PAC says the proposal has "potentially significant" impacts for both local authorities and tenants of social housing, especially in areas where house prices are high.
In May 2015 the government extended Right to Buy discounts to 1.3 million housing association tenants, on the same basis as those available to council tenants. It also announced that there would be a one-for-one replacement of the homes sold with new affordable homes. Funding for the discounts would be obtained from local authorities, by requiring them to sell high-value council homes as these fell vacant.
The Government also made a commitment that for each of these council homes sold, an additional affordable home would be provided on at least a one-for-one basis (and at least two-for-one in respect of council homes sold in London). The Department’s expectation is that the sales of high-value council homes would pay for the extended Right to Buy discounts, thus making the policy fiscally neutral.
Howeve PAC says that many key policy details have not been clarified, with the Department offering "only vague assurances as to how this policy will be funded", without producing any figures to demonstrate that additional funding from central or local government will not be required.
The report added:
"Even if the policy does prove to be fiscally neutral, the Department confirmed this would only be so for central government, not the public sector as a whole: for local government it would mean a net loss, with councils required to sell their assets and make payments to central government, a proportion of which would then be transferred to housing associations. The Department said it was looking carefully at the implications for local authorities, but was unable to answer whether this forced sale of their assets would undermine their balance sheets. Nor was the Department able to say what would happen if sales of higher-value council homes did not raise enough money to cover the costs of a council’s annual levy payments."
Other concerns remain, including the extent to which the new homes funded by this policy will be genuine replacements for those sold, and whether there will be sufficient controls to prevent abuse of the scheme given the significant discounts proposed for housing association tenants wishing to buy.
The report highlights that other organisations have also expressed concerns over the proposal. The Chartered Institute of Housing noted that there could be a reduction of 300,000 homes for social rent by 2020, leading those in social housing need to suffer greater overcrowding. It also believes that the policy would cost up to £2 billion per year and that it was likely there would be a funding gap, as sales of high-value council homes would not cover this amount. Additionally, it said fraud was "a big and growing problem", stating that in 2014 the Audit Commission had estimated the losses at £12.3 million per annum, a five-fold increase since 2009–10.
PAC added that concerns had been raised about the potential impacts in rural areas, for instance that landowners would become more reluctant to make land available for housing, where there was a risk such housing would not remain in the affordable rented sector.
MPs are calling for a full analysis showing how this policy is to be funded, a clear statement of where financial and other risks lie, and its contingency plan if its policies prove not to be fiscally neutral by the time of the 2016 Autumn Statement.
