My Lords, we are now deep into the debate on the implementation of the voluntary right to buy for housing association tenants. I did not feel able to add my name to the amendments in this group that seek to exclude some or all housing association tenancies from the grant to be made available to pay for the discounts for these tenants. I am, however, alongside my noble friend Lord Cameron of Dillington, and I support amendments in the names of a number of other noble Lords directing where the proceeds from any right-to-buy sales should be reinvested.
A good deal of controversy greeted the promise of a right to buy for housing association tenants when it appeared in the Conservative Party’s election manifesto last year. In the event, the initial right-to-buy policy was changed to a voluntary scheme negotiated between the National Housing Federation and the Government. The resulting agreement has led to the federation being criticised for doing a deal with the Government rather than fighting to get this measure abolished. Parallels have been drawn with the last time the Government proposed a right to buy for housing associations, in March 1983. I was the chief executive of the federation at that time, and it mounted a campaign to persuade this House to reject the proposal. The House, which was largely Conservative then, did so by a large margin. As a result, the Government abandoned the measure and the stock of housing association homes has avoided being depleted by sales at heavily discounted prices over the past 33 years.
Should I now be exhorting your Lordships once again to reject this measure? The revamped policy still subsidises housing association tenants to purchase their homes, and therefore still means that they are not available to be re-let in the future to lower-income households. However, the deal now done differs from the earlier proposal of a statutory right to buy in fundamental ways.
First, no statutory right is being offered to housing association tenants. Rather, tenants will be able to buy, and receive substantial discounts to do so, if the housing association’s board so decides. This acknowledges that housing associations are independent bodies, mostly charities, and they should decide on matters as important as this, rather than being told what to do by central government. It means that housing associations can protect some or all of their housing stock where, for example, they do not believe it can be replaced. For example, Hastoe Housing Association, a leading rural housing association, has announced that it will not be offering the right to buy to its tenants in rural areas, as defined in several amendments to the Bill.
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Secondly, again in contrast to the proposition that came before your Lordships in 1983, housing associations will receive 100% of market value of any tenanted property that they sell. The discount for the tenants will be paid in full to the housing association. This will therefore generate a capital receipt that could and should be used to replace the home that is sold and, sometimes, to produce more than one for one. Getting the full market vacant possession price for a tenanted property, which had previously been on the books for much less, strengthens the housing association’s balance
sheet and enables it to recycle assets tied up in property to build more homes. These funds are clearly very important at a time when grants for affordable housing have been considerably reduced.
Those two big differences contrast favourably with the previous proposal for every housing association to be compelled to sell on the very generous terms dictated by the Government, with no compensation for giving the tenant their hefty discount. Sadly, that remains the position for councils, which have no discretion in the matter and have to take the hit of the right-to-buy discount and, even after that, have to send a substantial chunk of the remaining sales proceeds to the Treasury. So I do not criticise the National Housing Federation and its chief executive, David Orr, for the arrangement it negotiated.
There is a further significant reason why that deal was necessary. It concerns the reclassification by the Office for National Statistics of housing associations as public bodies. At the time when the voluntary right-to-buy scheme was being negotiated, there were fears, which were subsequently realised, that housing associations—or “private registered providers”, as the new jargon tediously calls them—would be reclassified from their private status to that of public bodies. Reclassification is a matter of considerable disquiet for the Government as well as for housing associations, because it means that borrowing by these bodies is regarded as public expenditure. Loans by housing associations then form part of the national debt, adding over £60 billion to it; worse, they increase the annual deficit by £3.5 billion per annum at a time when reducing the deficit is the Government’s very highest priority.
Abandoning the idea of a statutory right to buy for housing association tenants did not head off the ONS; it declared that government controls over housing associations had already passed the point where these bodies could be regarded as private, and the ONS duly reclassified them as public non-governmental bodies. Hence the need for the deregulatory measures in the Bill, which we will come to later. If any statutory right-to-buy provision had been in the Bill, these legislative changes to deregulate housing associations so that they can be reclassified as private would have had to be wound back to cover the right to buy. The hazard here was rightly pre-empted by the federation’s deal. If the negotiations had failed, the Government, with their manifesto commitment to give housing association tenants the right to buy, might have felt compelled to accept the ONS’s changed classification of housing associations, affirming their public status. That would of course have been followed by imposing spending controls and borrowing caps on housing associations, as on councils, nullifying housing associations’ future development plans.
