It is almost a year since Greg Clark, then-communities minister, took to the stage at the National Housing Federation's (NHF) annual conference to announce housing associations would make a historic offer on the voluntary extension of the Right to Buy.
A year later, with the scheme still to be rolled out nationally, much of the detail is still to be decided. The best evidence so far comes from the pilot schemes which began in early 2015 and are nearing completion.
The pilot schemes
Five housing associations – L&Q, Sovereign, Saffron, Thames Valley and Riverside – launched government-backed pilot schemes in January. The schemes were designed to test both the appetite for the Right to Buy among housing association tenants and its practical application.
Council homes will eventually be sold to fund the scheme, but this hasn't happened yet. So the government has to pay for the pilot directly and to limit the burden on government funds, it was capped at 600 sales. The expectation at the outset was that this would be comfortably exceeded, but in practice it has proved very different.
The five housing associations only offered the pilot Right to Buy to specific tenants in specific local authority areas. In total, this meant 48,000 households were in the pilot areas which were in London, Norfolk, Merseyside, Oxfordshire and Surrey (see graph).
But in a further bid to limit cost, the government introduced a long eligibility period into the pilot scheme meaning you needed to have lived in social housing for 10 years to buy. This compares to just three years in the local authority scheme.
In addition, many homes were excluded. Housing associations decided to avoid rows with local authorities by removing homes built through Section 106 planning agreements. Rural housing and supported housing were also kicked out.
Under the main scheme, housing associations will design local exclusion policies meaning some of these exclusions will not apply but many might. Sector figures have told Inside Housing the government effectively allowed participants in the pilot scheme to exclude anything they liked, without any questions asked. In the main scheme, exclusions will be subject to regulatory oversight. In the main scheme, excluded tenants will get a portable discount, but this was not tested in the pilots.
Nonetheless, a shade under 16,000 of the 48,000 households were allowed to buy under the pilot once the exemptions were applied.
And how many wanted to? As of April, more than 4,000 expressions of interest had been made – around 8% of all households (many would have made expressions of interests without realising they were ineligible). But of these, only 790 went on to make a formal application to buy. This is 5% of those who qualified, but a tiny 1.6% of the households in the scheme as a whole.
The NHF has been at pains to suggest there are no concerns about low demand, as is the Department for Communities and Local Government. But a source close to one of the pilot landlords said: "There is much less demand than they thought. They don’t realise the situation has changed since the 1980s. Loads more people are in zero-hour contracts these days and they can’t get mortgages like they could in the 1980s."
No more data from the pilot scheme will be released until the academics at Sheffield Hallam release their report into the evidence next month. It has been revealed that as a consequence of the long eligibility, it has been dominated by over-50s. An unintended effect of this has been that they qualify for the maximum discount – a source of frustration for a penny-pinching government.
Outstanding issues:
Portability, Compensation and Eligibility
Portablitity
Concerns from housing associations about the potentially vast number of tenants expecting a portable discount remain. The requirement is that housing associations offer a suitable alternative housing association property to all tenants who live in an excluded home. But this creates difficulties.
In a major city, where lots of housing associations are developing, there may be a range of suitable, local, vacant properties to move into. But in more remote areas, it will be much more challenging. A National Housing Federation (NHF) briefing note to members accepted that in these areas associations "may only have a single available property within the next year or not even that". With many rural homes likely to be excluded, this is going to be a live issue.
At sounding board meetings with government, associations had pushed hard for relaxations on this. They wanted tenants to be able to use the discount to buy any home on the private market. But the government dug its heels in – it didn't want to make the compensation payment to a private owner who would not reinvest in new build. Associations must develop a local portability scheme to deal with this before the scheme launches on an as-yet-unspecified date.
Compensation
Full, unconditional compensation has been the rock that has underpinned the voluntary deal. It is the promise on which the housing sector gave its consent. But with just months to go until the scheme launches, there is still debate and confusion over this key point. The government is committed to paying housing associations’compensation for the discount tenants receive, meaning they get full value for the properties sold.
But the question is when they pay this discount. Despite some bitter wrangling behind the scenes the government is adamant it will pay 70% of the cash on the sale and the remaining 30% when the housing association starts a replacement property.
But this has difficulties attached to it. Not all housing associations will replace all homes sold – the specific one-for-one promise is sector wide. It will be met by (for example) giant, developing London-based landlord building three for every home they sell to make up smaller,cash-strapped, rural organisation from Cornwall building 0.5.
This is specifically acknowledged by government, but how and when does the small social landlord from Cornwall get the additional 30%? The NHF insists they will – but the mechanism has not yet been revealed. This is a big stumbling block, as many housing associations have said without guaranteed compensation there is no deal.
Eligibility
At the outset of the pilot scheme, the expectation was that the 10-year period would move in for the main scheme.
But many sector figures have told Inside Housing they expect it to stay at 10 years. The government is yet to confirm the eligibility period,but it has not yet got the money in from councils to pay for the scheme, and there is fiscal pressure to limit sales until it has built up a pot.
