Monthly Archives: October 2016

The Right to Buy- Where are we now?

The Right to Buy was introduced by the Housing Act 1980. Just under 2 million local authority properties have since been sold under the policy. The UK now faces an unprecedented housing crisis and Local Authorities are struggling with a chronic shortage of housing stock, with c.40 percent of homes purchased under right to buy now in the hands of private landlords.

In this post Alice Richardson considers the recent and impending changes to right to buy across the UK and the increasing divergence of policy between Parliament and the devolved administrations of Scotland, Wales and Northern Ireland.

When does the right arise?

The right to buy arises after a tenant has spent a specified period of time as a public sector tenant: Sch.4 para.6 Housing Act 1985.  Currently the tenant must, however, be a secure or flexible tenant at the date of his application. The specified period is five years in Wales or  three years in England: s.119.

The right is lost if the tenant ceases to be a secure or flexible tenant before he acquires the freehold or leasehold interest in the property e.g. he no longer occupies the property as his only or principal home: Sutton LBC v Swann (1986) 18 H.L.R. 140.

 

How much is the discount?

If the property is a house (and the tenancy began after 18 January 2005) the discount is 35 per cent at the date the right to buy arises plus 1 per cent for each further year, to a maximum of 60 per cent: s.129(2)(a) Housing Act 1985. The starting discount is 32 per cent if the tenancy began before 18 January 2005: s.180 Housing Act 2004.

 

If the property is a flat (and the tenancy began after 18 January 2005) the discount is 50 per cent at the date the right to buy arises plus 2 per cent for each further year, to a maximum of 70 per cent: s.129(2)(b). The starting discount is 44 per cent if the tenancy began before 18 January 2005: s.180 Housing Act 2004.

The landlord may require the tenant to repay anything up to the full discount if the property is sold within five years of it being purchased: s.155(2) and s.155A(2).

By the Housing (Right to Buy) (Limit on Discount) Order 1998/2997 the Labour government set the maximum discount at between from £22,000 and £38,000 (varying by region).

In April 2012, the government repealed the 1998 Order and in 2014 the Housing (Right to Buy) (Limit on Discount) (England) Order 2014/1378 increased the maximum discount to £77,000 in England and to £102,700 in London. By the Housing (Right to Buy) (Limit on Discount) (England) Order 2014/1378 from April 2015 the maximum discount has increased at the same rate as the percentage change in the consumer prices index from the preceding year.

The maximum discount in Wales is currently considerably lower than in England at £8,000: Housing (Right to Buy) (Limits on Discount) (Wales) Order 1999/292, Housing (Right to Buy and Right to Acquire) (Limits on Discount) (Amendment) (Wales) Order 2015/1349.

 

Where are we now?

The Scottish Parliament, having increasingly restricted scheme, abolished the Right to Buy from 1st August 2016: s.1 Housing (Scotland) Act 2014. Announcing the intention to do so in July 2013, then Deputy First Minister, Nicola Sturgeon said:

“We can no longer afford to see badly needed homes lost to the social sector. That is why I am today announcing the final stage of the abolition of the right to buy – a decision that will safeguard Scotland’s social housing stock for the benefit of citizens today and for our future generations.” (The Scottish Government, Safeguarding Scotland’s social housing, 3 July 2013)

 

The Welsh Assembly have announced plans to do the same. The Legislative Programme for 2016-17 contains a commitment to bring forward a Bill to abolish the Right to Buy and Right to Acquire in Wales:

“…we will bring forward a Bill to abolish the right to buy and the right to acquire. We must safeguard our social housing stock in Wales and ensure it’s available to people who need it and who are unable to access accommodation through home ownership or the private rented sector. We need to build more homes, and this Government is committed to delivering an extra 20,000 affordable homes during this Assembly term, but we must also tackle the pressure on our current social housing stock. This Bill will seek to protect that stock from further reductions. The analogy I’ve used before is that it’s like trying to fill the bath up with the plug out.”

