Right to Buy replacement will be lost in just five years

The Local Government Association has revealed that council’s ability to replace homes sold under Right to Buy will be all but eliminated within five years without major reform of the scheme.

Under the current scheme, local authorities can only keep a third of each Right to Buy (RTB) receipt to build a replacement home, with the system also preventing local authorities from borrowing to make up the shortfall.

Such restrictions have led to two thirds of councils having no chance of replacing homes sold off under RTB on a one-for-one basis in five years’ time, unless a significant restructuring of the scheme takes place. The analysis, carried out by Savills, also finds that approximately 12,224 homes were sold under RTB last year, but that it is estimated that in 2023 councils will only be able to replace approximately 2,000 of these homes.

This means that less than a third of councils would be able to sustain any kind of one-for-one replacement of homes sold under the scheme in five years’ time. Over the last six years, over 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.

The LGA says that this leaves a shortfall of 46,000 homes which could have provided secure affordable housing. The organisation is now urging the government to commit to a comprehensive package of reform to the funding of RTB, including allowing all councils to borrow to build new homes, enabling local authorities to keep 100 per cent of all sales receipts, and for councils to have the ability to set RTB discounts locally to reflect community needs.

Martin Tett, LGA Housing spokesman, said: “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.

“Enabling all councils to borrow to build and to keep 100 per cent of their Right to Buy receipts will be critical to delivering a renaissance in house building by councils. 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. This money is badly needed to deliver homes for our residents – instead of resting in an account in Whitehall, it should be sent back to where it belongs.”