If tenants don’t exercise their right to buy, where will the money go, asks John Perry.

Indications that only a small proportion of housing association tenants are likely to buy their homes once the scheme is rolled out begs a number of questions. What will happen to the money raised from selling higher-value council houses, given that its main purpose was supposed to be to finance the new Right to Buy discounts and help build replacement homes? Will sales still go ahead and, if so, will any spare money simply be scooped up into the Treasury pot?

There have been several estimates of the impact of the new Right to Buy, all made before the pilot scheme involving five associations began to produce real evidence. The Chartered Institute of Housing (CIH) projected 145,000 sales over five years, compared with 220,000 by the National Housing Federation and 120,000 by the Local Government Association (LGA). Then Sheffield Hallam University did an extensive tenant survey which forecast a lower level of sales – just 70,000 – although it may not take into account new tenants who become eligible once the scheme is underway.

In the five pilot associations, although high numbers expressed interest in buying, there have been only 790 applications. This doesn’t allow for a likely sizeable number of tenants who – having applied – do not then follow through to completion. However, we don’t yet know the final eligibility rules for the scheme, and they might be set so that tenants become eligible in (for example) five years rather than 10, opening the door to a lot more applicants.

The more the final scheme differs from the pilot scheme the less the pilot tells us. But if the pilots proved to be a fair indication of take-up, at only a little more than a quarter of the Sheffield Hallam estimate and benefiting only around 1% of tenancies, it could call into question whether the scheme is worthwhile.

No sales have yet taken place because the pilots won’t sign contracts until they are sure of the money to pay the discounts. But the Treasury has no money set aside for this, and will only put up the cash once it starts to get the receipts from the sales of higher-value council houses. The Department for Communities and Local Government has yet to announce the rules for such sales, which are bound to be controversial and could be challenged by those councils who are hardest hit.

But suppose higher-value sales go ahead on something like the scale being considered last year when the Housing and Planning Act was going through parliament. The Conservative election manifesto expected 15,000 sales per annum. The CIH thought it might be less than half this number, but still generating between £1.2bn and £2.2bn in receipts. While the CIH concluded that the money would be insufficient to pay for the new Right to Buy discounts, together with replacements of both Right to Buy and higher-value council sales, it may well leave a significant surplus if Right to Buy take-up now turns out to be as low as the pilots suggest it could be.

Apart from criticism of government delays in settling the details either of the new Right to Buy or of the higher-value sales scheme, there has been a new round of scepticism about the whole direction of government policy.

Councils’ ability to build has been drastically undermined by rent changes, the LGA is calling for radical reform of the existing Right to Buy given the gap between sales and replacement building, and even the Conservative Home website is questioning the wisdom of using the receipts from higher-value sales.

All this came in the week when Right to Buy ended in Scotland and its demise in Wales was also announced. In the face of such scepticism, will the government continue to roll out the Right to Buy extension and the higher-value sales scheme, and if so will it promise that any spare cash is reinvested – not in Starter Homes – but in the genuinely affordable rented homes whose numbers are in rapid decline?

Original post: Inside Housing