Last year right to buy sales grew to over 12,300, producing nearly £1 billion in receipts. Why can’t councils keep all of this money to build new homes?

When right to buy started in 1980 councils could reinvest the receipts in upkeep of their stock, but after 1990 they were forced to ‘set aside’ 75% to offset their debts. By 1997, around £5 billion had accumulated and the new government launched a ‘capital receipts initiative’ which allowed this to be re-invested. But it didn’t give up control of receipts: from 2003, 75% had to be paid in cash to the Treasury.

This was all expected to change with council housing finance reform in April 2012. But having said originally that reform would allow councils to keep all their housing receipts, the Treasury rode back on its commitment and stuck to the 2003 arrangements. By then right to buy sales had fallen below 3,000 and receipts were small. But the reinvigorated right to buy, also begun in April 2012, has since led to £2 billion in new receipts.

How much is being paid back was revealed in a letter from the housing minister to London Assembly member Tom Copley: over the last two years London councils paid back more than £90 millions. The letter also registered an important policy change: ‘all’ right to buy receipts paid to the Treasury now go into its general funds. This goes back on a 2012 promise that repaid receipts would be ‘re-distributed for new affordable rented housing’.

Since 1980, English councils have sold 1.8 million homes through right to buy and built only 350,000. The CIH report Keeping Pace – Replacing right to buy sales showed that councils will continue to struggle to achieve the current one-for-one replacement target. One reason is that councils have to re-use any receipts they keep within three years: the report called for them to given at least a five-year time period.

When council housing became self-financing there was already a strong argument that councils should keep their sales receipts because they were buying their independence with a one-off payment to the Treasury of £800 million. With the alarming gap between numbers sold and numbers replaced, and the government no longer promising to reinvest receipts in new housing, the case for councils keeping all the money received is stronger than ever.

Original post: Inside Housing