The government has published new rules for the revamped Right to Buy, which will significantly increase the discounts for social tenants in England.
Currently most Right to Buy discounts are limited by caps ranging from £16,000 in most parts of London to £38,000 in parts of the South East – described by housing minister Grant Shapps as “miserly restrictions”. From 2 April 2012, the maximum discount available to tenants exercising the right to buy will go up to £75,000 – a £25,000 increase on the cap proposed in the consultation document.
The government has pledged that every additional home sold under Right to Buy will be replaced by a new Affordable Rent homes, with receipts from sales recycled towards the cost of replacement.
The Department of Communities and Local Government claims that, after calculating transaction costs and compensating authorities for loss of income above what has been covered in the self-financing settlement, HM Treasury and local authorities will receive the amounts they would have expected to receive, had the policy on Right to Buy remained unchanged.
Councils will be allowed to retain the remainder of the receipts if they agree to use the money to fund part of the cost of replacement homes, and so long as Right to Buy receipts account for no more than 30 per cent of the cost of the new home. The remainder of the cost will be funded by borrowing supported by Affordable Rents, which may be up to 80 per cent of market rents, “and by cross-subsidy from the landlord’s own resources, including (in some cases) land”.
If a council is unwilling to sign an agreement with the DCLG then funds will be redistributed nationally by the Homes and Communities Agency or, in London, the Greater London Authority.
The government cannot insist that housing associations replace right to buy homes since they are independent organisations, but it plans to incentivise them to reinvest receipts – for instance by prioritising those that toe the line when considering bids to use the funds returned for national redistribution.
The consultation responses and the government’s response has also been published, together with an impact assessment and a fact sheet for lenders.