Legal Update | RTB receipts drive resurgence in council housing

Legal Update | RTB receipts drive resurgence in council housing

Local authorities are increasingly using right to buy receipts to purchase rather than build council housing, says Charlotte Cook, Partner in the Social Housing team at Winckworth Sherwood.

Local authorities have for the last decade been able to reinvest right to buy receipts into new council-owned housing. However, it was not until the lifting of the borrowing cap in 2018 and, in 2021, extending the spending window from three to five years that has seen local authority owned housing accelerate. Today, there are over 1.5 million homes owned and managed by local authorities.

The right to buy programme has been heralded as both a success for private home ownership and, at the same time, a strategic failure undermining social housing stock with over six million homes falling out of public ownership. Right to buy has seen 1.1m homes transferred into the private rented sector.

In a report in March 2022, the Chartered Institute of Housing (CIH) says right to buy has proven costly to taxpayers, driving up housing benefit and temporary accommodation costs. The CIH says it has driven greater inequality in energy efficiency and housing standards with homes in the private rented sector often falling behind homes owned by local authorities and registered providers.

Local authorities are very much on the front line of the housing crisis with lengthy waiting lists, families and vulnerable individuals in unsuitable accommodation and increasing housing costs. Soaring house prices and rents continue to compound the challenges faced.

They are increasingly responding by looking to purchase back council housing stock rather than building new stock, and with good reason. Housing benefit, now rolled into Universal Credit, represents a significant and increasing expense, costing government over £17bn a year. Put simply, local authorities that own and manage their own housing stock can make reductions to housing benefit.

Yes, there will be costs associated with the management of owned properties, but council-owned housing brings many other benefits too. Costs (whilst significant) are not the only driver.

In owning and managing housing, local authorities can offer vulnerable individuals and families greater security of tenure, and more appropriate support where needed. They no longer need to turn to private sector landlords who use shorthold tenancies by default. In short, nominations, benefits, and management all under one umbrella.

Wealth of expertise
It has been argued that local authorities have lost the knowledge and skills they once retained to manage large housing portfolios. And whilst that may be the case in some instances, there remains a wealth of expertise in local authorities that continues to grow.

And where the acquisition is of ex -right to buy stock, the quality of its construction and design (with schemes often supported by generous amenity space and ‘old school’ space standards) can be seen as better ‘value for money’ than new-build units.

Local authorities will continue to build and operate new homes yet face considerable challenges. It takes time to build new homes when housing need is immediate. And then there is rising costs of material and labour that shows no sign of abating.

We will increasingly see a greater number of local authorities purchasing properties outright funded by right to buy receipts. They will in many instances be homes that were once in local authority ownership. The era of quality housing owned and managed by local authorities is returning.

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