Local authority leaders have warned their ability to replace homes sold under Right to Buy (RTB) will be all but eliminated within five years without ‘major reform’.
Under the current right to buy system, councils are only allowed to keep a third of each RTB receipt to build a replacement home. They are also prevented from borrowing to make up the shortfall.
A new analysis by Savills, commissioned by the Local Government Association (LGA), has found that without reform two thirds of councils will have no chance of replacing homes sold off under RTB on a one-for-one basis by 2023.
Last year, an estimated 12,224 homes were sold under RTB. If the current system is not changed, Savills calculated that in 2023 councils would only be able to replace approximately 2,000 of these homes.
The LGA added that, in the last six years, more than 60,000 homes have been sold off under the scheme at a price which is, on average, half the market rate, leaving councils with enough funding to build or buy just 14,000 new homes to replace them.
‘We know that the Right to Buy changes lives – it helps people who otherwise wouldn’t be able to get on the ladder experience the security and independence of home-ownership. It is essential that it continues to do so,’ said Cllr Martin Tett, LGA housing spokesman.
‘However, we are now in a situation where without fundamental reform of the way the scheme is funded, this vital stepping stone into home-ownership is under threat.
‘Councils urgently need funding to support the replacement of homes sold off under the scheme, or there’s a real chance they could be all but eliminated. Without a pipeline of new homes, future generations cannot benefit from the scheme.’
Cllr Tett stressed that reforming the current system was necessary to delivering a ‘renaissance in house building by councils.’
‘Enabling all councils to borrow to build and to keep 100% of their Right to Buy receipts will be critical to delivering a renaissance in house building by councils,’ he said.
‘However, if we’re to truly make right to buy sustainable, we must also move towards greater flexibility on discounts locally so we can reflect local community need.
‘Councils are closest to their communities and it’s essential this money is reinvested in homes in those areas so our residents can access secure, affordable housing.