The Right to Buy extension will create two major challenges. Alasdair Muir explains the impact on housing associations involved in the pilot and how they can prepare.
The Right to Buy (RTB) expansion is gradually inching forward with the next pilot to be rolled out across both the east and the west Midlands. Housing associations with more than 1,000 units are expected to take part, but there are two big hurdles to be tackled – portability and the ‘one-for-one’ policy.
Housing associations will have to explain to their tenants which properties within their stock are included within the RTB, and which aren’t.
As evidenced in the original pilot, some properties will be exempt and that could be for a number of reasons. For example, if the stock is subject to planning restrictions and must remain affordable in perpetuity, a disposal under RTB is unlikely to meet this requirement so the properties will be excluded. The same applies with some rural leases and supported housing schemes.
To overcome this issue, the portability concept has been introduced by the Government. This will enable a tenant to exercise their RTB even if their home has been excluded by allowing them to ‘port’ their discount to another property.
During the first pilot, housing associations wanted to know how they’d be refunded if they were going to dispose of properties at a discount. After some discussion with Government, the result is ‘one-for-one’; a policy which will see each property disposed of replaced with another.
But the downfalls to this policy are twofold:
- If a housing association disposes of a three-bed house, it will receive the value of the discount back, which may only be enough to build a one bed flat replacement.
- The replacements are to be delivered nationally which means some housing associations may lose stock, to others. It may also mean once the process has concluded certain parts of the UK may benefit from more stock than others.
How can housing associations prepare:
Although it remains to be seen how portability and the one-one policy will work in practice, there are steps housing associations can take to prepare and factors to consider.
Ultimately, each housing association will have to decide which properties fall within the RTB parameters, but they must have a consistent and clear portability policy from the outset. Those which fail to do so could be challenged in the Courts if they unfairly deny leaseholders the RTB opportunity.
Boards are advised to work closely with their existing RTB and Right to Acquire (RTA) teams to learn from their processes and ensure that their RTB and RTA teams are resourced properly, and to ensure your development colleagues are ready for buying up smaller bits of land to deliver replacements. It might be worth considering an exercise into how poor planning and space in previous developments could be utilised now.
Housing associations must also consider policies for removing properties from charge. Some stock which is caught by RTB/RTA may be subject to charges, or ongoing charging exercises, so this must be assessed from a securitisation point of view.
Furthermore, as some properties will be excluded because of planning restrictions, some s.106s could be re-negotiated. So if a previous s.106 you’ve been caught in has that your affordable home ownership tenure split must be so many rented and so many shared ownership units, a simple deed of variation to change the tenure split needn’t be the costly, lengthy process you might be thinking of.
And if you’re part of an association located outside of the Midlands, consider how your organisation will adapt as this initiative will spread if it proves popular.
For further advice, including assistance drafting a portability policy, please contact our real estate and projects team.
Further guidance on Voluntary Right to Buy for housing associations is also available from the National Housing Federation.