“Sell council houses to subsidise HA RTB sales? And I though I was mad.”
Part of me thinks that this election proposal to extend the Right to Buy (RTB) to housing association (HA) tenants is actually an admission by the Tories that they have no chance of winning a majority in this election. In this case there is nothing to lose by floating crazy policies which you know have no chance of ever getting through coalition negotiations.
An unfair transfer from poor to rich
However, on the off-chance that they are serious, there is a serious unfairness at the heart of the proposal which will see the poorest communities subsidising the better off. The money to pay for the policy is meant to come from selling off council houses, but only a minority of local authorities still own any housing stock – about 100 out of 326 English authorities. This means the entire burden of funding a national policy will fall on this minority.
This would be bad enough in its own right, but if you consider the disparity between the LAs that own stock and those that don’t, it is actually much worse. This is because the LAs who retain their council homes tend to be those urban and with more deprived communities and those who have no stock are on average leafier boroughs or rural, with wealthier populations.
If all HAs are to be reimbursed for the RTB discounts, this means that the money for HA sales in LA areas with no council homes has to come from outside the area – from LAs that do own stock. On average this will see a transfer of assets from already poorer areas, to already richer ones.
Beggar Wolverhampton to help Elmbridge
Esher, Elmbridge Borough, Surrey
For example, Elmbridge in Surrey a very pleasant place and typified by high incomes and very high property values, transferred its own council houses, so has nothing to lose from this policy. However if an HA in Elmbridge sells a home through this RTB scheme, it will get reimbursed the full market value (likely to be a large sum) by the Government, so be well placed to build a replacement. But how is this to be paid for?
Heath Town estate, Wolverhampton
In order to give money to the HA in Elmbridge an LA that does own stock will have to sell some homes. For example, a place like Wolverhampton, one of the most deprived parts of the country, where the council owns lots of homes but is characterised by low property values. Even the smart parts of the city don’t command huge house prices and on a typical housing estate a nice modernised 3 bed semi might only be worth £75,000-£100,000 on the open market. How many of these homes would poor Wolverhampton be forced to sell in order to send money to wealthy Elmbridge?
No such thing as a free lunch
The Tories want a free lunch on RTB, but it will actually come at a real cost to some of the poorest in society.
Let’s not forget that you cannot simply sell council homes and use the whole receipt to fund the scheme. There is attributable housing debt attached to all council homes which would have to be repaid, early repayment also attracts an additional cost. The selling LA would also suffer loss of future income which would need to be recompensed or risk detriment to the current tenants. The net receipt would therefore be far lower than the sale price.
In the example I have used, Wolverhampton could well lose two council houses to fund RTB discounts in Elmbridge which would see little net loss in affordable housing. It is hard to see how this is anything other than a regressive redistribution of wealth from the poor to the rich. Not only is the Tory proposal a bad one, it is also grossly unfair and will tend to increase inequality.
Right to Transfer 