Grant Shapps’s Right to Buy Con – Will a Pennny of Receipts be used to Build Replacement Council Housing?

Every single statement of the housing minister needs to be taken with a huge grain of slat.  He often claims for example that housebuilding is increasing when it is falling, of he doesnt have the latest figures on housebuilding to hand, when his department has just published them or he and DCLG SPADs have taken a week to spin around the bad news.

Possibly the worst offence though is over the expansion of the right to buy programme – to a £75,000 discount. Where the government claims a policy of ‘one for one replacement’ .

Local authorities will be able to retain the receipts for replacement housing – provided they can sign up to an agreement with Government that they will limit the use of the net Right to Buy receipts to 30% of the cost of the replacement homes….The council must also pay the Government an amount which reflects the income which the Treasury expected from Right to Buy sales prior to the new scheme,  Once these costs are deducted, the remaining receipts (the ‘net receipts’) are available to fund (and must be applied to) replacement affordable rented homes.

Proposals issued by the Labour government in March 2010 said councils would keep all right to buy receipts, as well as rental income & it was on this basis that negotiations for local councils to take on the housing debt were commenced.

In other words you take up to £75k off the valuation and then the Treasury keeps 70% of the receipts and from that small sum you have to build an ‘affordable home’ which the government has now defined as including housing at only 20% discount of market values, as opposed to the 70% discount typical with Council Housing.  So the replacement housing must be built with 30% of the receipts, for three times the rent and certainly not to ‘Parker Morris/SDS standards.  They will Hobbit Homes, or Shapps Slums as I am sure they will be christened.   There is no way any local authority can build one for one replacement council housing with this kind of deal.

A spokesperson for the DCLG has acknowledged that receipts would not be enough to deliver replacement homes in some areas but said that the one-for-one target was a national one.  Freedom of Information requests need to be submitted to find out the DCLGs region by region and authority by authority calculations of replacement rates and the debt dynamics of Housing Revenue Accounts.

But it gets much worse, as a deal with housing authorities saw them agree to take on £21.5 billion of housing debt, but in return the Treasury would not take a share of housing revenue accounts.  This deal however will breakdown if any of its variables are changed, and the assumption was that local authority receipts from right to but would be used to improve the existing stock and subsidies on right to buy would be at their previous levels.  These issues have caused squeels of protest from bodies such as the Institute of Housing and The Association of Retained Council Housing.

“Stock retaining authorities agreed to take on billions of pounds of debt collectively in exchange for local control of local resources. We have spent months consulting our communities, putting business plans in place and balancing the books based on debt and RTB levels. With just five months to go, that is now thrown up in the air.”

John Bibby, director of housing and community services at Lincoln City Council.

After allowing for current discounts and pooling of capital receipts the City Council received only £16,800 from the recent sale of a three bedroomed council house. “I would question how my council could build a new three bedroom house for £16,800 to replace the one sold under the RTB.

What is worse is that houses demolished before 2017 wont be included in the debt settlement.  This has prompted Nottingham and Birmingham councils to plan to demolish 2,100 council homes between them . ‘we propose to build less homes than we demolish‘ says Nick Murphy, chief executive of Nottingham City Homes.

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About andrew lainton

International Urban Planner

Posted on March 17, 2012, in Affordable Housing, Housing. Bookmark the permalink. 2 Comments.

  1. I’m glad to see that somebody outside of local government has spotted the government’s political. 3 card trick. I have no doubt that DCLG and Mr Shapps are already drafting press releases, blaming councils for the lack of new council house building, when the public realises that few, if any, new houses have been delivered, whilst many hundreds have been lost to the private sector at ridiculously generous discounts.

  2. Take a closer look at the ‘Self-Financing’ scheme, which goes ‘live’ on 31st March. According to House of Commons Housing Group evidence & Hansard, the historic council housing debt was under £13 bn in 2005, but New Labour quietly stacked it up to some £23 bn by 2010, to pay for grants to ALMOs etc. (rather than use revenue), while the Treasury wasted the billions netted from the HRAS negative subsidy system.
    In ten days’ time 200 councils will borrow £28 bn from the PWLB in a bridging loans, and within a year must pay off the PWLB loans by sourcing private sector funding. The assumptions made in the councils’ 30-yr plans are ridiculous and the risks enormous, but the opportunity to become developers, delay repayments and have a spendfest with the free money convinced our financially illiterate councillors to turn a blind eye to reality.
    Labour’s plan was to take £23bn of public sector debt (£10bn of remaining historic debt + 13 bn of Labour spending) and move it off-balance-sheet, Enron-style, as a ‘final settlement’ freeing councils from the HRAS and allowing them to borrow massively & build flats. The Tories have added £5 bn more borrowing in order to subsidise developers and kickstart the economy, and Mr Osborne has granted himself the right to dump more debt on councils in future, thus punishing any future financial prudence.
    So in essence, Osborne’s Plan is to make the financing of the economic recovery dependent upon (i) the depth of council tenants’ pockets, and (ii) the sustainability of Enron economics and profligacy.
    Who said more debt isn’t the answer?
    Will Mr Osborne mention this on Wednesday?
    Now let’s see, who else can we dump mortgages onto, all underwritten by the taxpayer?
    Jerry, JC Consultants 01252 724664

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