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Will right to buy for housing association tenants worsen the housing crisis?

The Housing Secretary has announced plans to give tenants of new housing association homes the right to purchase a share in the equity of their property. Shares would start at 10% and rise in 1% increments.

How would it work?

In a speech at the Conservative Party conference on 30 September, Mr Robert Jenrick said that the right would apply to any new housing association homes built with a "voluntary" arrangement between associations and the government for existing tenants.

It is not clear how the policy will be enforced. However, there are suggestions that the government is considering making it a condition of grant funding.

As no further details of the policy are available at the moment, it is difficult to predict what the likely outcomes will be.  Some potential impacts are:

  • Less social rented housing

    The National Housing Federation has already voiced concerns that these proposals will make it harder for housing associations to build new social housing and could mean that less social rented housing is available to lower income families who need it most.
  • An impact on borrowing

    One G15 housing association has paused its acquisition of a large site whilst it assesses how this policy will impact on its borrowing capacity.  Traditionally, housing associations are able to borrow money at low rates because they have a steady and predictable income stream.  There is a concern by some in the sector that lenders may not like this change in policy and this could result in increased borrowing costs.
  • There could be other ramifications too for example, when negotiating the grant of nominations rights to local authorities.

What will it mean for tenants?

This may be great for tenants who can afford to buy shares in their homes but what about the millions who cannot.  One also has to question whether this is truly a good deal for the tenant because as a shared owner a tenant will become liable for paying full service charges and could be responsible for repairs on top.

On the positive side, housing associations will receive a capital receipt they had not expected and  some in the sector are of the view that shared ownership assets are good, stable assets that lenders like to lend against.

Switching housing policy

Last month the government promised significant changes to the shared ownership model to allowing staircasing in as little as 1% and this is a further step offering the 'Right to Buy' to potentially 2.6 million households.  It would seem that Boris Johnson's new government is switching housing policy to focus on home ownership once again.  This is in stark contrast to Theresa May's comments earlier in the year at the Chartered Institute of Housing Conference where she said that too many governments had focused on home ownership at the expense of social housing. 

It has been described by some as a "retrograde move" because, whilst the policy may assist those in shared ownership, it is not a strategy for increasing the supply of housing.  It is widely acknowledged that not enough homes are being built in the UK to replace those being taken out of the housing stock such as when they are sold through the "Right to Buy".  There are therefore fears that the policy could worsen the housing crisis.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at October 2019. Specific advice should be sought for specific cases. For more information see our terms and conditions.

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