Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Memoranda


Memorandum by Oona King MP (HOU 20)

RIGHT TO BUY

  Several organisations have submitted evidence on the mounting problem of RTB, and the impact it is having on the provision of affordable housing. I wish to briefly outline some policy solutions to moderate the impact of Right to Buy in areas of high demand. I will also set out the problem facing the Ocean Estate in Tower Hamlets as an example of the unintended and catastrophic effects RTB is now having.

ABUSE OF RTB

  In Tower Hamlets, RTB has increased 60 per cent since 1997. Stephen Byers stated before the Urban Affairs Select Committee in May that "there is clearly an opportunity to exploit the right-to-buy provisions as they are presently drafted". There is growing evidence of this abuse by a small group of mortgage lenders and companies involved in property management.

  Another type of abuse occurs when estate regeneration schemes prompt significant numbers of tenants to submit RTBs in the expectation that their properties will have to be bought back by the council at full market value.

THE OCEAN: A £21.5 MILLION PROJECT SWAMPED BY £28.5 MILLION RTB COSTS

  On the Ocean Estate, £21.5 million is earmarked for a housing demolition and refurbishment programme. If demolition went ahead tomorrow, it would cost the Council £18.7 million to compensate 156 existing leaseholders on the estate. The further 111 outstanding RTBs (most of which went in since the demolition plans were raised) would cost the Council £9.8 million—ie a total £28.5 million cost for a £21.5 million project. This is a clear example of how efforts to bring social housing up to a decent standard are being thwarted.

POLICY SOLUTIONS

    —  Reduce the maximum RTB discount. RTB maximum discount in London should be the same level as the Right to Acquire discount—approximately £16,000. This is the single most important change that will limit the damage currently caused by RTB.

    —  Extend the discount repayment period. Originally five years under the last Government, it was reduced to three years. It should now urgently be increased to seven years. This would discourage property companies from becoming involved in speculative purchases.

SUSPENDING RTB IN AREAS OF REGENERATION?

OR SUSPENDING IN AREAS OF HIGH DEMAND?

  While the suspension of the Right to Buy in regeneration areas would help protect funding earmarked for neighbourhood regeneration, it would not have much impact in reducing the overall numbers of properties lost each year. Suspending RTB on the Ocean estate, for example, would still leave 95 per cent of the borough's stock vulnerable. We must therefore consider the more wide-reaching step of suspending the Right to Buy in areas of high demand.

LOCAL AUTHORITIES SHOULD BE ALLOWED TO APPLY TO THE SECRETARY OF STATE TO SUSPEND THE SCHEME FOR A LIMITED PERIOD

  Selective suspension along these lines would require primary legislation. Tenants would therefore have notice of the scheme's suspension a long time in advance, which might encourage some to submit an application that they might not have done otherwise. A similar situation arose when the regulations lowering the maximum discount were introduced in 1999. The evidence indicates that the numbers of applications increased dramatically in the eight months between the beginning of consultation and the date the regulations came into effect. For this reason, it would be important to introduce disincentives mentioned (eg lower discount) following a short consultation period.

  If suspension is deemed too risky, then the absolute minimum change to the rules must be that estates such as the Ocean are able to ring-fence the receipts from RTB so that money is recycled onto that estate to tackle the lack of decent affordable housing.

HELP LOW INCOME FAMILIES BENEFIT FROM HOME OWNERSHIP

  The Government must help low-income families benefit from the opportunity of home ownership. RTB is not an effective way of doing this. The uptake in RTB has coincided with (or been encouraged by) the reduction in money available from alternative schemes to help tenants into home ownership, such as Cash Incentives. These were cut back following the introduction of the Single Capital Pot. Any restrictions in RTB should be accompanied by a short-term expansion in the number of Cash Incentive Scheme grants available (this has happened recently and should continue further). This would also free up a sizeable number of decent quality family-sized units that are urgently needed by those who have spent years in overcrowded or temporary housing.

  Finally, the Government must consider ways to make equity stakes widely available, so that the supply of social housing stock is not reduced.



 
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Prepared 22 October 2002