Agenda item

(Director of Housing) To consider the attached report.

The Panel received a report from the Director of Housing regarding the Council’s proposed response to CLG Consultation Paper on “Reinvigorating the Right to Buy and one for one replacement.”

 

In late December 2011, the Department for Communities and Local Government issued a consultation paper on “Reinvigorating the Right to Buy and one for one replacement.” The closing date for responses was 2 February 2012.

 

A proposed response by the Council to the consultation paper was attached to the report. It was suggested that rather than attempting to provide a response to each question raised in the consultation paper, the response only comments on these aspects of the consultation paper which it was felt warranted comment from the Council.

 

Consultation - Proposals for Caps, Discount Rates and Eligibility

 

The Government proposed to raise the upper limit on the Right to Buy discount entitlement to £50,000 throughout England. This more than tripled the cap currently applied in most of London and provided a substantial increase in the rest of England. However, for the East of England, it only amounted to an increase of £16,000 from the current maximum of £34,000. The Government was interested in views on whether there was a case for charging the minimum and maximum discount rates applied to houses and flats, or the rate at which tenants qualified for increased percentage discounts.

 

Consultation Question 1 – we would welcome views on the proposals outlined above.

 

Response:

 

(1)        The resultant effect and level of tenant interest would vary in different parts of the country;

 

(2)        The maximum RTB discount in the District’s region was £34,000, the Government’s proposals would therefore result in the maximum discount, for this region, as increased by 47%. In London where maximum RTB was £16,000, the maximum discount was increased by 210%. Therefore it was likely that the take up by tenants in London would be greater than in similarly high priced areas like Epping Forest;

 

(3)        The Council felt that the current discount rates were very generous and should not be changed to further reinvigorate Right to Buy;

 

(4)        The Council welcomed the Government’s intention not to change the qualifying period for eligibility.

 

The Right to Acquire

 

Paragraph 37 of the Consultation Paper pointed out that, as assured tenants, some housing association tenants benefitted from the Right to Acquire.

 

The suggested response explained that many housing association tenants were eligible for the Right to Acquire, but did not necessarily exercise this right, due to the financial benefits being less than even the current Right to Buy Scheme.

 

The proposed response stated that since many housing applicants on council housing registers were now nominated to housing associations for accommodation, it was now inequitable to have a different purchase scheme for housing association tenants and council tenants. It was the Council’s view that arrangements and discounts for sitting tenants to purchase either their council property or their housing association property should be the same. Therefore the Council believed that the proposals within the consultation paper should also apply to housing association tenants, and that the Right to Acquire should be re-aligned with the Right to Buy Scheme.

 

Consultation - Use of Right to Buy Receipts: Proposals on Allowances and Deductions

 

Right to Buy receipts included all receipts from tenants under Right to Buy legislation. The government proposed including receipts arising from voluntary sales at discounts to secure tenants and some shared ownership sales.

 

Councils would no longer need to make and justify expenses claims to central government, making a detailed retrospective allocation of staff time between successful and unsuccessful applications. Instead councils would be able to simply deduct and retain a flat rate per successful sale. They would continue to be able to charge administration costs to the Housing Revenue Account.

 

Flat rate allowance would be set for each region with regard to the 40^th percentile of costs achieved by councils in that region over the last three years. Adopting a flat rate at the 40^th percentile of costs provided a strong incentive to councils to achieve efficiency in their operations. Where councils were able to push costs below this figure they could retain the surplus.

 

Consultation Question 5 – We would welcome your views on these proposals

 

Consultation Question 6     What proportion of Right to Buy applications are subsequently withdrawn in your area?

 

Consultation Question 7     What costs are incurred in managing aborted applications?

 

Consultation Question 12   We would welcome views on the calculation of allowable deductions

 

Response:

 

The Council welcomed the Government’s proposals to compensate local authorities for the loss of income to the Housing Revenue Account for each Council property sold above the total number of sales assumed by the Government within local authorities HRA Self Financing Settlements.

 

The District Council welcomed the fact that the Government had at last recognised that all local authorities incur costs in relation to the administration of withdrawn sales. However, the Council strongly disagreed with the Government’s proposal to assess the local authority transactions and administration costs for the Right to Buy based on a flat rate allowance, instead of the actual cost to the Council as at present.

 

The Council’s actual average administration costs per Right to Buy sale was £4,766 per sale. This actual cost to the Council was therefore around £3,700 more than the proposed flat rate allowance of £1,070.

 

Therefore if the Government’s proposals to introduce a flat rate administration allowance went ahead, the Council would lose around £3,400 per sale compared to the current arrangements. Based on the Government’s assumption that the District Council would sell 37 properties over the next four years under the existing Right to Buy Scheme, the council would lose around £136,000 over the next four years, compared to the current arrangements.

 

The Council noted from paragraph 47 that the Government believed that adopting a flat rate allowance at the 40^th percentile of costs would provide a strong incentive to councils to achieve efficiency in their operations. However, the Council continuously strove to make efficiency savings within all of its areas of operations and we fundamentally disagreed that savings of this magnitude could be made in a relatively small area of operation for the Council.

