Memorandum by Oona King MP (HOU 20)
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.
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.
A £21.5 MILLION PROJECT
£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 millionie
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.
Reduce the maximum RTB discount.
RTB maximum discount in London should be the same level as the
Right to Acquire discountapproximately £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
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.
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
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.