Published: 29 Oct 2015 by Adam van Lohuizen

At Shelter we have tried to estimate the impact that the some of the Government’s housing policies might have on genuinely affordable homes in the future, which will affect the 1.4 million households waiting to be housed in the social rented sector. It is challenging to predict the impact of such far-reaching policies, but by looking at both present circumstances and what has happened in the past, we have been able to estimate the effect of three policies which we see as potentially having a large impact on homes for people with low incomes:

1. Extension of the Right to Buy for housing association tenants;
2. The forced sell-off of council homes;
3. The transfer of Section 106 contributions away from providing affordable homes for rent towards affordable home-ownership products, such as Starter Homes and shared ownership.

Looking five years into the future, what impact could these policies have on the number of low cost rented homes?

The Right to Buy extension

The Government has said that it wishes to extend the Right to Buy to “1.3 million more families across the country”[1], currently being housed by housing associations. However, if we exclude the households who already have the Right to Buy under the Preserved Right to Buy (when councils transferred their housing stock to housing associations), this gives us 850,000 households who would be newly eligible[2].

We then need to understand how many housing association tenants might exercise their new right in the first five years. The NHF have estimated that 221,000 housing association tenants may be able to afford to buy their home under the Right to Buy, but we do not know if, or how fast, these tenants might choose to act.  To give us an indication of the speed at which the impact might be felt, we took looked at the take-up rate when the original Right to Buy policy was introduced in the 1980s[3].

Although there are many reasons why the overall take-up may be different to the 1980s (changing affordability, mortgage markets, demographics; even the aspirations of the tenants living there), the take-up rate provides us with clues as to how fast the homes may be sold.

Based on this, we have estimated that in the first five years from 2016/17 to 2020/21, approximately 76,000 homes that were housing people on low rents will be sold under the extended Right to Buy. There have been some recent indications that the introduction of the policy could be staggered[4] due to funding gaps but this has not been formally announced.

The forced sell-off of council homes

The selling off of council homes is being used to fund the extension of Right to Buy. At the moment it’s not clear exactly how these two policies will interact with each other and whether the council homes will need to be sold first before offering the extension of Right to Buy to housing association tenants.

For the purposes of this analysis we have looked at the number of council homes that would be eligible to be sold off using the Government’s thresholds and those likely to become vacant each year, using re-lets data[5].

In the first five years of this policy, we estimate that 19,000 council homes, previously housing people on low rents, will be sold on the open market.

Section 106 contributions

The lack of quality data on current Section 106 contributions makes the effects of this policy change very difficult to estimate. We have therefore made an estimate of the number of affordable homes for rent that would have been built in the next five years if recent patterns continued:

1. The JRF calculated that between 2004/05 and 2013/14 there were 234,279 homes built through the Section 106 planning requirements[6]. This period covers both a relatively buoyant housing market pre-2007 and one of low volume post-2008. If we apply the average number of homes built each year under Section 106 to the next five years this gives us an estimate of the total number of homes that could have been built through Section 106 by 2020/21.
2. Not all homes built through Section 106 are for low rent – some are for low cost home ownership or other tenures. The 2011 Housing Strategy Statistical Appendix gives the types of tenure that were built through Section 106. Unfortunately this was the last time this data is available, but from this we can see that in 2010/11 72% of the homes built were for some sort of low rent (social or affordable). As this is the latest available data we have assumed that 72% of the homes built over the next five years could be for low rent.

Based on these assumptions we estimated that over five years there could be around 85,000 low rent homes that would otherwise have been built if S106 contributions are redirected to supply of Starter Homes.

Total effect

With all of these policies in place and with no commitment from the Government that low rent homes would be replaced with comparable homes we are looking at potentially losing approximately 180,000 homes for low rent by 2020/21.

[1] Government press release, Historic agreement will extend Right to Buy to 1.3 million more tenants, October 2015.

[2] National Housing Federation, Right to Buy extension estimated to cost £12 billion, April 2015.

[3] The take-up rate of Right to Buy between 1980-1984 was 8.96% of the total stock.

[4] Inside Housing, Right to Buy roll-out may be staggered due to funding, October 2015.

[5] More information on how we calculated this can be found in Shelter’s report on the Forced Council Home Sell-off, September 2015.

[6] JRF, Rethinking planning obligations: balancing housing numbers and affordability, July 2015.