Cash raised from Right to Buy sales to be used to build new affordable homes.
Details of how thousands of new affordable homes will be built using the cash proceeds from the Government’s reinvigorated Right to Buy scheme were today (15 May 2012) unveiled by Housing Minister Grant Shapps.
The minister said he was responding to appeals by local authorities for more time to take advantage of the new scheme by allowing them 3 years to reinvest the funds they gain from additional sales into hew housing. He said councils now have a “prime opportunity” to refresh their housing stock and help meet the housing needs of hard-working families currently languishing on the waiting list.
The revamped Right to Buy, which will give 2.5 million social tenants the opportunity to buy their home with discounts of up to £75,000, was launched last month.
Mr Shapps has said his ambition is that, for the first time, every extra Right to Buy home sold will be replaced by a new affordable home to rent nationally. He said he had listened to views raised by councils on how they would deliver this ambition, and has agreed to extend their time frame for spending the receipts from 2 years to 3.
Under the new, light-touch agreement between Whitehall and town halls published today, councils will have the opportunity to keep receipts from additional Right to Buy sales and the freedom to spend the cash as they see fit to meet local housing demand.
Councils will have the freedom to:
- decide on the type, size and location of the new homes they build according to local needs
- work with other organisations such as housing associations to finance and deliver affordable homes for their area; or
- pass the cash to Whitehall to help deliver 1-for-1 replacement at a national level
Housing Minister Grant Shapps said:
“By upping the Right to Buy discount to a maximum of £75,000 we’ve given hope back to thousands of council tenants who want to own their home, and for the first time in years, social housing is on the move.
“For every extra property sold under Right to Buy we’re giving councils the flexibility to build the homes they need, where they need them, or to work with us to ensure every penny raised through the scheme goes towards housebuilding. I’ve listened to their views, and they now have 3 years to make the most of the extra funds the scheme will bring.
“This is a prime opportunity for councils across the country to refresh their housing stock, handing the keys to thousands of tenants who want to cross the threshold to home ownership and building new affordable properties to rent for local families who for too long have been left languishing on the waiting lists.”
To ensure best value for taxpayers’ money, Mr Shapps said Right to Buy funds should account for no more than 30% of total investment in new homes, in place of government funding. This is in line with the highly successful affordable homes programme, which has exceeded expectations and is expected to deliver up to 170,000 new affordable homes by 2015.
However, the minister was clear that the new homes must be delivered as quickly as possible, which is why councils must spend the cash on new affordable homes for rent within 3 years of first receiving it. This has been extended from the original proposal of 2 years in response to feedback from councils.
And if additional Right to Buy receipts remain unspent after 3 years they will be returned to Whitehall to be reinvested in housebuilding nationally.
Additional Right to Buy receipts for councils that have not signed the Right to Buy agreement will immediately be passed on to the Homes and Communities Agency or the Greater London Authority for investment. Councils will then be able to bid for funding for investment in affordable housing from this pot.
Councils that wish to retain additional Right to Buy receipts for the first quarter of 2012 to 2013 must sign up to the Right to Buy agreement by Wednesday 27 June 2012. Agreements can be signed after this date but will not cover receipts for quarter 1.
The agreement being issued today follows a short technical consultation in April 2012.
If Right to Buy receipts remain unspent at the end of 3 years they must be returned to central Government for investment by the Homes and Communities Agency or Greater London Authority. Similarly, if receipts constitute more than 30% of total investment, then a sum equivalent to the overspend should be returned to central government.
The remaining 70% invested in new affordable homes must come from authorities’ or housing associations’ own resources, which could include borrowing supported by the additional rental income. (For local authorities this will be possible only if they have sufficient head room to borrow under the recent self-financing settlement.)