Right-to-Buy Scheme

Part of the debate – in the House of Commons at 7:02 pm on 11th January 2006.

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Photo of Brian Iddon Brian Iddon Labour, Bolton South East 7:02 pm, 11th January 2006

Given that 2005 was the 25th anniversary of the statutory right-to-buy scheme, which was introduced by the Housing Act 1980, it seems appropriate to assess the policy's impact on the British housing scene today. I was elected to Bolton metropolitan district council in 1977 and for 20 years I served on its housing committee, which I chaired from 1986 to 1996. For most of those 20 years, the council house waiting list remained at about 5,000 applications. When it started to rise in the late 1980s, I became concerned, but I became alarmed when it rose to about 8,500.

The right-to-buy policy had started to impact by then. Unfit private sector houses were still being cleared, albeit on a much-reduced scale, and council house building had stopped completely. The housing committee therefore formed a partnership with five preferred housing associations. The council provided land at nil cost in order to keep rents down, and we started to build our way out of what was becoming a housing crisis. Thus was born Bolton Community Homes Ltd, which still thrives today. It compiles a joint housing register for all social housing, called "Homes For You". Councillor Noel Spencer, the current chairman of Bolton At Home, which is an arm's length management organisation, told me that the "Homes For You" housing register has recently exceeded 20,000—the highest expression of interest in social housing that Bolton has ever seen.

"Homes For You" in Bolton runs a choice-based lettings system. Every week, a list of available properties is published in the property section of the Bolton Evening News. In one corner of its advertisement appear the results of expressions of interest in properties that were advertised two weeks earlier. These weekly lists provide evidence of a steadily rising demand for social housing, which was one reason for seeking this Adjournment debate. Bolton is not able to build its way out of its difficulties today because its housing capital resources have been shifted to the pathfinder authorities and to other areas of the country.

Another reason for seeking this debate was that I and others believe that Bolton's highest-ever housing registration figure has been inflated as a result of the right-to-buy scheme. Bolton has sold 28 per cent. of its housing stock, close to the national figure of 30 per cent. Of course, it is always the better homes in the high-demand areas that are sold first. On some Bolton estates, sales stand at well over 50 per cent.

Knowing that council house modernisation schemes affect valuation prices very little, tenants sometimes wait in the hope that a modernisation programme will improve their property before they exercise their right to buy. Investment in the decent homes policy might be accelerating sales for that reason, but there is no doubt that current prices in the private housing sector are the most significant impacting factor.

In Bolton, house prices rose by an average of 12 per cent. in 2001–02, by 16 per cent. in 2002–03, and by a significant 32 per cent. in 2003–04, although the rise slowed to 10 per cent. in the first half of 2004–05. The National Housing Federation has reported that a person on average earnings in the north-west needed to borrow 6.1 times their annual salary in May 2005 to purchase an average home. In Bolton, the borrowing ratio was worse, at 6.3 times the average salary.

That brings me to public sector valuations, which have always lagged behind private sector valuations for similar houses in similar areas. In Bolton, sale prices are established by private sector valuers. Completion of sales takes about 12 months, but the valuation is front-loaded, which means that the sale price can be significantly out of date at the time of completion.

Bolton's chief housing officer reported in February 2005 that, of 26 applications referred for determination to the district valuer, 19 were reduced by an average of 6 per cent. Five valuations remained the same, while two were increased by an average of 4.4 per cent. Those two increases were the first ever valuation increases by the district valuer in Bolton since the right-to-buy policy was introduced in 1980.

I shall give my hon. Friend the Minister some idea of how low the valuations in Bolton are. For example, Hargreaves house in the town centre was built in 1958. Recently, a two-bedroom flat there was valued at £28,000, and was sold for only £8,400. Bolton council recently completed internal refurbishment of the flat, and the discounted purchase price hardly covered the cost of that refurbishment. In addition, almost immediately before that sale the council had spent £638,000 refurbishing Hargreaves house, both externally and in the communal areas. However, the cost-floor rules do not allow such improvements to be taken into consideration in the sale of the property. In contrast, Marsden house is a recently built block of flats less than a quarter of a mile away from Hargreaves house. The selling price of a typical two-bedroom flat there is £150,000.

