Councils that still own houses are nervously waiting to see if and how the government will implement a Conservative manifesto policy to force them to sell high-value homes to finance a new right-to-buy for housing association tenants.
The idea was floated in a 2012 paper for the right-wing Policy Exchange thinktank, Ending Expensive Social Tenancies, but received little attention until the party’s manifesto was published.
That said sales would raise £4.5bn a year to be split between compensating associations for having to sell homes at less than market value, replacing sold council homes and a £1bn ‘brownfield regeneration fund’.
Councils would therefore see little of the proceeds of sales of their properties.
Homes would be sold as they fell vacant, making this income stream unpredictably dependent on residents’ decisions.
If this is in the Queen’s Speech councils will face a host of complex financial problems, even when ‘high-value homes’ is clearly defined.
When the old housing revenue account system ended in 2012, councils drew up 30-year business plans based in most cases on the assumption of continued rental income from all properties.
These plans would unwind were councils forced to sell the most valuable homes, as there are few alternative sources of income.
In high-value areas, building costs may make it impossible to replace homes within resources available, and even if they were replaced these new homes could themselves become subject to forced sale.
Association of Retained Council Housing chief executive John Bibby said: “There are a lot of implications for council business plans, which were all based on the assumption that there would be continued income from these properties over 30 years. The impact varies between local authorities and depends on what thresholds are set for sales.”
Rents form council housing’s only income – apart from leaseholder service charges – and “freedom to increase rent is limited by central government guidelines”, Mr Bibby said.
Lewisham LBC elected mayor Sir Steve Bullock (Lab), who leads on housing for London Councils, said: “I am deeply concerned. The most valuable homes are larger ones, and three-to-four bedroom homes for larger families are like gold dust in London as it is.”
Alistair McIntosh, chief executive of consultancy Housing Quality Network, expected councils would be “very reluctant” to sell high-value vacant homes, and was “sure local authorities will find ways to frustrate this”.
He added: “If the government thinks councils will sell freeholds for nothing I’m sure it will have another think coming.”
Housing consultant David Hall, who has worked with many councils, said: “It does make you wonder if it adds up, as the total build costs could be more than the value of the properties being sold”.
Mr Hall said that if their best stock were sold, councils might be left letting only their smallest and sometimes least desirable dwellings and “the remaining tenanted stock will become less and less economic to run if the sold dwellings cannot be replaced”.
Forced home sales from which councils get only partial income will certainly provoke cries of “unfair”, but the prominence accorded this policy at the Tory manifesto launch makes it hard for the government to draw back from it even if it wished to.
Analysis: Tory right-to-buy plan sparks financial and fairness concern