Still, we are not out of the woods entirely on this aspect of the reclassification issue. The case still has to be made to the ONS that housing associations are genuinely independent of government control over the sale of their homes. The ONS must not be faced with a statutory right in all but name. Therefore the more that is left to the boards of housing associations to decide, and the less that is set out in statute, the better.
Hence my reluctance to support a variety of exclusions in the Bill that would remove the entitlement to a grant to cover the discount for some groups of tenants and thereby appear to confirm the entitlement in respect of the other groups. At the same time, excluding some groups from this part of the Bill would mean that the tenant did not get a portable discount, which tenants denied the right to buy would otherwise receive to help them to purchase elsewhere. Denying tenants the opportunity to move out with a portable discount, which costs the housing association nothing, might seem churlish.
I am bound to say that the portable discount remains something of a mystery until the regulations relating to the new scheme are known. The noble Lord, Lord Young of Cookham, has suggested that portable discounts should not be confined to helping tenants to buy other council or housing association properties but should be available for those tenants to buy new homes on the open market. That would encourage increased supply and would not diminish the existing stock of much-needed social housing. It sounds like a valuable suggestion. With or without that improvement to the portable discount scheme, excluding certain tenants from access to these portable discounts, as well as excluding them from the opportunity to buy their own home, could be viewed as going too far.
So is everything now okay with this voluntary right-to-buy scheme, ignoring the question of whether a voluntary right is not a contradiction in terms? In a later group of amendments we shall come to the controversial mechanism by which the Government have chosen to raise the money that pays for the new discounts. I strongly disagree with that measure but it is not part of the voluntary deal, and no opprobrium should accrue to the National Housing Federation on account of that arrangement.
At this point there are some different concerns. Amendments in this group aim to ensure that the proceeds from sales not only achieve a programme of new homes but finance those homes in places where they are most needed. Since housing associations will receive significant grants to compensate for paying discounts, attaching some conditions on the use of those grants does not sound too interventionist. A key condition expressed in Amendments 57B and 57D is that in rural areas, if precious housing association property is sold, proceeds from sales should be reinvested in the same rural localities, either in the same parish or in an adjoining one. As the noble Lord, Lord Cameron of Dillington, set out, and as we discussed last Thursday in endeavouring to prevent the developments of rural exception sites being switched from affordable rented homes to starter homes, many village communities face acute shortages of homes for local people who cannot afford to buy.
We know that the boards of several housing associations that concentrate on rural housing, including Hastoe, which I mentioned, will not be offering their tenants the voluntary right to buy in rural areas. I believe that Ministers understand the special position of rural housing, which is at such dangerously low levels in many areas. I am sure that the regulator that monitors housing association behaviour in this regard
will respect the conscientious decision of these associations, including all the fledgling community land trusts that are now making such a welcome contribution in several areas. Housing associations working in rural areas would welcome any words of reassurance from the Minister today to the effect that the Government fully accept—perhaps indeed fully applaud—their decision to abstain from right-to-buy sales in those localities. The associations are not just acting in accordance with the agreements that they made with landowners and local authorities to assist local people but are increasingly in accord with the new neighbourhood plans.
Nevertheless, fears have been expressed that not all housing associations with property in rural areas will opt for a policy of no sales. Some, it is suggested—although I would be surprised by this—could see their homes in villages as a cash cow, with sales there netting substantial gains. They would expect handsome profits, not only because property prices are on average 26% higher than in urban areas but also because they have often obtained the land at a heavily discounted cost, usually because it was on a rural exception site but with no covenant or legal agreement to prevent sales.
I am doubtful that housing associations, which will most likely have had to go through a long struggle to add a few extra cottages in a village setting—frequently in the teeth of local objectors and sometimes only because of help from specialist rural housing enablers—would favour sales that would be bound to mean resales later to commuters, second-home owners and so on, which would undermine all their hard work. However, to guard against rural housing assets being plundered to pay for urban developments elsewhere, Amendments 57B and 57D would ensure that reinvestment of sales proceeds in the same rural locality. Therefore, while steering clear of putting exclusions from the voluntary right to buy in the Bill, I support these rural-focused amendments.