To accommodate a large family, two three-bedroom semi-detached properties in Mancroft avenue, built in 1932, were recently converted into a six-bedroom house at a cost of £28,000. Yet the converted property was valued at only £57,500, and it sold at a discounted price of £27,600—less than the conversion cost. Again, the cost-floor rules allowed that to happen. Will my hon. Friend the Minister therefore be prepared to look at the cost-floor rule to prevent such anomalies in the future?

It seems to me that the guidance for valuations of tenanted public sector homes is not working to the advantage of the public purse. How is it possible to reach those valuations in any case, when there are very few comparisons with sales of tenanted properties in the private sector? Will my hon. Friend the Minister also look at the valuation guidance, in the interests of the public purse?

According to a recent parliamentary answer by my right hon. Friend the Deputy Prime Minister, housing waiting figures have gone up by 50 per cent. nationally since 1997. That means that another 1.5 million are waiting for an affordable home in the public sector. The worst-hit areas, of course, are London and the south-east, where rising property prices have meant that waiting lists for council homes have risen by 77 per cent. In the case of Hertsmere council in Hertfordshire, they have risen by a massive 2,424 per cent since 1997. In the early days of the RTB scheme, we were led to believe that houses sold would be replaced, but no Government, not even a Labour one, have met the demand for social housing.

That brings me to capital receipts. For every house sold in Bolton, 75 per cent. of the capital receipt ends up in the Treasury. I wonder how much of the pooled income from across the country is spent on providing new, affordable public sector homes. More than generous discounts, heaped on top of ridiculously low valuations, have meant that capital receipts, even had they all been spent on building new homes, have been nowhere near enough to build the replacement homes we need. In most financial years, significantly more council homes have been sold through the RTB policy than were built by local councils and housing associations put together.

Despite the RTB scheme's obvious popularity, first realised by Margaret Thatcher, it was always destined to affect most those in the greatest housing need. The Office of the Deputy Prime Minister has established that more than 15 years after purchase at least half the purchasing households remain in occupation on the estates, which helps to stabilise them. However, many of the homes sold end up in the hands of private landlords who let former council houses at more than double council rents. That has put a huge strain on the housing benefit budget. Furthermore, tenants evicted by their council landlords for antisocial behaviour often end up living round the corner on the same estate, and on at least double the rent, which is often met from the public purse.

Owner-occupation rose from 58 per cent. in 1981 to 71 per cent. in 2004, but with it comes responsibility. Unfortunately, many former council tenants, persuaded to purchase their homes by low valuations and generous discounts, by low mortgages since 1997 and by successive Governments, have not always realised the true cost of maintaining a home.

The RTB is preserved for those tenants whose homes have been the subject of large-scale voluntary transfer. An accelerating number of sales is creating increasing financial difficulties for those housing associations—registered social landlords, we call them today—that have taken ownership of a considerable number of former council home properties.

The effect of the RTB policy in rural areas has been devastating, particularly in attractive parts of the country where properties are sold off as second homes. The Housing (Right to Buy) (Limits on Discount) (Amendment) Order 2003 reduced the RTB discount in 41 local authority areas in London and south-east England that were experiencing high levels of homelessness and high property prices. The changes appear to have slowed sales. Will my hon. Friend the Minister therefore review the current position and consider extending the order to other local authorities?

A pressurised housing status exists in Scotland, and East Renfrewshire council became the first to win it. Tenants there are prevented from exercising their right to buy until the status is lifted, which makes sense to me. Will my hon. Friend also consider providing a level playing field between the right-to-acquire policy, applicable to housing association tenants who can receive a maximum discount of only £9,000 in the north-west region, and that for council house tenants, including those managed by arm's length management organisations, whose discounts are far more generous?

As a result of abuses to the original RTB scheme, changes have been made, too, to the qualifying period before a public sector tenant can make an RTB application, to the discount calculations and to the rules for repayment of discounts. Those exercising their RTB must now offer the property back to the council at the market price if they choose to sell it within 10 years of purchase. It will be interesting to measure the effect of those changes on RTB sales.

At the end of September, local authorities across England became duty bound to write to all their secure tenants to explain how the purchase price of their homes is calculated, provide details of how to apply and explain the potentially high costs associated with owning a home. The home ownership section of Bolton Community Homes has included a warning in its leaflet about the private companies whose representatives still appear on doorsteps to try to persuade tenants to exercise their right to buy. Sometimes they pretend to be working with the council. They spread rumours that the right to buy is coming to an end, when it is not, and that the council is about to sell off its homes, when it is not. They also tell tenants that their rents are likely to double.