What happens if you force councils to sell low rent homes?

The government’s proposal to extend the Right to Buy to housing association has been criticised by a whole host of people and organisations, from credit agencies to commentators at the Financial Times and Telegraph. But the way the government is going to fund the policy has received least attention and is probably the most destructive part of the package of housing measures being introduced in the Housing Bill and the Comprehensive Spending Review.

The proposal is to fund Right to Buy discounts for housing association tenants by forcing local councils in areas to sell their more valuable low rent council homes. So for each social rented home bought under the Right to Buy, another social rented home will be sold on the open market.

While individual councils have come forward to voice concerns about this policy, like the Leader of Westminster Council, there has been a significant gap in comprehensive analysis of what the effect of the policy will be. So today we’re publishing a report that examines the multitude of problems that this proposal will create, including an estimated £2.45 billion black hole in the funding plan.

While this will cause a headache for the Treasury, the biggest problems will be felt by ordinary people in those local areas that will be directly and indirectly affected.

Most directly affected will be the expensive areas where councils will be forced to sell the most homes. But lots of less expensive areas will also be indirectly affected by the subsequent influx of lower income households displaced by the shortages of affordable homes.

The direct impact

The government has not said exactly which areas will be forced to sell most homes, but using publically available data we have made a nationwide estimate of the number of homes that every council will be forced to sell.

The top 20 areas that will be forced to sell most homes

High house prices in London mean that many of the areas that will be hardest hit will be in the capital – where the need for affordable homes is also very high. But the policy will also directly hit areas that are struggling with high housing costs across the country, from Cambridge and Epping Forest to Newcastle and York. Sadly, the assertion that all homes lost will be replaced simply doesn’t ring true: there’s simply not enough cash in the plan to fund the Right to Buy discounts and rebuild the homes sold. And even the most optimistic defenders of the government’s plan don’t pretend that replacements will be like-for-like: at best, some replacements may be built, years later, in cheaper areas, in more expensive tenures.

Loss of social housing will impact these areas in a number of different ways:

• More people will spend longer on housing waiting lists. If large numbers of social homes are sold to the highest bidder as soon as they become vacant, there will be fewer homes to let to people on the council housing waiting list. This means that homeless families, members of the armed forces, people who are struggling with high rents or living in overcrowded accommodation will be forced to wait for longer to get a home.
• Many of these homes will become privately rented. The highest bidder will often be a buy-to-let investor. So many homes will switch from being low rent social homes, to expensive, privately rented ones – meaning more families will be stuck with high rents and low security.
• Council house building plans will be put at risk. Between them, the top 20 councils that will be hardest hit have plans to build over 20,000 homes. But forcing them to sell these homes (and taking the money to pay for Right to Buy discounts elsewhere) will make it – and destroy their incentives to do so.
• They’ll lose specialist housing, like homes for older people. Specialist housing is often more valuable because it’s been adapted for a particular purpose, like being accessible for people with disabilities.

The indirect impact

Over time, the loss of affordable housing in expensive areas will inevitably push lower income people out into cheaper areas. This is already happening, particularly in London, where the hollowing out of the city centre has become a hot topic in recent years and where places in outer London like Croydon have seen large increases in the numbers of low income households moving in.

Leaving their communities, schools and jobs is obviously hardest for the families that are displaced like this, but it also creates new pressures on local services in the areas where they move to. This includes pressures on council services as budgets fail to keep up with population growth and on other services like primary schools which see sudden increases in pupil numbers. And it leads to a growth in the size of the private rented sector, as the people who move in are unable to buy or access social housing. This can itself have a destabilising impact on communities.

Some places on the outskirts of London may find themselves facing a double whammy: losing lots of social homes at the same time as receiving influxes of people from more expensive areas needing low rent housing. Places like Epping Forest and Dacorum in Hertfordshire may soon start to feel these squeeze – at a time when council budgets are already hard pressed.

We think that the policy of forcing councils to sell valuable homes is so fundamentally flawed that the government needs to scrap it entirely. It doesn’t make sense to sell off precious low rent homes at exactly the time they’re needed most. Over the next few months the government has an opportunity to commit to building more affordable homes, instead of selling off the ones we have at the moment. That’s what it should be doing in the forthcoming Comprehensive Spending Review.

You can join our campaign to get George Osborne and the government to change their plans, protect affordable housing and commit to building more affordable homes by signing our petition here.