New figures expose poor take-up of flagship Government housing policy in Harrow
The Government was accused of undermining social opportunity and social mobility. Its own official figures expose the minimal take-up across Harrow of the flagship Government scheme to allow social tenants to buy or part-buy their home.
Figures also reveal how the ‘Right to Buy’ is now increasingly beyond the reach of council tenants in Harrow. As a result, even before the credit crunch, the chance of tenants of buying their council flat or house has been denied to ever more people on lower incomes.
Minimal take-up of Social Homebuy: The Government’s Social Homebuy scheme was supposed to enable council or housing association tenants to own or part-own their rented homes. Launched in April 2006, it was intended to help 5,000 households every year into home ownership. Yet the latest figures show that in the last three years, only 300 households have been helped, compared to the target of 15,000.
Government cuts to Right to Buy: The Right to Buy gives council tenants the ability to purchase their home or flat, with a discount to the sale price. Labour Ministers have presided over six different cuts to the Right to Buy discounts and eligibility criteria. Figures have now revealed that since 1998, the average discount as a percentage of the market value has plummeted from 53% of the house price to just 13%.
Promoting mixed communities and neighbourhood pride: Independent experts have made clear that the Right to Buy has “enabled many households to become owner-occupiers who would not otherwise been able to do so”, with a “positive influence in maintaining mixed communities”. Building on its success, Conservatives are pledging to give social tenants an equity stake for responsible behaviour, grant tenants a ‘Right to Move’ to promote mobility, and support schemes to allow people to buy or part-buy their council house or housing association home.
Bob Blackman, Conservative Parliamentary Candidate for Harrow East said:
“It is disappointing that Labour Ministers have kicked away the housing ladder away from social tenants in Harrow and made it harder to realise the ambition of home ownership.
“Housing mobility has a vital role in fixing our broken society. Giving people a financial stake in their home promotes greater neighbourhood pride across Harrow. Helping people move up the housing ladder frees up a social property for those on the increasingly long housing waiting lists.”
Notes to Editors
FAILURE OF LABOUR’S SOCIAL HOMEBUY SCHEME
Labour’s Social Homebuy scheme was supposed to allow social tenants in England to own or part-own their rented home. The initiative stemmed from ideas originally proposed by Alan Milburn when he was Labour’s general election co-ordinator. Mr Milburn is currently chairing a Government commission into social mobility.
Milburn explained: “Most people would prefer to own rather than rent… We should explore whether a right to buy or partially buy can be extended to housing association tenants” (The Guardian, 10 November 2003) and “we need to break the prevailing orthodoxy that the only future for those who don’t own their own homes is social housing… [we need] more flexible forms of borrowing… Nor should help for tenants to take equity shares in social housing simply be left on the back burner” (Speech to the IPPR, London, 9 November 2004).
When launched, Social Homebuy was supposed to help 5,000 households every year into home ownership (ODPM, Homebuy – expanding the opportunity to own, April 2005, para 1.4). Yet:
- The latest figures show that as of the end of March 2009, there have only been a mere 306 completed sales following its introduction in April 2006 (Hansard, 19 May 2009, col. 1353W).
- £15 million of funding has been allocated to the Social Homebuy scheme between 2006 and 2008 (Hansard, 24 October 2006, col. 1799WA), but only £3.5 million has actually been spent (Hansard, 9 February 2009, col. 1694W).
- Part of the problem is that Social Homebuy is voluntary for local authorities and housing associations, and has had a very low take up. As of September 2008, only 10 local authorities and 69 housing associations offer Social Homebuy (Hansard, 15 September 2008, col. 2086W). There are 1,400 housing associations across the country.
LABOUR CUTS TO RIGHT TO BUY
Right to Buy discounts across England have not kept pace with house price inflation in the last ten years, and combined with Labour cuts to Right to Buy, the average discount as a proportion of the total cost of the house has plummeted. As a result, buying your council house is now far, far harder, even before the credit crunch. The average Right to Buy discount has fallen from 50 per cent of the market value of the property in 1998 to just 24 per cent today.
How Labour cut the Right to Buy
Under Right to Buy, the price payable by the tenant is the value of the property less a discount.
