At least 80,000 social rented homes could be lost by 2020 unless councils are given greater powers to build new homes, new analysis from the Local Government Association reveals today.
The LGA estimates this drop in affordable council rented housing would shift spending from bricks to benefits by driving up the housing benefit bill by £210 million by the end of the decade as more families move into the more expensive private rented sector.
Town hall leaders forecast that 66,000 council homes will be sold to tenants under the existing Right to Buy (RTB) scheme by the end of the decade with current complex rules and restrictions making it difficult for councils to rapidly replace the majority of these homes sold. Councils only keep a third of sale receipts to build new homes and have long argued for the ability to retain 100 per cent of receipts locally.
The LGA predicts councils could then be forced to sell a further 22,000 “high value” homes in order to fund plans to extend the scheme to housing association tenants, although this number could be higher depending on howgovernment chooses to define “high value”.
The LGA is warning that some new housing measures, such as the loss of £2.2 billion from council housing budgets by 2020 as a result of social housing rent cuts, risk making building any replacements all but impossible.
It estimates that 80,000 of these 88,000 homes sold under Right to Buy by 2020 will not be replaced as a result.
This fall would also increase rents across housing markets making it more difficult for working families to save for a deposit to buy their first home. Separate new research for the LGA by Savills shows the average first time buyer now needs a deposit equal to 116 per cent of their annual income to get on the housing ladder.
The LGA, which represents more than 370 councils in England and Wales, believes the extension of RTB to housing association tenants should not be funded by forcing councils to sell-off their social housing. Councils should retain 100 per cent of receipts from any council homes they sell and Right to Buy discounts should be set locally to reflect local house prices, it said.
Local government leaders insist this is the only way to ensure councils can replace vital homes and reinvest in building more of the genuine affordable homes our communities desperately need and which are crucial to keeping rents low, reducing homelessness and tackling council waiting lists.
Cllr Gerald Vernon Jackson, Leader of the LGA Liberal Democrat Group, said:
“Not everyone can afford to buy. With 68,000 people currently living in temporary accommodation, annual homelessness spending of at least £330 million and more than a million more on council waiting lists it is clear that only an increase of all types of housing – including those for affordable or social rent – will solve our housing crisis.
“As a minimum, we forecast that 88,000 council homes will be sold up to 2020. There is a real risk that complex rules and restrictions will combine with certain aspects of the Housing and Planning Bill to have the unintended consequence of making building replacements almost impossible.
“This loss of social rented housing risks pushing more families into the private rented sector, driving up housing benefit spending and rents and making it more difficult for families to save the deposit needed for their first house – which is now 116 per cent of the average income.
“Councils and Liberal Democrats have long-called for the ability to replace housing sold through Right to Buy quickly and retain 100 per cent of receipts from all sales. This is imperative to ensure that councils can to reinvest in rapidly building the homes that people in their areas desperately need.”
- The LGA, which represents more than 370 councils in England and Wales, said measures within the Housing and Planning Bill – currently being debated in the House of Lords – risk combining to reduce the number of existing council homes, which local authorities will be forced to sell and struggle to replace.
- Forcing councils to sell off homes to fund the extension of Right to Buy to housing association tenants could cost councils £6 billion by 2020. Around 24,000 housing association tenants a year will buy their home with an average discount of £63,271 under the Right to Buy extension – the discount would cost £1.5 billion a year.
- 5,500 high value council homes would be sold each year up to 2020 should “high value” be defined as the top third value of regional market. This figure could vary significantly depending on how Government defines “high value”. The Housing and Planning Bill effectively gives Government the freedom to decide how much it would like to “tax” each council with housing stock, and to define high value for their area to deliver that figure.
- The Government should fund the RTB extension by giving councils the power to help raise £13 billion by building more new homes on surplus public land rather than forcing the sale of other valuable homes. Figures released this week shows government is not meeting its targets to build new homes on its surplus land.
- Proposals to reduce rents paid by tenants in social housing in England by 1 per cent a year will cost councils £2.2 billion in planned rental income – used to build new homes and improve and maintain social housing stock – by 2020, and increasing uncertainty that puts long-term housing investment plans at risk.
- Other sources of new affordable rented homes are also due to fall as 20 per cent discounts on 200,000 new starter homes for first-time buyers will be funded by exempting developers from paying Section 106 affordable housing contributions. Should 100 starter homes be built through the planning system, between 51,000 and 76,000 sub-market rented homes would not be built.
- Since 2012, 35,000 homes have been sold and 4,000 new homes have started to be built. Complex restrictions and rules restricting councils from replacing homes sold on a one-for-one basis also include nationally-set discounts that do not reflect local housing markets, councils not being allowed to use RTB sale receipts alongside government grants or to invest receipts in building replacements on their own land.
- Average difference between average social rent (£92) and private sector (£112) housing benefit claimed per household is £20 per week or £1,040 a year.
- LGA forecasting based 20,000 homes a year sold and not replaced up to 2020.
|Council homes sold and not replaced (thousands)||20||40||60||80||–|
|Projected additional pressure on Housing Benefit (millions)||20.8||41.6||62.4||83.2||208|