In Northern Ireland, the equivalent of the right to buy is the “House Sales Scheme” and the maximum discount is £24,000. Although the Executive has not indicated any planned changes as yet, the Stormont Agreement, A Fresh Start (November 2015) includes the following:

“The Executive is also committed to progressing significant structural reform of social housing provision. This will be focused on reducing the Departmental Expenditure Limit subsidy pressures.”

 

Expansion of the Right to Buy in England

Meanwhile the Conservative government continue to expand the Right to Buy in England. The Party’s 2015 Manifesto set out an intention to extend the Right to Buy to housing association tenants and require local authorities to sell off their most valuable properties in order to pay for it.

 

Before the Housing and Planning Bill 2015-16 was introduced the National Housing Federation (NHF) proposed the implementation of an extended Right to Buy on a voluntary basis only. The offer was described as a compromise which would allow Housing Associations to refuse the right to buy in relation to certain properties.

 

On 7th October 2015, David Cameron announced that agreement had been reached on the offer and that the first housing association tenants would be able to buy their homes in 2016. During the Autumn Statement and Comprehensive Spending Review 2015 the Chancellor announced that the extended right to buy would be piloted by five housing associations.

 

The Housing and Planning Act 2016

The Housing and Planning Act 2016 does not, therefore, contain a statutory Right to Buy.  However provisions are made for, inter alia, the funding of the voluntary right to buy.

s.64 of the Act enables the Secretary of State to pay grant to private registered providers to cover the cost of a discount awarded to the tenant of a provider when buying their home from that provider and s.65 enables the Greater London Authority to make equivalent grants in respect of Right to Buy discounts for dwellings in Greater London.

 

ss.69-79 enables the Secretary of State to require local housing authorities to make a payment to the Secretary of State calculated by reference to the market value of the higher value vacant housing owned by the authority.

 

s.76 places a duty on local housing authorities to consider selling such housing and enable the Secretary of State to enter into an agreement with a local authority to reduce the amount of the payment.

 

These payments will, apparently, be used to compensate housing associations for selling housing assets at a discount to tenants.

 

Comment

The extension of the right to buy to housing association tenants was the subject of an inquiry by the Communities and Local Government Select Committee. The Committee concluded in their report that:

“The extended Right to Buy is designed to increase home ownership and increase housing supply. We support these aspirations and the principle of giving people the opportunity to buy their own home. Despite this, we feel that there are unresolved issues and remain concerned that the Government’s policies could have a detrimental effect on the provision of accessible and affordable housing across all tenures, particularly affordable rented…”

 

Unsurprisingly the report also found that large numbers of homes sold through the statutory Right to Buy for council tenants had in a relatively short space of time become rental properties in the private sector. Selling social housing assets at a discount, only for them to become both more expensive and possibly of lower quality housing in the private rented sector was therefore a significant concern.

 

Regarding the funding of the Right to Buy discounts for housing association tenants with the proceeds from the sale of high value council homes the Committee were of the view that public policy should usually be funded by central Government, rather than through a levy on local authorities.

In a separate report the Public Accounts Committee criticised the fact that many key policy details have not been clarified, with only vague assurances as to how it will be funded, without producing any figures to demonstrate that additional funding from central or local government will not be required. Other concerns included the extent to which the new homes funded by the policy will be genuine replacements for those sold, and whether there will be sufficient controls to prevent abuse of the scheme (Committee of Public Accounts, Extending the Right to Buy to housing association tenants, HC 880 2015-16, April 2016).

A further difficulty with the scheme may be that different approaches to exemptions by different housing associations could give rise to claims for judicial review. Five housing associations are currently piloting the voluntary right to buy and the pilot schemes will run to January 2017. An evaluation report, due in September 2016, is yet to be published but is no doubt anticipated with interest by tenants, housing associations and their lawyers.

 

 

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