Select Committee on Communities and Local Government

Philip Hollobone Excerpts

Thursday 11th February 2016 Commons Chamber

[Mr Clive Betts (Sheffield South East) (Lab)]

I would like to thank the Backbench Business Committee for the opportunity to present our report on housing associations and the right to buy. I would also like to thank Craig Bowdery, our Committee specialist; Professor Christine Whitehead, our specialist adviser; and Professor Ian Cole and his research colleagues at Sheffield Hallam University for their help in producing the report.

There is clearly a housing crisis in this country, so the Committee wanted to look in greater detail at one of the Government’s key policies: extending the right to buy to tenants of housing associations. That was a Conservative manifesto commitment, so the Committee did not question whether it should be implemented. As is appropriate for Select Committees, however, we scrutinised how it was being implemented. We also looked at other Government policies, such as the 1% reduction in social rents, pay to stay and starter homes, which will all have an impact on the provision of social housing and on housing associations.

We had a large response to our request for evidence, with more than 175 written submissions, and we heard from a range of witnesses, including housing association chiefs from across England, Scotland and Wales, council leaders and representatives of tenants and mortgage lenders.

Throughout our investigations, we found a great deal of uncertainty—that was a key point—and a lack of detail. The robustness of the funding model for the right to buy is extremely questionable, and we call on the Government to cost the programmes fully as a matter of urgency.

Shortly after our investigations began, a deal to implement the extended right to buy voluntarily was reached between the Government and the National Housing Federation. We recognise that a voluntary deal is a way of delivering a key policy from the Government’s manifesto while maintaining the independence of housing associations, and that, in the circumstances, it is the best way forward for both. However, there remains much uncertainty in the wording of the agreement. A minority of associations voted against it, and some abstained, and we do not yet know how the right to buy will be imposed on them and how binding the terms of a voluntary agreement can be.

Another issue is exactly how much discretion each association will have to decline sales. Can they, for example, choose not sell any of their homes in a certain area, or will they sell them on a case-by-case basis? Similarly, what is the appeal process for tenants who are refused the right to buy?

The extended right to buy is designed to increase home ownership and housing supply. We support those aspirations and the principle of giving people the opportunity to own their own home, provided that the homes sold under the right to buy are replaced on a one-for-one basis and that housing continues to be delivered across all tenures to meet the country’s housing needs. We feel there are unresolved issues, and we remain concerned that the Government’s policies could have a detrimental effect on the provision of accessible and affordable housing across all tenures, particularly on affordable rented homes.

We looked particularly at houses in rural areas, where there is often high demand. Limited land availability means that it can be challenging to build new homes to replace those sold through the right to buy. For our rural communities to thrive, it is important that young people and those on lower incomes can afford to live in them. The terms of the voluntary agreement included the ability of housing associations to offer a portable discount in place of selling a home. Given that rural areas such as national parks can be large, it remains to be seen how that will work in practice.

We are concerned that the extended right to buy could hinder the provision of specialist and supported housing schemes. Homes in such schemes are expensive to build and can be harder to replace, but they provide essential services to those living in them. We also believe that to avoid confusion or possible legal challenges, restrictive covenants on specific sites and properties built using charitable funds should be explicitly exempt from the extended right to buy.

We found that large numbers of homes sold through the statutory right to buy to council tenants had become rental properties in the private sector in a relatively short time. That is a concern because the private rented sector is often more expensive than social housing, and the quality of homes can, in some cases, be lower. Selling much needed social assets at a discount, only for them to become more expensive in the private rented sector, is therefore a significant concern for the Committee.

Measures to restrict homes sold through the right to buy from ending up in the private rented sector need to be explored. We suggest that those might include a provision that any right-to-buy homes resold within 10 years should first be offered to local housing associations or the local council, which could choose to buy them at market price. They might also include a restrictive covenant requiring a minimum period of owner-occupation. Those are matters for exploration.

