Right to Buy extension 'to cost councils £26m a year'

The sell-offs of council properties needed to fund the Government's plan to extend Right to Buy to housing association tenants could hit local authorities with annual  bill of £26m, according to new analysis.

Homelessness charity Shelter said that faced with a black hole in the funding to expand Right to Buy discounts to an estimated 1.3m households, the Government is "shifting the goalposts" by amending the Housing & Planning Bill to allow the secretary of state to force the sale of a much broader of council homes than before.

This could result in the "haemorrhaging" of 23,500 much-needed local authority homes every year, it added.

The Conservative manifesto originally proposed to extend Right to Buy though the sale of vacant "high value" council homes, as defined by local thresholds. Ministers estimated that 15,000 could be sold every year, raising £4.5bn to pay for discounts, as well as the "one-for-one" replacement of council houses, clearing outstanding debts and a £1bn brownfield regeneration fund.

However, previous analysis by Shelter showed that if the original value thresholds were applied, only 3,875 homes would be sold each year, raising just £1.4bn and leaving the scheme with a major funding gap.

The Government's amendment changes the definition of council homes liable for sale from "high value" to "higher value".  It would also give the secretary of state the power to order each local authority to sell a defined proportion of their vacant homes, including properties below the previous thresholds.

According to Shelter's figures, meeting the £4.5bn target would require every council to sell of 30 per cent of its vacant stock every year. This would leave councils with an annual average bill of £26m and result in the loss of 23,503 local authority homes - six times the charity's estimate of annual sales under the original thresholds.

Furthermore, the move from flat thresholds to a relative proportion would mean councils that would have previoulsy escaped the worst of forced sales are now facing some of the highest levies. Under the threshold policy, Birmingham City Council would have had to sell off 53 homes a year to fund a bill of around £7.3m, making it the 33rd worst affected council. Under the proposed amendment, however, it would be the worst hit area, having to raise £145m a year by selling off 1,190 homes.

Shelter noted that councils will not be simply passing on the receipts of completed sales. Instead, each would receive a bill to pay based on a Whitehall formula that includes an estimated value of their vacant stock. It would then be up to the council to raise the funding.

If the money could not be raised from sales, it would have to be found elsewhere. Shelter said the recent Public Accounts Committee report on the policy said DCLG was "unable to answer" whether forced sales would undermine local authority balance sheets.

Furthermore, because the Government has committed to "one-for-one" rather than like-for-like replacement of council homes, Shelter said replacements could be built in different areas to those sold off, be different sizes, or be different tenures, potentially leading to the "systematic replacement of genuinely affordable council housing with unaffordable Starter Homes".

The cross-party PAC said the Government has failed to make a "diligent and credible case" for extending Right to Buy and criticised ministers' approach to funding the policy as "entirely speculative" and not backed up with any costing or working out.

"We are not talking about a 'back of an envelope' calculation- there is no envelope at all," chair Meg Hillier MP said.

She added that the Government should be "embarrassed" by the committee's findings.

DCLG said the proposals on defining higher value council properties will be subject to parliamentary scrutiny.

"This Government makes no apology for helping people into homeownership. Our voluntary agreement with housing associations will mean 1.3m tenants will have the chance to own their own home, while every home sold will be replaced with a new affordable property," a spokesperson added.

"We are currently working jointly with the housing association sector and are running a pilot to assess the operation of the scheme and have always been clear we will set out further information."