Housing Market High on the Election Agenda
With the election now just days away all parties are making high profile pledges on the housing market. This week the Labour Party announced plans for a £300,000 stamp duty limit for first time buyers whilst the Tories are seeking to introduce the Right to Buy scheme for housing association homes.
However, extending the right-to-buy scheme could undermine the UK’s public finances, according to an assessment of the Conservative party’s flagship policy by the Institute of Fiscal Studies.
The independent tax think tank warned that selling off housing association homes would “represent a significant giveaway … potentially billions of pounds over the next parliament” and would “worsen the UK’s underlying public finance position”.
It said given the “less-than-impressive record” of delivering replacement social housing under the existing right to buy, “there is a risk that these policies will lead to a further depletion of the social housing stock – something the proposal explicitly seeks to avoid”. It also called into question a series of financial assumptions made by the Conservatives about how much would be raised from sales.
In 2012, the right-leaning Policy Exchange group, which first proposed selling off more expensive social housing stock in 2012, estimated revenues in the region of £160,000 per property. But just three years later, the Conservative proposal assumes revenues of £300,000 per property. “It is not clear why the expected revenue per property is so much higher,” said the report’s authors, Daniel Chandler and Richard Disney.
The Conservatives have also assumed that about 15,000 high-value council properties will become vacant each year, and their sale would help fund subsidies to housing association sell-offs. This suggests a natural turnover rate of 7% a year as tenants die or quit their homes, yet Policy Exchange had previously said the turnover rate would be only half that level.
Brandon Lewis, minister for housing, said: “Since Conservatives reinvigorated the Right to Buy for council housing in 2012, we have helped 33,000 families into home ownership and boosted council house building to a 23-year high. Our plans to extend the Right to Buy to housing associations will similarly boost social housing construction and reduce housing waiting lists. In Scotland, Labour and the SNP voted to abolish the Right to Buy, and Labour now plan the same for Wales. Labour and the SNP are the enemies of aspiration and would kick hard-working people off the first rung of the housing ladder.”
Selling off the best council stock would also risk heightening social division, the IFS said. “Sales of expensive local authority properties would reduce the availability of social housing in the most expensive areas, thereby creating clearer divisions between areas where richer and poorer households are located.”
An estimated 1.3 million housing association tenants will be offered the right to buy their home, with subsidies increased to £103,900. “There is an upfront cost associated with this policy, because the government would compensate housing associations for having to sell their assets at a discount so they receive the full market price. An increase in right-to-buy sales would amount to a substantial giveaway to a relatively small number of households,” the IFS said.
The National Housing Federation has estimated up to 221,000 households could afford to exercise their right to buy, at a total cost of £11.6bn. But the IFS said this represented “an upper bound on the total cost”.
The fact remains that there is cross party agreement that we simply need more homes. If we sell off stock we need to be able to afford to build more affordable homes. It can only be the case that if they are sold too cheap there will not be enough money to build new ones. Whilst tenants have paid rent for many years, so have many home owners paid interest on their mortgages and not received interest on their savings used as a deposit.
We can only have what we can afford, and I wonder whether many of the promises about the housing market from all parties can actually turn into reality.
Solicitor, Executive Director, Head of Residential Property Services
Banner Jones Solicitors
Tel 01246 560560
Fax 01246 220390