted by the Government on 7th October. The “voluntary” nature of the deal neatly sidesteps the amendment to the Charities Bill. Housing associations will have discretion not to sell a particular property in some circumstances. But in these “exceptional circumstances” tenants will be offered the opportunity to use their discount to buy an alternative home from either their own or another association’s stock.
The Housing and Planning Bill does not therefore provide for a statutory extension to the Right to Buy as originally anticipated but acknowledges a voluntary arrangement that will be supported by grant funding by Government (or, in London, by the GLA) to compensate for the discount to be given to tenants on a sale and an intended change to the Regulatory framework to which registered providers are subject.
Clauses 56 and 57 of the Bill therefore state that grants “may” be given “in respect of right to buy discounts”. Those grants “may be made on any terms [the Secretary of State or the GLA] considers appropriate”. This harks back to the right to buy receipts agreements signed by most local housing authorities whereby they have three years to spend the receipts, i.e. a “use it or lose it” offer. A similar arrangement can be expected here because Government is expecting registered proprietors to replace sold housing on a 1-for-1 basis.
It is unlikely that the grants will cover registered providers for loss of rental income and other costs (e.g. finding replacement security for funders). But David Orr in his recent evidence to the Communities and Local government Committee was confident that registered providers would be able to replace housing on a 1-for-1 basis. An initial analysis undertaken by Savills in May indicated that, outside London and the South East, this would not be feasible.
So Boards will have to plan for how receipts will be used to avoid having to repay the grant and any embedded SHG/AHG and what the impact on their borrowing obligations might be. Failure to do so may put the organisation at financial risk.
But surely this is all voluntary such that individual registered providers can ignore VRTB? No, the intention is that enforcement will come via the HCA’s Regulatory Framework. Clause 58 of the Bill enables the Secretary of State to require the HCA to monitor compliance with “the home ownership criteria”, i.e. criteria that relate to the sale of dwellings by registered providers to tenants “otherwise than in exercise of a right conferred by an Act” (i.e. voluntarily). The intention is that satisfying the home ownership criteria will become a factor in whether or not a registered provider is complying with the economic and consumer standards prescribed by the Housing and Regeneration Act 2008. In due course, Boards will be expected to develop policies that enable (and indeed encourage) tenants to take advantage of vRTB together with support and advice in relation to home ownership.
The Government obviously thinks that the criteria fall within the ambit of those standards. We do not think that this is clear cut. So that may be an interesting area for challenge.
The Bill at the moment just provides a framework for the management of vRTB. Registered providers will need the details of the basis upon which grant will be provided, i.e. amount, timing and conditions of payment. Already there are press reports that the cost of grant payments may exceed receipts from the sales of high value Council houses and the requirement on registered providers to sell may be phased in.