Government should pay for Right to Buy scheme, says committee criticising 'levy'

The Government is relying on an "extremely questionable" model to fund its flagship Right to Buy sell-off of housing association homes in England, a parliamentary committee warned.

Under plans unveiled last year, local authorities will be required to sell "high-value" council homes when they become vacant, with part of the proceeds funding discounts of up to £103,900 for housing association tenants who want to buy their homes.

But the House of Commons Communities and Local Government Committee (CLGC) said the Government should pay for the scheme itself, arguing it was wrong to fund a national policy with what was effectively a "levy" on councils.

It warned that the policy could have a "detrimental" effect on the availability of affordable housing.

The amounts raised could vary widely across the country, depending on property prices locally and the number of social homes individual councils manage, warned the report.

And it said that a decision to require councils to make upfront payments would leave them at risk if homes do not become vacant at the expected rate.

Ministers say that the sums raised from selling "high-value" council homes will pay not only for Right to Buy discounts, but also for the construction of cheaper social housing to replace them and a new £1 billion Brownfield Regeneration Fund to support building on derelict land.

But the CLGC report quoted estimates from the Chartered Institute of Housing which suggested that the sale of high-value homes will raise only £1.2-£2.2 billion a year of the £4.5 billion needed.

A "substantial surge" of demand to buy homes can be expected from the 1.3 million housing association tenants immediately the new scheme comes into effect, leading to the risk that the policy will "stall" for lack of funds.

Members of the cross-party committee said they were "sceptical that forcing councils to sell financially and socially valuable properties is a sustainable funding source for the Right To Buy".

And committee chairman Clive Betts said: "The fundamental success of this policy depends not just on whether more tenants come to own their home but on whether more homes are built."

He added: "The Government needs to set out more detail on how it will meet its target of at least one-for-one replacement of the sold homes, particularly given issues such as the availability of land, the capacity of the building industry and the uncertainty of income from council home sales".

The committee said there was "significant concern" that large numbers of housing association properties will quickly end up being rented out more expensively by private landlords, as was the experience with council homes sold under the Right to Buy.

"The Government should consider introducing restrictions to prevent this happening, said the report.

The report also voiced concern over the Government's imposition of a 1% rent cut for four years on housing associations, which the committee warned would threaten their ability to build new homes and provide other services to tenants.

A Department for Communities and Local Government spokesman said: "Anybody who works hard and aspires to own their own home should have the opportunity to realise their dream.

"Our voluntary agreement with the National Housing Federation will ensure that more than 1.3 million housing association tenants will have the opportunity to do so, while for every home sold there will be at least one additional property built.

"There are billions of pounds locked up in local authority housing assets. It is only right that when they become vacant they are sold, enabling the receipts to be reinvested in building new homes and supporting home ownership through Right to Buy."

Labour housing spokesman John Healey said: "Government policies should be funded by Government, not a cash-grab from councils forced to sell off their own housing to pay for right-to-buy discounts. Unless the legislation is changed, ministers will force cash-strapped councils to pay for their pet policy project.

"Ministers must now take this report as a wise warning, re-think their plans and drop the Chancellor's levy on councils to fund their right-to-buy programme."

Liberal Democrat leader Tim Farron said: "Right to Buy is set to fail and this Government, yet again, is saying the right things and doing the wrong ones. The Government is not funding this scheme and are not making sure the homes are replaced, like for like, in the communities they are sold off in.

"The Government is slowly strangling the social housing sector."

Local Government Association spokesman Peter Box said councils were expected to have to sell at least 22,000 high-value homes, and that it would be "all but impossible" to replace them. Councils will lose £2.2 billion from housing budgets by 2020 as a result of Government cuts in social housing rents.

"This loss of social rented housing risks pushing more families into the private rented sector, driving up housing benefit spending and rents and making it more difficult for families to save the deposit needed for their first house," said councillor Box.