Right to Buy Receipts

Friday 14 July 2017   Category: Housing By Cecilie Booth

Consultation for greater flexibility to use RTB receipts for shared ownership

Supporting the local housing market and the provision of affordable housing is a key target for most local authorities.  On 1st April 2016, there were 1.46 million households on local authority housing waiting lists. However, the supply of social housing is declining year on year.  The above table shows the decline in social housing since the RTB scheme was introduced.

The Right to Buy scheme was introduced in 1980 and gives qualifying social tenants the right to buy their home at a discount. The scheme is open to secure tenants of local authorities and non-charitable housing associations, and to those assured tenants of housing associations who have transferred with their homes from a local authority as part of a housing stock transfer.

The table also shows that over time, some of the decline has been picked up by the private sector. However, more recently, buy-to-let mortgages have fallen by almost half since last year according to new figures from the Council of Mortgage Lenders. The CML's buy-to-let lending forecast has dropped, with figures now expected to be £35 billion in 2017 and £33 billion in 2018, down from December's prediction of £38 billion for both years.  

So with a reduction in social housing and a reduction in private sector housing, where will people live?

In 2011, the Government increased the caps on Right to Buy discounts to enable more tenants to buy their homes. All RTB receipts are used to fund a replacement new home for affordable rent, on a one for one basis.  Local authorities are required to sign up to a “1-4-1 agreement” with the government, however, the RTB contribution is limited to 30% of the cost of the replacement homes. The remaining 70% must be found from other resources.  Some, if not all, local authorities are finding it difficult to find the additional 70% due to the restrictions of the HRA debt cap.  Shared ownership could potentially provide a perfect solution on a 30 / 70% split basis, but shared ownership is unfortunately expressly excluded from the 1-4-1 agreements.

We are often asked by our clients to develop new and innovative solutions to housing related challenges, and the use of RTB receipts and the current restrictions is certainly a challenge for many.  

Arlingclose’s Open Market Shared Ownership (OMSO) could potentially provide a new solution. OMSO provides additional shared ownership units without the need to build new.  Properties are bought and sold in the open market rather than being limited to existing designated shared ownership / affordable units.  

As a direct result of client requests, 50 local authorities including Oxford City Council, Swindon Borough Council, Bolsover District Council and North East Derbyshire District Council, are currently supporting a consultation exercise with the new Housing Minister, Alok Sharma, and the CLG’s Policy Team. The request to review current arrangements and the possibility of allowing RTB receipts to be used for open market shared ownership was submitted in June 2017, and we are eagerly awaiting the outcome.

For further information on OMSO or on the 1-4-1agrement consultation with the Housing Minister and the CLG, please contact Cecilie Booth, cbooth@arlingclose.com, telephone 07557 650852.

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