Background briefing paper for TRAs 1

Extension of the right to buy to housing association tenants and ‘pay to stay’ for both council and housing association tenants

Council_flats_270x250Background: The number of families that are stranded long-term on housing waiting lists, living in poor or overcrowded homes, or who have been made homeless continues to grow in London. It would take almost 13 years, at the average rate of building new social-rented homes, just to deal with London’s existing backlog of need.

Since 2011, government grant for building new ‘affordable homes’ has been reduced. Also the grant can only be used to build new affordable-rent, with rents of up to 80% market rents, not homes at social rents.

In some parts of the country 80% market rents cost the same as social rents, but in London they are two or three times higher (depending on which part of London you live in).

In addition, for roughly each new affordable rent home built, landlords can convert an existing social-rented home into an affordable rent home. In London, 11,011 social-rented homes were converted to affordable rents between April 2012 and April 2015.

In May 2015, it was announced in the Queen’s speech that the following policies would be introduced by the government in a housing bill (likely in October 2015). These will have further negative impact on London’s dwindling supply of social-rented homes.

Proposal to extend the Right to Buy to Housing Association tenants:
Housing association tenants will be able to buy their homes with a discount of up to £104,000 – giving them the same rights as council tenants.

The government has been increasing Right to Buy (RTB) discounts since 2012 and so more council homes are now being sold. Councils have also been selling homes at valuations that are up to seven years out of date. This means that over the last ten years £4 billion less has been received in RTB sales than had up to date valuations had been used.1

The government has argued that for each home sold through the RTB another home will be built. However, this is just not happening. Between April 2012 and April 2015 there were 8,044 council RTB sales2 but only 1,107 replacement homes were started to be built on site or acquired3.

Councils will have to foot the bill for housing association RTB sales. They will be forced to sell their most expensive properties to compensate housing associations for the difference between the discounted price between the discounted price and the actual value of each home sold. The money raised through the sales will also be used to build replacement homes and contribute to a £1b fund for new homes to be built on brownfield sites.

The government says that 15,000 high value council homes will be sold each year, which will raise £4.5 billion. However, Savills (a global real estate service provider) says it is likely that only 5,500 high value council homes will be sold, bringing in £3.2 billion a year. While the money raised from the sell-offs is to be distributed across the country, 78% of the sales will be from London, where property values are highest.

In London homes deemed to be high value, which councils would have to sell when they become vacant, are those valued at between £340,000 for a one bedroom home and £790,000 for a four-bedroom home. A high percentage of these would be in inner London boroughs. In Kensington and Chelsea, for example, 63% of council homes are high values, in Westminster, 48.2% and in Camden, 31.6%. Family sized homes would be most vulnerable.

Pay to Stay: The existing ‘pay to stay’ policy allows councils to charge market rents to tenants whose household income of £60,000 or more a year.

The government now proposes to introduce a compulsory scheme through which council or housing association households that together earn any more than £40,000 a year will have to pay market rents. It’s not definite yet whether all will be charged full market rents or some ‘affordable rents’ with gradual increases in the percentages of market rents.

The law will be changed to force social housing tenants to declare how much they earn. While housing associations would be able to keep any money raised through pay to stay, any raised by councils would go to the government.

Even households with two or more relatively low waged working class incomes would be vulnerable to significant rental increases. Job insecurity will be a significant risk. Where a member of a household has lost a job, they could suddenly find themselves unable to pay their rent and potentially (certainly in respect of housing association tenants) be threatened with eviction. The policy could force more to try to buy their homes but dangerously overstretch their finances.

More and more RTB sales are actually Buy to Let. This increases transience and reduces the stability of social housing communities. Recent evidence suggests that 40% of homes that have been sold under RTB are currently Buy to Let.

What can we do?

Post or email the attached letter (A) either as it is, or amended as you see fit, to your local councillors, MP and the Mayor of London, City Hall, The Queen’s Walk, London SE1 2AA or [email protected] Make sure that you add the name and address of your tenants and residents association.
Ask your local councillors or MPs if they plan to oppose these proposals.
Encourage debate in local newspapers by writing letters to them about these proposals.
Let tenants and residents on your estate or street know about these proposals and encourage them to post or email letter (B) to local politicians and the London Mayor.

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One thought on “Background briefing paper for TRAs

  • Frances Scott

    The plans for charging market rents or near market rents to social housing tenants will cause millions to be threatened with homelessness and misery. This must be resisted and instead, there needs to be a bill that stipulates no more than 50percent of market value rents to be charged to social housing tenants. Economic justice is an important principle for a democracy. We need to be building more social rented properties and the government should be introducing rent controls to stop spiralling rents, and look at ways to sto wealthy foreign buyers from buying up swathes of london which pushes the prices of property up whulst often leaving the property empty.