Forced council house sales in the housing bill

We’ve had a week now to get to grips with what’s in the Housing and Planning Bill on the detail of the government’s plan to force council’s to sell valuable homes.

We were clear from the start that we are deeply concerned about the likely impact that the policy will have. When the government originally set out their plans to fund new Right to Buy discounts for housing association tenants by selling much-needed council homes we said that it was going to be like robbing Peter to pay Paul.

But it’s only now that we have the detail of the bill that we can really see how bad things are. There are still a lot of uncertainties because so many of the decisions are being left to regulation, but we have three main areas of concern:

  • That there is no commitment to replacing the homes that are sold
  • That the government has failed to exempt any homes from being subject to sale
  • That councils might be asked to hand over much more cash than they ever make from selling properties

Replacement

The bill includes no commitment whatsoever to replace council homes that are sold through the scheme.

The government has previously tried to placate concerns about the bill by pledging to replace every home that is sold. But with no explicit commitment to replace homes in the bill that pledge is unsupported.

The shortcomings of the existing replacement scheme for Right to Buy, which has replaced only one home for every nine sold, demonstrate the need for a cast-iron commitment on replacement. We’ve spelled out in detail what this should look like, and it must include detail on:

Unless it’s in the bill, there’s no guarantee it will happen.

Exemptions

We’ve set out how the forced sales policy could have some damaging unintended consequences unless particular homes are exempt from sale. These include:

  • Specialist and modified homes
  • Homes in rural areas
  • Homes that have undergone significant improvement
  • Homes that are made vacant through eviction
  • Homes that are made vacant by transfer

While the wording of the bill opens up the possibility of some homes being made exempt from the policy, no explicit exemptions are made in the bill. Unless these homes are exempt, there is a danger that areas will lose homes that can’t be replaced or that councils will be given perverse new incentives. For example, will councils be so inclined to invest in improving properties if they think that it will push up their value and make them subject to forced sale?

How much will councils owe?

This final point is quite technical but very important.

Before the bill was published, there had been a question about how the government would work out how much councils would owe the Treasury every year under the policy. Broadly, there were two options for how to work it out:

  • Government could bill councils based on the amount of money that they’d actually raised from selling homes. Under this approach councils would be required to value homes as they became vacant, to sell those worth more than a particular amount and then send the money they raise to Treasury.
  • Government could make an assumption about how much councils should make from selling homes and bill them based on this. Under this approach, the government would make a calculation based on the estimated value and distribution of council homes, estimated vacancy rates and then bill councils based on these estimates.

The bill confirms that the government has decided to go with the latter of these approaches.

To be clear: there are problems with both of the methods. The first is bureaucratic and expensive. It would slow down the speed at which you could re-let council homes (because you’d have to value them first), but at least it would reflect reality.

The danger of the second – the one that the government is going to use – is that it is very easy to get estimates of values, distribution and vacancy rates wrong. In fact, Shelter, Savills, the Chartered Institute of Housing and the Institute of Fiscal Studies have all warned that the pre-election estimates of how much would be raised from the forced sales policy were wildly optimistic.

In a tacit admission that they may well get things wrong, the bill even states that councils will be required to make payments in line with the government calculation, “whether or not [its] assumptions are, or are likely to be, borne out by events” (my emphasis).

Basically, raising money is the priority. Councils may be forced to sell homes that are not ‘high value’ in order to pay their debts, but ultimately what the government cares about is getting paid. And, by saying that calculations can be entirely removed from reality, it is completely closing down the option of appealing against unrealistically high estimates.

As the bill is only just starting its journey through the parliamentary process, there’s still plenty of opportunity for amendments. We’ll be working with parliamentarians to try to limit the potential damage of this policy. You can help us by adding your voice to our campaign calling on the Treasury to focus on building more genuinely affordable homes rather than selling the precious few we have left.

Join our campaign calling on the government to invest in affordable homes.

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One Comment
  1. One of the corner stones of the policy is that of ‘high value’ council property but the Act itself does not provide for any definition of that term, which will only be provided by Regulations, AFTER the Act has passed. It is in effect saying “pass this law but we are not telling you what it is before you do”.

    The finance proposals are also vague in that it involves
    “an estimate of —
    (a)the market value of the authority’s interest in any high value housing that is LIKELY to become vacant during the year”

    “A local housing authority in England that keeps a Housing Revenue Account must CONSIDER SELLING ITS INTEREST in any high value housing that has become vacant.”

    Again it does not provide any detail of what may happen if a sale is considered and then for whatever reason rejected. Possibly the govt will deem nonetheless that the property was sold. The Act says that a LA must take into account any Guidance by the Sec of State but again that of course does not normally get published until after the Act is passed.

    As with the “voluntary” disposal agreement these proposals are like the MPS having their arms twisted behind them.

    In the North East there will be HA tenants who wish to go for the RTB, but that there are very few what (possibly) will be deemed “high value”

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