Impacts of Right to Buy on housing association tenants

December 14, 2015

The Joseph Rowntree Foundation (JRF) published some important new research on the impact of the Right to Buy extension on housing association tenants.

In July 2015, the new Government confirmed that they wished to introduce RTB level discounts for housing association tenants. The funding to compensate housing associations selling off their properties at sub-market values should be made available by the forced sale of higher value local authority properties when they become vacant.

Overall projected reduction in social rents lets resulting from sales of local authorities dwellings according to the JRF report
Overall projected reduction in social rents lets resulting from sales of local authorities dwellings according to the JRF report (Click figure to enlarge).

Government intends that sold off stock will be replaced on a one-for-one basis. Importantly though, the replacement stock will not necessarily be of the same tenure as the housing it replaces. The JRF report investigated the impacts of these policies under three scenarios:

  • Scenario 1: Replacements for stock sold under the RTB and the forced sale of local authority dwellings is built within three years and is let at the same rents as the stock it replaced.
  • Scenario 2: Replacements for stock sold under the RTB and the forced sale of local authority dwellings is built within three years and is let at Affordable Rents.
  • Scenario 3: Replacements for stock sold under the RTB and the forced sale of local authority dwellings is built for sale as shared ownership.

Although 1.3 million housing association tenants are gaining the RTB, JRF estimates that only around 180,000 of these appear to be able to afford to exercise this.

The Pay to Stay proposal is likely to affect half of the households who are able to afford the RTB as it will encourage them to buy their homes as they will have to pay higher rents. It is estimated that between 17,000 and 58,000 will exercise the RTB during the first year of the policy. JRF’s research estimates the total uptake of these policies in 128,000 homes for the following 5 years.

It is important to note that the impact of local authority sales will be localised and likely to present enormous challenges to some local authorities. As the policy proposed the sell off high value properties, some authorities will be severely impacted.

Case study – This is the case for Welwyn Hatfield, Guilford, Brentwood and Kensington and Chelsea where the proportion of high value stock is estimated as 90%, 80%, 74% and 71% respectively. The resultant reduction in lettings as a proportion of all social rent lettings could be estimated for Welwyn Hatfield in 67% and Guilford in 53%. Some local authorities already face difficulties in meeting housing needs and accommodating homeless households and this dramatic reduction in lettings is likely to cause severe difficulties. This impact could be mitigated if they are able to build back the social housing within the local authority boundaries.

The key conclusion from this project is that the tenure of the replacement housing is critical in determining the longer term impact on poverty of the two policies. If it is possible to build replacement housing on a one-for-one basis for the stock lost under both policies and to build it at similar rent levels to the housing it replaces; then over the medium term (five to ten years), there could be a net positive impact on the availability of lower rent housing.

Andrew Eagles, Managing Director, Sustainable Homes commented “Previous experiences showed that only a fraction of sold housing stock were replaced. There is also a concern that homes replaced may not also be used for affordable housing. This is likely to impact poorer households who will have fewer options for social rent housing and therefore will end up paying higher rents

Under the first scenario the policy has an overall positive impact on poverty levels once the replacement stock is built. The second one considers that Affordable Rents will increase poverty as these are considerably higher than social rents. Finally, the third case scenario would divert many households to the private rented sector increasing poverty and non-poor households will access new shared ownership housing.

We are still at the early stages in discovering the full-length impacts of these policies to the social housing sector; nevertheless the RTB scheme would definitively have an immediate impact on low income households who rely on the social rents.

I’d be interested in your view on these policies, what do you think? Does the analysis ring true? Will RTB be beneficial in the long term for housing in the UK?

Daniel Navarro