The Government propose to fund the extended right to buy with the proceeds from the sale of high-value council homes. The definition of “high value” has not yet been announced, and it is long overdue. The precise mechanism by which this policy will be funded contains too many unknowns and unclear definitions. However, we observe that public policies should usually be funded by the Government, rather than through a levy on local authorities. If only those councils that have retained some housing stock are required to make the payment to fund the right-to-buy discounts, the effect on communities, and the financial risk for local authorities, will be greater in some areas than in others. That is another reason for our belief that a national policy should be funded nationally.

We received much evidence on the proposed funding, and we are concerned that the sums do not add up. We cannot be sure that the proceeds from selling council homes will cover the costs of providing right-to-buy discounts, the costs of building replacement council homes and the brownfield regeneration fund. We urge the Government to publish their figures and to clarify the funding mechanism as soon as possible.

The success of the extended right to buy largely depends on the homes that are sold being replaced and on the housing supply being maintained. We appreciate the size of the challenge of building more homes to meet demand, but we seek more details from the Government on how they will meet their objective of achieving at least one-for-one replacement of the homes sold. They must take steps to ensure that the homes built to offset right-to-buy and council home sales meet the needs of local communities and have a tenure mix that reflects local circumstances.

Another policy that could impact on housing associations and the provision of rented housing is the new legal duty on councils to ensure the provision of 200,000 new starter homes across all reasonably sized sites. It is important that homes for affordable rent are also built where the need exists, particularly because starter homes now count towards satisfying the affordable housing allocation in section 106 agreements. Starter homes should not be built at the expense of other forms of tenure; it is vital that homes for affordable rent are built to reflect local needs. To put that in context, about 250,000 housing association rented homes have been built in the last 10 years through section 106 agreements.

Another policy change is that housing associations have been required to adapt to the fact that the Government are reducing social rents by 1% a year for four years. That reduction in housing association’s income is significant and could impact on the pastoral services provided. It could also impact on associations’ development capacity and the viability of supported housing schemes. It will affect different housing associations in different ways. We welcome the recent announcement that supported housing rents will be exempt from the 1% reduction for a year while the Government review the situation.

Before the 2016 autumn statement, the Government should provide some certainty over rent levels post-2020, to assist long-term business planning and increase investor confidence. We support their efforts to deregulate housing associations, and we argue that giving them the freedom to set their own rent levels is the next logical step.

It is clear that the housing association sector is undergoing a substantial change. We encourage the regulator to adopt a framework that is based on risk, rather than factors such as size, and that recognises the sector’s diversity. Regardless of how housing associations might change in future, it is vital that they remain mindful of their social mission and philanthropic purpose.

The Government have ambitious plans to address the severe housing shortage, and they are seeking to do so by prioritising affordable home ownership. None the less, rented housing at full market rents and sub-market rents will continue to be essential to meet the needs of many in our society and should exist alongside other forms of housing.

Finally, I thank all members of the Committee for working assiduously and collectively to produce this unanimously agreed report.

[Mr Philip Hollobone (Kettering) (Con)]

May I congratulate the hon. Gentleman on his statement, and him and his Committee on its report? I was interested in conclusion 96, which says:

“It is important that housing associations which generate surpluses apply them to delivering new housing.”

In his report, the hon. Gentleman highlights the fact that the department has identified

“that the housing association sector had a surplus of £2.4 billion”,

which it could make use of. Does he share my concern that there is tremendous scope for more efficiencies in housing associations? Is he as concerned as I am that some chief executives of housing associations receive very large salaries indeed?

[Mr Betts]

That was an issue the Committee was mindful of. That wording in the report is very clear. Where there are large surpluses, and there are housing shortages to be met, housing associations should look to make sure those surpluses are spent in a way that delivers more homes.

It is also important that housing association boards look at how their resources can be managed to the maximum efficiency. The public sector as a whole has had to have an eye on efficiency in the last few years. The housing associations are deliberately not in the public sector, and the Government have taken steps to deal with that issue. Nevertheless, they receive public funding, and they should make sure they spend that public money as efficiently as possible.