The government’s right-to-buy targets are achievable – if the politics are possible
The government’s policy of forcing councils to sell off their most expensive properties as they become vacant was an idea initially floated by Policy Exchange in its 2012 report Ending Expensive Social Tenancies.
The original idea was that each expensive home sold would be replaced on a more than one-for-one basis with an average priced one in the same regional area. This would therefore grow the affordable housing stock to help house the (then) 1.8 million people on social housing waiting lists, as well as support overall housing supply. This has, self-evidently, metamorphosed instead into a policy to help fund right-to-buy extension, which Policy Exchange also supports.
Across the (then) 171 stock-holding authorities, the report estimated 339,000 council homes to be “expensive”, meaning above the regional median average home value, based on analysis of English Housing Survey data. In terms of regional impacts, London was estimated to have the highest proportion of social properties that fell into this expensive category (31%) and the north-east the lowest (15%).
The policy announced by the Conservatives will actually require councils to sell fewer homes; namely their most expensive 210,000. So the bar is higher; council homes in the top third of the house price distribution in their area, and not the top half.
The report also estimated the familiar £4.5bn a year being raised from the sales. Although arrived at on a very different basis and on house prices lower than those of today, it was possibly a figure in the minds of policymakers from the outset.
The report’s £4.5bn is also based on a cautious 3.5% of expensive social homes – though both council and housing association – becoming vacant and sold each year, through deaths and voluntary moves. The historical average turnover cited in the report was actually somewhat higher, at 5-7%.
The government expects there will be about 15,000 council sales each year, which implies about 7% of the 210,000 expensive council homes becoming vacant and sold. Although feasible, this is clearly challenging, being at the top end of the historical range.
The implied average net receipt (ie after debt repayment) of £300,000 is perhaps less so, given around half the receipts will come from London. According to the Land Registry, even the more modest mean average house price in London is £523,000 and England £264,000 (latest full-year figures). So overall, the government can be reasonably confident of getting a healthy level of receipts.
So what about one-for-one replacement? In total the government would raise £63bn (net) from the selling of 210,000 of expensive council homes, with the National Housing Federation estimating £12bn of that will be needed to fully compensate housing associations for the full extension of right-to-buy in today’s prices, though this serves as an upper estimate.
Then, there is the £1bn brownfield regeneration fund. Replacement also has to be done without additional local authority borrowing given the borrowing caps will rightly remain in play. On the face of it, such numbers do not seem totally insurmountable, though this abstracts from the arguments about the slice of money the Treasury and councils get to keep.
The reinvigorating right-to-buy and one-for-one replacement policies announced by the coalition in April 2012 explicitly intended such replacement to happen at the national level but not necessarily the local council one, i.e. some councils would be able to replace more than one-for-one and others fewer, depending on their net sale receipts.
Ending Expensive Social Tenancies implicitly saw within-area replacement at the more regional level: for example London sales matched one-for-one by London replacements. Upholding a commitment to full replacement within a local authority is more challenging still, though there is usually some scope for building in a cheaper part of the local authority.
However, the charges of social cleansing abound and the politics are tricky. In sum, while the sale and replacement policy in some form appears perfectly achievable, much debate lies ahead about what that form takes. Difficult decisions and tough negotiations lie ahead.