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A Consultation 212436 2 28/05/12 CMYK CSD CW P2 A4 JS The Future of Right to Buy in Scotland A consultation Join us at http://www.facebook.com/righttobuyscotlandconsultation Ministerial Foreword Our vision for housing is that all people in Scotland live in a high-quality, sustainable home that they can afford and which meets their needs. That is why I think it is important to do everything possible to protect and increase the supply of affordable housing. One way we can help to do this is by reforming the right to buy. We recognise that many people choose to rent their homes, while for others renting is their only option. We want to do everything possible to make sure that they, and future generations of families, have access to affordable rented housing. That is one reason why we are committed to providing 30,000 affordable homes in the lifetime of this Parliament, of which two thirds will be in the social rented sector. In our last Parliamentary term, we successfully introduced important changes. By ending right to buy for new tenants and new-supply houses we have already gone some way to protecting social housing from right to buy. These changes are already bearing fruit as social landlords are building new houses safe in the knowledge they will not be subject to the right to buy. We are now consulting on further proposals. We do not believe that the discounts of up to 70% available to people on the ‘preserved’ right to buy can be justified. I think these large discounts are unfair to landlords financially and on other tenants who have smaller discounts. One change we could introduce is to move people who have a preserved right to buy entitlement onto the ‘modernised’ right to buy, which has a smaller discount. Another possibility is to end the right to buy altogether, which would remove the complexities of the current legislation, whilst protecting both current and future housing stock for generations to come. This does not mean that we are against home ownership. On the contrary, I know that many people want to own their own home and there are a range of initiatives in place to encourage low cost home ownership for first-time buyers. We believe that it is important for Scotland to have vibrant communities with a mixture of housing tenures. Under devolution we can make many decisions on housing policy, in the best interests of the Scottish people. As a result we already have a strong housing sector here in Scotland. The high level of devolution in 2 the housing sector has allowed the Scottish Government to create a distinctively Scottish product, targeted at the needs of the Scottish people. Transfer of greater powers in areas such as taxation, welfare, energy and regulation present an opportunity for further targeted support. Our freedom to make decisions in all areas of our lives that allow Scotland to flourish economically and socially is the core question to be decided in the referendum we are proposing to hold in 2014. I know that right to buy is something many people feel strongly about. That is why we look forward to hearing from tenants, prospective tenants, equalities groups, social landlords and everyone who wants to have their voice heard on this important issue. Keith Brown MSP Minister for Housing and Transport 3 Contents page 1. Introduction 5 2. Background 6 3. The need for more changes 7 4. The financial effect on landlords 11 5. Other changes 12 6. Assessment of equal opportunities 14 7. Business and Regulatory Impact Assessment 15 8. Summary of consultation questions 16 9. How to tell us what you think 18 10. How we will use your response 19 Annex A Partial Equalities Impact Assessment 20 Annex B Partial Business & Regulatory Impact Assessment 30 Annex C List of organisations consulted 35 4 1 Introduction 1.1 The purpose of this paper is to consult on the reform of right to buy laws in Scotland. In our strategy and action plan, ‘Homes Fit for the 21st Century: The Scottish Government's Strategy and Action Plan for Housing in the Next Decade: 2011-2020’ http://www.scotland.gov.uk/Publications/2011/02/03132933/0 we said the following. “To strengthen the social housing sector, we have already acted to remove the right-to-buy (RTB) for new homes and new tenants, and we will take action to further restrict the RTB. While the RTB has provided new options for households over the last 30 years, the costs of this policy will now fall on future generations. The transfer of hundreds of thousands of properties out of the social housing sector has decreased our social housing stock, and placed increasing pressures on councils and housing associations. It has also had a profound and detrimental effect on some communities, with less desirable areas now even more marginalised. At the same time, many of those who exercised their right-to-buy have struggled to meet the costs of home ownership. The discounts of up to 70% under the "preserved" (pre-2002) right-to-buy scheme are unjustifiable. They leave social landlords out of pocket, leading to pressures on rents for remaining tenants and an eroded asset base. Under current legislation, some 207,000 tenants still have the preserved right. These discounts are excessive in comparison with the lesser discount under the "modernised" RTB.“ 1.2 In this strategy, we said that we would consult on ways to reform the preserved right to buy, to make it fair for both tenants and landlords, and that is what we are now doing. As part of this consultation we are also taking the opportunity to gather people’s views on other changes that could be made to existing laws, as well as the option of completely removing all entitlements to the right to buy in Scotland. 1.3 Any right to buy reforms will be included as part of the next Housing Bill. 1.4 For information on current right-to-buy legislation, tenants and other interested members of the public may find it helpful to refer to our guidance booklet, ‘Your Right to Buy Your Home: a Guide for Scottish Secure Tenants’ while landlords can refer to our guidance circular. Both are available on the website, http://www.scotland.gov.uk/rtb 5 2 Background 2.1 Right to Buy was introduced in 1980 but in its current form the basis is the Housing (Scotland) Act 1987 ('the 1987 Act'), which was later amended by the Housing (Scotland) Act 2001 ('the 2001 Act') and the Housing (Scotland) Act 2010 (’the 2010 Act’). There can be exceptions in particular cases, but, in general terms, the changes made by the 2001 Act were introduced in a way that 'preserved' the entitlements of existing tenants and introduced 'modernised' entitlements for new tenancies that started on or after 30 September 2002. The 2010 Act kept existing entitlements, but ended the right to buy for new tenants, those returning to the sector after a break, and for new supply houses. We have summarised this below. 'Preserved' right-to-buy entitlements 2.2 Tenants who have right-to-buy entitlements over their current home from before 30 September 2002 can buy after a two-year qualifying period with a ‘relevant landlord’ (generally a local authority or registered social landlord). For houses, the discount starts at 32% of the market value, rising by 1% a year up to 60%. For flats, the discount starts at 44% of the market value, rising by 2% a year up to 70%. 'Modernised' right-to-buy entitlements 2.3 Tenants who gained the right to buy between 30 September 2002 until 1 March 2010 have the right to buy after a five-year qualifying period with a ‘relevant landlord’. The modernised discount starts at 20% of the market value after those five years and rises by 1% a year for all house types, up to 35% or £15,000, whichever is lower. In over half of all sales using the modernised entitlement, the maximum discount of £15,000 applies. Some tenants cannot use the modernised right to buy if they live in an area or type of home that has been classed as ‘pressured’ or if they are the tenants of registered social landlord (RSL) affected by a ten-year suspension from the right to buy. The suspension generally affects RSLs which are non- charitable or which became charities after 18 July 2001 Tenants with preserved right to buy are not currently affected by these suspensions. However, if the proposal to move them on to modernised right to buy is adopted, the suspension would then also apply to them. No right-to-buy entitlement 2.4 From 2 March 2011, the 2010 Act ended the right to buy for new tenants and those returning after a break. From 1 March 2011, it also ended for new supply houses (those built or acquired after 25 June 2008). It did not remove any existing entitlements. Existing tenants moving to a new-supply home cannot buy that home. However, they do keep the right to buy if they then move to a home that is not new supply. The act also changed the ‘pressured area’ rules. This means that from 30 June 2011 local authorities rather than Scottish Ministers can decide (designate) if an area is pressured. They can make the designation for up to 10 years, and can choose types of homes as well as areas. 2.5 It was already the case that some tenants of social landlords had no entitlements to the right to buy (for example, if they live in a group housing scheme 6 such as sheltered housing).
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