Five Questions on the new Right-to-Buy

In his speech yesterday, the Prime Minister suggested more people owning their own homes should be a measure of his Government’s success in creating a ‘Greater Britain’.

In so doing, he appeared to accept the terms of the deal on right-to-buy for housing associations, proposed by the NHF and voted for by the majority of HAs in a matter of days last week. This deal will radically change the landscape of affordable housing in the UK.

In recent years, housing associations have been the primary developer of affordable homes – delivering 186,000 properties across the UK between 2011 and 2015.  The new deal (details here) will broaden the right to buy to cover properties currently owned by housing associations, under the same rules as Local Authority properties.

HAs will be compensated for this loss by Government at market rate, with the idea being they will reinvest this money in replacing the lost affordable housing within 3 years of sale.

This new reality poses a series of significant questions – some of which are excellently summarised by Jules Birch here.

Firstly, ever since the introduction of right-to-buy, housing associations have been running to stand still in order to replace sold stock – new building by social landlords has barely replaced half the homes sold (see DCLG data below, from Lyons review).

In the new regime, will they be able to not just replace but exceed the current numbers of affordable homes? If not, who will undertake this task? Is there a plan to increase numbers of affordable rent homes or are we happy with a steady diminishing?

Second, there remain questions as to what constitutes a legitimate replacement home (house type, type of tenure, location) and whether the criterion of ‘affordable’ housing (80 per cent of market rent) is in some places still so expensive as to lock out low earners. The location question is particularly crucial in London, where developable land is harder to come by, and is not specified in the deal as laid out – could this policy speed up the hollowing out of genuinely affordable homes in the capital?

Third, does this change the role of housing associations? As a whole they currently sit on some quite significant financial assets – and in the short-term this will boost their coffers significantly. Many have also been increasingly diversifying their portfolio – cross-subsidising affordable homes with market rent properties. What are the incentives now acting on associations to ensure these assets are used to provide more affordable housing and at what point does this require tougher action from the regulator?

Fourth, what does this mean for relationships within the sector? While non-developing HAs will be encouraged to partner with those that do develop in order to replace their housing, the practicality of this relationship needs to be explored. The process of the deal has also splintered an already diverse sector – with some HAs proving vocal critics of the deal and in turn the NHF.

Fifth and finally, the way the deal was struck raises interesting questions for our politics and policy-making more broadly. The Government has thus far not shied away from creating policy through negotiation with institutions and other brokers, not just in this case but also in the various devolution deals including the flagship Northern Powerhouse. The latest example of this is the gambit from Len McCluskey of the Unite union, engaging directly in negotiations with the Government by saying that his union will accept the proposed strike thresholds in exchange for online voting in workplaces.

This mild revival of a kind of corporatism entails policy being made outside the Palace of Westminster, meaning that it does not undergo the scrutiny of Parliament and the consequent raising of public awareness – significant as many expected the House of Lords to prove a stumbling block to the Housing Bill.

As Isabel Hardman has suggested, this may be pragmatism on behalf of the Government – seeking to avoid their slim majority being overturned. But it may also reflect the current perceived weakness of Her Majesty’s Opposition, who these institutions don’t trust to successfully defend their interests at the despatch box.