Right to Buy: are replacements on track?

The effect of Right to Buy on the supply of affordable housing has been a controversial topic for some time, particularly after the Coalition Government’s ‘enhancement’ of the scheme resulted in a resurgence in sales. More recently, proposals to extend the Right to Buy to housing association tenants have stirred up debate again.

The government has promised to replace all homes sold under its enhanced policy within three years, but questions have been raised about whether they are on track to do so. In this blog post, we look at new data from DCLG to examine whether replacements are keeping up with the target.

What is the enhanced Right to Buy?

In England, the Right to Buy gives certain council housing tenants the ability to buy their home from the local authority at a discount. Around 2 million properties have been sold since the policy was introduced in 1980, but by 2010 annual sales had decreased considerably compared to peaks in the 1980s and 1990s.

Between 2012 and 2014, the Coalition Government introduced policies to ‘enhance’ the Right to Buy, mainly by increasing the discounts available to tenants. At the same time, they committed to replace every additional property sold within three years of sale.

Are homes sold being replaced?

The question of whether the government is meeting its commitment to replace all homes sold under the enhanced Right to Buy has been controversial.

In the past, the government has asserted that the target is being met: when the issue was raised at Prime Minister’s Questions last year, Theresa May told Jeremy Corbyn that the government has “delivered on the one-for-one replacement under Right to Buy”.

However, other analysis has raised questions about whether this is the case. Reports from the National Audit Office and Public Accounts Committee have pointed out that the number of replacements will have to increase substantially for the government to continue meeting its three-year target.

We’ll explain this in more detail below, but first it’s worth considering how the government measure their progress.

How does the government measure their progress?

The government has a specific method for measuring progress against the target. In short, they look at the number of actual sales minus the number of sales that would have happened anyway and aim to start or acquire replacements within three years.

This method is partly explained by DCLG in their quarterly Right to Buy sales bulletin, and has been clarified through further communication with the Library. According to DCLG, this is how the calculation is made:

 – The commitment is to replace additional sales resulting from the enhanced Right to Buy.

 – Working out how many sales are ‘additional’ requires an estimate of how many homes would have been sold without any further government intervention.

 – Projections made in 2012 are used for this purpose (they’re from the Housing revenue account self-financing determinations) with adjustments to remove local authorities that have transferred their stock since then.

 – The quarterly projections are subtracted from actual quarterly sales to estimate the number of ‘additional’ sales.

 – Additional sales made in a quarter need to be replaced within three years. A replacement is any property started or acquired by the local authority, the Homes & Communities Agency or the Greater London Authority.

Our latest briefing paper on Right to Buy has more detail about how these calculations are made.

While the government has promised one-for-one replacement, they have not said that properties must be like-for-like in terms of size, location or cost.

And the government is keeping up with replacements, according to their measure?

Yes – for now. But the number of replacements will have to increase rapidly for this to remain the case.

The animated chart below helps explain why this is. It shows the number of additional sales in each year and, over time, the number that have been replaced. Although the government has nearly replaced the first two years of sales – all within the time allotted – none of the sales from year three onwards have been replaced yet.

Right to Buy: additional sales per year and replacements to date

In their most recent bulletin, DCLG record around 8,400 sales between the first quarter of 2012-13 and the third quarter of 2013-14: that’s the first seven quarters of sales. They also record around 10,600 replacements between the start of 2012-13 and the third quarter of 2016-17. That represents the three-year replacement period for those sales, or nineteen quarters of replacements.

Because those initial sales have been replaced within three years, DCLG report that the commitment for one-for-one replacement is being met. However, their method doesn’t address the replacement of sales made later on. Replacing all the sales from year three onwards (assuming no more sales are made) would require over 2,100 replacements per quarter. This is more than twice the current replacement rate.

The Housing Minister, Gavin Barwell, recently acknowledged this point. Giving evidence to the Communities and Local Government Committee this February, he said; “at the moment we are delivering on [three-year replacement], but the projection suggests that, in the future at some point, we will not be. Therefore we need to look at what we can do to make sure we get those replacement homes.”

The Library’s latest briefing paper on Right to Buy has more detail on how progress is measured, as well as complete figures to date. It also gives background on the voluntary Right to Buy for housing association tenants.

Picture Credit: Peckham by Axel Drainville; Creative Commons Attribution NonCommercial 2.0 Generic (CC BY-NC 2.0)