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‘Haringey’s housing vehicle would have limited impact of right-to-buy’

V. Charles Ward
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Momentum may have killed off Claire Kober’s development vehicle in Haringey but what is it going to put in its place?

How is Momentum not only going to deliver 6,400 new homes in Haringey but also ensure that the 40% allocated as ‘affordable’ are kept permanently available to meet housing need?

One of the reasons councils choose to work with private developers is that they have no real choice. It’s not just about the money. There are also sound legal reasons why a go-it-alone housing regeneration scheme could never guarantee to meet housing need over the longer term. One of those reasons has to do with right-to-buy.

Save for a few statutory exceptions, any new housing stock that a council builds to meet long-term housing need and then lets out directly to its own tenants is immediately converted by the Housing Act 1985 into a secure tenancy carrying with it a statutory right-to-buy. After a qualifying period, tenants can begin exercising their right-to-buy at increasing levels of discount as time elapses.

There is no guarantee that those homes sold under right-to-buy will remain forever in owner-occupation. Once a home has been sold to a sitting-tenant, there is in most cases nothing to stop that home being re-sold immediately by that former tenant to a private buy-to-let landlord. Yes, there may be some discount to repay, but there is little legally to prevent that sale taking place. The end result is that as, over time, the new social housing is sold off, councils are eventually put in the position of having to rent back properties on their own estates in order to meet their statutory obligations. Paragraph 2.13 of the Greater London Assembly October 2013 Housing Committee Paper, Right to Build: What’s Stopping Councils from Building More Housing? highlighted the problem:

“Perhaps the most egregious consequence of right-to-buy and abuse of the system has been the recycling of former council homes into the private rental sector. Hard evidence is difficult to come by but Mayor Sir Steve Bullock, for London Councils, suggested that conclusions drawn from research undertaken in Scotland, demonstrating that this had happened to a large proportion of ex-council stock, were also likely to apply in London. This can result in the absurd situation of councils having to rent back their old stock from new private landlords at much higher rents in order to fulfil their statutory duties. The increased costs are usually met by the benefits system.”

Recent Freedom of Information requests by Inside Housing to 111 councils revealed that 40.2% of ex-right-to-buy homes were now being rented out by private landlords, rising to 70.9% in Milton Keynes. There are six other councils, namely Bolsover, Brighton and Hove, Canterbury, Cheshire West, Stevenage, Nuneaton and Bedworth, where more than half are rented out.

By working with Lendlease through its development vehicle, instead of building out directly (assuming it had the resources to do so), Haringey could have put itself in the same legal position as any other private landlord, at least as regards new residential lettings. Yes, there is a separate statutory ‘right-to-acquire’ for housing association tenants but with a maximum discount of only £16,000. And yes, special arrangements would need to put in place for those existing council tenants rehoused in the new development whose right-to-buy has been preserved. But over time the proportion of tenants with preserved rights would have dwindled, with no more being created.

What is surprising is that, with its focus on the wider constitutional issues, the 8 February 2018 High Court decision in Peters v Haringey LBC and Lendlease Holdings, does not even mention the minutiae of housing or landlord-and-tenant law. Had the parties not even thought about it?

Days before the judgment, Haringey’s cabinet had already announced that any further decision on the development vehicle would be deferred to the new administration following the May elections. The judgment may also be subject to an appeal. For now, the development vehicle has had a last-minute stay-of-execution.

But if Momentum has an issue with public-private partnerships as a vehicle for affordable housing delivery, it should think about this.

Isn’t the existing transfer of ex-council housing stock into the hands of private landlords through the medium of right-to-buy a form of back-door privatisation? Isn’t it absurd that councils have to rent back properties on their own estates to meet their statutory housing responsibilities – with the taxpayer picking up the bill through the housing benefits system?

‘For the many, not the few?’ It doesn’t feel like it.

V Charles Ward, senior property lawyer, HB Pulic Law (shared service owned by Harrow and Barnet LBCs). Mr Ward’s book, Housing Regeneration: A Plan for Implementation, is published in February 2018 by Routledge

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