Right to Buy for social housing residents?
10th May 2022
The Government has hinted at introducing the Right to Buy for Registered Provider residents.
For potential purchasers there is an obvious advantage to Right to Buy over Right to Acquire. In terms of maximum discount potentially available to increasing sharply from £16,000 up to £108,000 (dependant on region and other factors including length of residence).
For RPs there will be much to consider should Right to Buy be introduced. What we do know is that the introduction of a universal Right to Buy for Registered Provider tenants would require new legislation.
Looking at the potential financial implications, Registered Providers may have to spend time considering the effects on any complex long-term financing legal agreements which they have in place. Unlike Local Authority stock, the majority of Registered Provider properties are funded by private sector debt. This debt must be serviced and Registered Providers depend on rental income to do this. The introduction of the Right to Buy could also have an impact upon loan security for stock which is charged as security.
The move may bring all Registered Provider debt into public debt. As we saw in Northern Ireland, the proposals for the Office for National Statistics to transfer the social housing sector to the public balance sheet for government accounting purposes presented challenges to a landlords’ ability to borrow against its assets for development purposes.
In the Voluntary Right to Buy pilot introduced across the Midlands, the Government set the aim that every home sold would be replaced on one-for-one basis with a newly constructed property. A review of the pilot showed that this was challenging and that replacement homes would be on average smaller, at higher rents and include more homes for shared ownership and fewer for rent. For Registered Providers this may present challenges in terms stock management and ensuring that there is sufficient suitable affordable stock available to meet the changing needs of their customers.
Registered providers also own significant stock acquired as part of Section 106 agreements that are required to remain affordable in perpetuity. In the pilot, those living in properties that could not legally be sold were given the opportunity to ‘port’ their Right to Buy discount a different property. Around 12% of applicants who were offered portability completed on their purchase.
Consideration as to the extension of the Right to Buy to Registered Providers is nothing new, we saw this in 2005, 2015 and again 2019. At that time the Government of the day did not press forward with the proposals, and it remains to be seen whether the proposals will come to pass.
At MSB we’ll be keeping a close eye on any developments and will be on hand to discuss any statutory changes, financial arrangements and to help assess any impact that they may have on your organisation.
If you have any queries, please contact Andy Moore at andymoore@msbsolicitors.co.uk.
Andrew Moore
Andy joined MSB as Head of Leasehold and Homeownership in 2019. He brings with him 10 years of housing experience, having represented a range of clients from the largest RPs in the country, to individual property landlords. His knowledge and experience has seen him act as a key advisor on a change of tenure for a £100 million + PFI project, in addition to having developed a process for unauthorised sub-letting that has been adopted by multiple RPs.
