Callcredit Blog

Right to buy – are councils and housing associations prepared?

General

Councils across the UK have a surprising portfolio of property assets.  According to a recent report from the Taxpayers’ Alliance, it includes pubs, restaurants, cafes, farms, theatres and golf courses as well as a cheese factory, sawmill and betting office (that last one is held by Copeland Borough Council in Cumbria, by the way).  About half of the 24,000 or so properties listed in the report are less surprising: car parks, for instance, with Swindon and Cornwall at the top of the pile.  A further 40% of properties are accounted for by shops and farms – see below graphic which shows a count of each by local authority.
Right to Buy

Source: Callcredit analysis, http://www.taxpayersalliance.com/

A much more significant set of property assets featured in the new government’s Queen’s Speech: housing.  The upcoming Housing Bill will extend the right to buy to housing association tenants and place new duties on councils to dispose of high value social housing. So what will they have to consider in preparation for this?

First, assuming the bill will become law, local authorities will need to dispose of large and high value social housing. Many London boroughs, the vast majority of which have properties in council tax band C and above, will need to evaluate which to sell when a home becomes void. In many areas of the Capital and South East almost every void home will need to be sold because of their high value in the open market for outright sale. In May an ex council flat sold for over £1m in Kensington & Chelsea.

Also, local authorities with high-value areas will need to find areas outside of their district to house people where they have a statutory duty. Westminster Council is already considering buying and building homes in the commuter belt around London because they already have insufficient suitable stock within the borough. Selling more social homes is likely to increase this phenomenon.

It is also likely that local authorities will need to put more resource into combating right to buy fraud. The 2014 Audit Commission Report found a 400% increase in right to buy fraud in London. The ever escalating cost of home ownership will enviably tempt some to defraud the state.

Housing associations will need to ensure their tenants who are applying to buy their home can afford the purchase. Neither the local authority nor housing association will have the desire to have to re-house several years down the track because a home has been repossessed.  When looking at adults in social housing falling into the ‘Credit Savvy’ band of Callcredit’s Credit Behaviours attribute vs the ‘Credit Difficulties’ band, for adults living in social housing; those living in Newham 65% are having credit difficulties whereas in Caerphilly it is less than 20%.

Whilst owning your own home is an aspiration and dream for many, central government, housing associations and local authorities need to ensure the policy is handled properly.

To find out more and to register for our wider white paper around the Housing Bill – which looks at some of the issues people hoping to take advantage of the new Right to Buy policy may encounter when applying for a mortgage – please get in touch.

Authors:

Kevin Gilhooly, Senior Business Development Manager – Housing – kevin.gilhooly@callcreditgroup.com

Paul Kennedy – Head of Consulting, paul.kennedy@callcreditgroup.com

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