 

The Council therefore strongly urged the Government to either retain the existing approach of allowing local authorities to reclaim the actual administration costs, or increase the proposed flat rate allowance to a more realistic and equitable level.

 

In addition, and in any event, since the current RTB arrangements would effectively apply to assumed sales, the Council felt that it was only fair and appropriate that the flat rate administration allowance should only apply in relation to additional sales to those assumed.

 

Numbers of Withdrawn RTB Applications

 

The Consultation Paper stated that the Government would welcome any information local authorities could provide on actual numbers and costs incurred in managing RTB applications which were subsequently withdrawn.

 

Over a 35 year period, the Council had received 11,634 RTB applications, which have resulted in 6,169 actual sales and 5,465 applications withdrawn. Therefore, as can be seen, 45% of all Right to Buy applications received of this period have subsequently been withdrawn.

 

More recently, over the 12 month period January 2011 to December 2011, the Council had received 26 RTB applications and, within the same period, only 7 RTB sales have been completed. Therefore, although there was a time lag between applications received and sales completed, it was reasonable to deduce from this information that currently, around 75% of RTB applications being received by the Council were subsequently being withdrawn.

 

This evidence suggested that the proposed uplift of 25% to cover withdrawn applications was insufficient. The Council would suggest that the uplift should be more in the region of 60% - 70% if it was to properly reflect the relatively high number of withdrawn applications that occur.

 

Consultation - Proposals for delivering Right to Buy replacement homes for Affordable Rent.

 

Under the Government’s take up modelling, receipts were generally greatest and sales increase the most in areas of high housing need, because these were the areas where house prices were highest and Right to Buy demand had previously been limited setting the caps at low levels. However, receipts generated locally would not necessarily secure one-for-one replacement in each area.

 

Local Model

 

Receipts available for the delivery of replacement homes could be left with the local authority for investment in local priorities including new homes for Affordable Rent. Authorities could either choose to manage development themselves or develop in partnership with neighbouring councils or to commission housing associations or other registered providers directly.

 

Local Model with Direction

 

Receipts available for the delivery of replacement homes could be left with the local authority with the requirement they were used for investment in new homes for Affordable Rent.

 

Local Model with Agreement

 

Receipts available for the delivery of replacement homes could be left with the local authority, subject to agreement with the Secretary of State, including agreement on the contribution to replacement costs that the Council would make from its own resources.

 

National Model

 

Receipts available for replacement homes at Affordable Rent could be surrendered to this department which would pass these to the Greater London Authority and the Homes and Communities Agency to manage replacement programmes in London and the rest of England.

 

Consultation Question 13   Which model for delivery of replacement housing do you consider the most appropriate, and why?

 

Response:

 

The Council currently had over 5,700 households on its Housing Register seeking affordable rented housing, provided either by the Council or one of the Housing Association Partners. The numbers registered on the Housing Register have been increasing continuously over the past five years.

 

In view of the high number of households seeking and needing affordable housing in the Epping Forest District and other areas within the Region, the Council was strongly of the view that any Council homes lost within a district due to the proposed changes to the Right to Buy should be replaced by at least one new affordable home within that District.

 

The Council had recently agreed to embark on a new Council Housebuilding Programme for the provision of new rented housing, at affordable rents, on Council owned land. However the District Council’s initial feasibility studies have identified that, even with charging affordable rents, there would still be a funding gap between the amount of loan that could be supported from the rental income received from the new properties over a 30 year period and the construction costs. Therefore, officers had identified that they would still need some form of grant funding to enable the Council Housebuilding Programme to be viable. The additional capital receipts that were expected to arise from the increased RTB sales as a result of the Government’s proposals could provide an invaluable source of funding for our Housebuilding Programme, if officers were able to use them.

 

The Council was of the firm view that the “Local delivery” model for the replacement programme was the most appropriate, and was the model that the Council supported.

 

The Consultation Paper set out three variations of the Local Model. Understandably, because the Local Model provided local authorities with maximum flexibility to manage its own affairs and, as recognised by the Consultation paper, was generally consistent with replacement homes being built in areas of greater housing need, the Base Local Model was the Council’s first preference.

 

However, the council recognised that, due to the maximum flexibility offered under this Base Local Model, it was unlikely that all the available receipts would be used for replacement homes and that it would therefore be unlikely to deliver on the Government’s commitment of one-for-one replacement at the national level.

 

Therefore, if the Government was of the view that the base Local Model was inappropriate, it was the Council’s view that the variation of the Local Model with Agreement should be the model adopted by the Government. This was because this variation of the Local Model provided three main benefits:

 

(i)         It enabled the Government’s commitment of one-for-one replacement at a national level to be achieved;

 

(ii)        We consider it a fairer way of utilising the receipts arising from additional RTB sales, since the additional capital receipts would only be used within the local authority areas in which they had been generated; and

 

(iii)       All of the capital receipts generated from additional RTB sales would be used to provide and replace affordable housing, and not used for other housing purposes.

 

The Council did not support the National Model.

 

RECOMMENDED:

 

(1)        That the abridged version of the CLG Consultation Paper “Reinvigorating the Right to Buy and one for one replacement” be noted; and

 

(2)        That the proposed draft District Council response attached to the report be agreed.