Originally: for a house, the discount was 32 per cent of the value of the house, plus one per cent for each complete year which the tenant has occupied above the two year qualification period. The maximum discount was 60 per cent. For a flat, the discount was 40 per cent, plus two per cent for each complete year after the two year qualification period. The maximum discount was 70 per cent. The maximum value of any discount was originally £50,000.
(i) In 1998, Labour reduced the maximum discount, by introducing regional caps – from £22,000 in the North East to £38,000 in London.
(ii) The discount cannot be allowed to reduce the price below a minimum sale price (the ‘cost floor’ rule). The cost-floor was originally the amount spent on the dwelling in the eight year period prior to the Right to Buy application. In 1998, Labour increased this floor to ten years.
(iii) In 2003, the maximum Right to Buy discount available to council tenants who wished to purchase their council property was halved from March 2003 to just £16,000 in 42 local authority areas in London and South East.
(iv) The Housing Act 2004 increased the initial qualification period for Right to Buy from two years to five years of tenancy (though not in a way that affects the discount) for those taking up a tenancy from 2005 onwards. This restricts the availability of the scheme.
(v) The maximum level of Right to Buy discounts have never been increased in line with house price inflation, further reducing the discounts through inflationary ‘drag’.
(vi) Labour has failed to extend further the Right to Buy to housing associations. When council housing is transferred to a housing association, existing tenants retain a ‘preserved’ Right to Buy. But brand new housing association tenants have no such rights. Given increasing levels of stock transfer, new social tenants are increasingly losing the Right to Buy. An average of 80,000 council houses in England are transferred to housing associations every year (from 1997-98 to 2006-07, Hansard, 18 December 2007, col. 1306WA).
Ministers were warned that such cuts would discourage tenants from buying their home. Back in 2003, a Government-commissioned report stated: “The data suggests that those affected by the ceiling were somewhat more likely to withdraw from purchase. They were also more likely to face questions about the affordability of their purchase. Withdrawal was associated with the need to make larger average payments. These effects appear to be becoming more pronounced with time” (ODPM, The Impact of the 1999 Changes to the Right to Buy Discount, May 2003).
Benefits of the Right to Buy
An independent report commissioned by the Government has highlighted the benefits of the Right to Buy in promoting home ownership, giving people a stake in the state of their neighbourhood and creating mixed communities:
“The Right to Buy was one of the most successful housing policies… because the policy enabled many households to become owner-occupiers who would not otherwise been able to do so… It has been a positive influence in maintaining mixed communities in spatial terms. It has also provided a cheaper access point into owner-occupation for lower income employed households helping to sustain mixed communities are these properties are transferred into the market.’ It also warned against reducing the discounts. ‘With reductions in discounts and other restrictions on the availability of RTB for social rented tenants, this driver for social and tenure mix within local areas will be reduced” (ODPM, Lessons from the past, challenges for the future for housing policy, January 2005, pp. 30, 56).
Conservatives will extend opportunity for social tenants across England, by:
- Rewards for good behaviour: Offering tenants with a record of five years’ good tenant behaviour a 10% equity share in their social rented property, which can be cashed in when they want to move up the housing ladder. This will give tenants a direct financial stake in the state of their neighbourhood, and reward law-abiding citizens who pay their rent on time, keep their garden tidy, and ensure their children stay out of trouble. By contrast, Labour policies reinforce and reward welfare dependency.
- A ‘Right to Move’: Introducing a comprehensive national mobility scheme for good tenants who wish to move to other social sector properties, and piloting a scheme which allows good social tenants to demand that their social landlord sell their current property and use the proceeds, minus transaction costs, to buy (and thereby bring into the social rented sector) another property of their choice – anywhere in England.
- Supporting low-cost housing sector: Including strengthening shared ownership schemes which allow those on intermediate incomes to part-own their home; allowing more flexible equity stakes, greater private sector offering of shared ownership schemes, and ensuring that shared ownership buyers are not routinely treated as sub-prime borrowers by mortgage lenders.
- Cutting waiting lists: Relaxing the rules that prevent thousands of habitable empty properties being used to house those on local authority waiting lists.