THE FORCED COUNCIL HOME SELL-OFF September 2015 shelter.org.uk CONTENTS 1. Executive summary 3 Loss of low rent homes 3 Jeopardising new building 3 Increasing local housing pressures 4 A financial risk to the Treasury 5 One for one replacements 5 Conclusion 6 2. Introduction 7 Background – how is the policy expected to work? 8 3. The direct impact 11 Which places will be most affected? 11 How will places be affected? 14 Case study 1: Waiting for a council home 18 4. The indirect impact 26 Which places will be most affected? 27 How will those places be affected? 29 Case study 2: The changing face of Croydon 30 Case study 3: The changing face of Peterborough 32 5. Replacement 34 Is the scheme financially sound? 34 Development lag and retrospective replacement 36 The existing replacement policy 37 Like-for-like 39 6. Conclusion 41 Appendix A – methodology of projections 42 1. National projection of stock over thresholds by local authority 42 2. Cost estimates of forced sales and associated policies 42 Appendix B – council building programmes 44 The forced council home sell-off 2 1. EXECUTIVE SUMMARY In the 2015 Queen’s Speech, the government confirmed its plan to force councils to sell their low rent homes in the most high value areas. The scheme was proposed as both a way While the government’s initial estimate of of paying for the extension of the Right 15,000 homes being forcibly sold per year to Buy to housing association tenants, is probably too high, Shelter estimates and as a way to get councils “to manage that almost 113,000 council homes are their housing assets more efficiently” likely to be above the value threshold, and by building more homes.1 Without hence liable to be forcibly sold. Due to modification, it will do neither of these the uneven distribution of council stock things – and will reduce the number of low and house prices, Shelter estimates that rent, social homes in the places they are 78,778 of these will be lost from the twenty needed most. As a result, more families on most effected local authorities. Half of low to middle incomes will struggle to get these twenty areas are in inner London a decent home that they can afford. – but they also include more suburban places like Dacorum and Epping Forest, Instead of encouraging councils to and northern cities like York, Leeds and build more low rent homes, the sell-off Newcastle. risks undermining councils’ existing building and regeneration programmes, Unless specific exemptions are introduced potentially causing tens of thousands there are likely to be particularly damaging fewer homes to be built. The scheme losses to the stock of specialist, adapted itself is also likely to create major costs and rural housing. These types of housing for the Treasury by failing to fully cover have been built to meet the needs of the Right to Buy discounts, and by leaving specific groups like elderly or disabled homeless families in costly temporary people, and would be excessively accommodation for longer. By pushing low expensive to replace. income families out of higher value places, particularly from inner cities, it will put new Jeopardising new pressures on communities and services in building more affordable areas on the urban fringe. The forced sell-off of high value council Shelter believes that the government assets will fundamentally undermine should abandon its plans to force the sale councils’ existing building and estate of valuable council homes, and find other regeneration plans, and introduce new means to fund Right to Buy discounts unanticipated inefficiencies and costs. for housing association tenants, if that is its priority. But if the sell-offs are to be The top 20 councils that will be most imposed, at the least the proposals must impacted by the forced sales policy be improved to limit the negative effects. currently have plans to build at least 20,390 homes between them which this Loss of low rent homes policy will put under threat. For example, Islington Council has said that the policy The primary impact of the forced sales will “could end our new-build programme”2, be the loss of social homes, particularly and Southwark Council that it would “drive in more expensive areas – where the a coach and horses” through its house need for low rent homes is most acute. building plans.3 1. Conservative Party Manifesto, 2015 2. ‘Don’t make London’s housing crisis worse’ say experts, London Assembly Press Release, 16th July 2015, accessed on 25/08/2015 3. Exclusive: Right-to-buy extension threatens home building plans, Local Government Chronicle, 10th June 2015, accessed on 25/08/2015 The forced council home sell-off 3 The policy threatens building plans homes on the market, without any because: restriction on who these homes are sold to. For example, many are likely ■■ Councils’ ability to borrow will be to be bought by buy-to-let investors – seriously eroded, as lenders will have particularly in places like London. This will no confidence in the security of future exacerbate the serious housing problems revenue streams or capital receipts already faced by people living in those from any homes built; areas. It will mean that: ■■ Ironically, existing council building ■■ Housing waiting lists will become programmes are often partly financed longer; from the revenue projected from selling a small number of the most ■■ More people will stay in temporary expensive council homes. Most of that accommodation for longer, at greater revenue will now be seized by central cost to local tax payers; government to fund discounts under the new Right to Buy instead; ■■ Councils will have less ability – and less incentive - to reduce under- ■■ If any new council homes risk being occupying and over-crowding forcibly sold as soon as they were households, as homes that fall vacant built, councils will have little or no as part of efforts to move households incentive to build. to more suitable accommodation may have to be sold; Some of the negative effects of the proposed forced sale scheme could be ■■ Councils will have less incentive to reduced through modifications to the invest in stock, as it may push the policy. This could be done by ensuring value above the arbitrary thresholds that there are sensible exclusions in place, for forced sale; and, including on new build homes and those that are earmarked for regeneration, and ■■ The reduction in the number of social by replacing homes sold off with a like-for- rented homes available will intensify like replacement. competition for private rented sector homes at the bottom of the market, Increasing local driving up rents. housing pressures The forced sell-off will also have knock-on impacts on the areas that lower income Between the 20 councils likely to be families are forced to move into. These hardest hit, 159,014 people are on council areas may experience increased pressures housing waiting lists and 22,371 children on local services, like education, health are living in temporary accommodation and council services, and may see an 4 due to the shortage of affordable homes. increased growth in the private rented But instead of helping to solve this sector beyond that which have happened shortage, the sell-off will exacerbate it without the forced sales. further by selling much needed council 4. Live Table 600 and Detailed Local Authority Level Homelessness Figures – January to March 2015, Department for Communities and Local Government The forced council home sell-off 4 A financial risk to the Treasury Figure 1: The difference between the total receipts and the total costs over four years is £2.45 billion5 10 10 8 8 6 6 £ Billion 4 £ Billion 4 2 2 0 0 Receipts from sales Brownfield Land Decontamination Fund Replacement of Council Homes Historic Debt Discounts for Right to Buy tenants Using the receipts from sold council Permanent Secretary of the Department for homes to pay for the extension to the Communities and Local Government and Right to Buy, replacement council homes, Chief Executive of the HCA, Lord Kerslake, historic debt and a brownfield land and the Mayor of London, Boris Johnson, decontamination fund creates a large have both suggested that the funding gap deficit for the Treasury. Over four years the could be plugged by offering discounts to costs of these four policies will be £9.65 housing association tenants in the form of billion. But our research also finds that the Help to Buy-style equity loans.6 total receipts from sold council homes are likely to be only £7.2 billion. This leaves a One for one replacements deficit for the scheme as a whole of £2.45 billion. Since 2012 when the existing replacement scheme for Right to Buy was introduced, Unless the funding of the discounts under nine homes have been sold off for the Right to Buy for housing association every one that has been replaced.7 This tenants are separated financially from the deficit is in part inevitable, as work on forced sale of council homes, the Treasury new replacement homes only starts risks unanticipated costs that could run once the original homes are sold. It is into billions. a consequence of the time that it takes to finance, plan and build homes. The Alternative means should be found to pay financial and practical problems with the for the Right to Buy extension, if that is the scheme also make it an example of the government’s priority. For example, former 5. Shelter calculations based on the receipts generated by sales at current turnover levels on current stock values (by bedroom) of homes at values that breach published thresholds.