|
|
|
|
One of the key considerations in determining a single social tenancy is the issue of right to buy. At present all council tenants (around 600,000) and tenants of Scottish Homes (around 14,000) have a right to buy. Tenants who transfer as part of a large-scale voluntary transfer (LSVT) retain a preserved right to buy on an individual basis. Currently there are about 125,000 registered housing association tenancies in Scotland. Of these 43,000 currently have a right to buy (preserved or otherwise). A further 39,000 are exempt because of their charitable status. This leaves around 43,000 housing association tenants who are neither the tenant of an association with charitable status, nor have a right to buy.
Our proposal is that the single social tenancy should be built around the existing secure tenancy and should incorporate a right to buy. There are a number of reasons for this approach. Firstly, we believe that it would be wrong to reduce the rights of existing tenants by removing the right to buy which is enjoyed by the vast majority of social sector tenants. Our view is that the right to buy should be available to those tenants who do not currently have that opportunity.
Secondly, we believe that variety in tenure options at the local or neighbourhood scale contributes to community and neighbourhood stability/vitality. Tenure variety allows households originating on estates and succeeding in the labour market to become owners without having to leave the neighbourhood. Our aim is to have more locally-mixed tenure estates and the right to buy has a part to play in this. Finally, it is important that housing policies reflect the aspirations and expectations of tenants. Some 83% of all Scots aspire to own their own homes and, even more strikingly, close to 3 out of 5 current council tenants share that aspiration. Moreover, the vast bulk of council tenants who aspire to ownership regard exercising the right to buy as the most likely route to achieving their tenure aims.
A modernised Right to Buy
We intend to modernise the existing right to buy to meet the needs of the 21st century. This will involve:
Continuing to apply the recently revised cost floor rules so that for new houses or those which have benefited from major repairs and modernisation work, the discount available can be reduced for up to 10 years after the work is carried out. . The Cost Floor limits the level of discount when the landlord has invested more than £5,000 in the property in the previous 10 years. These rules were amended with effect from 1 April 1999, extending the relevant period from 5 to 10 years and allowing landlords to include significant repairs and maintenance costs in the calculation for the first time.
Reviewing the need for capping discounts to prevent large windfall gains by some tenants (although the available evidence suggests that few right to buy purchasers in Scotland have benefited from relatively large discounts of over £30,000. In 1998 these larger discounts featured in only 3% of sales).
Exempting from the right to buy a wider range of houses provided specifically for those with special needs (at present only sheltered housing and certain other houses with special features for the elderly are exempt). We will take into account the views of key stakeholders in developing our proposals. Housing associations with charitable status will continue to be exempt from the right to buy.
Developing a mechanism to allow for all right to buy purchasers to join a factoring scheme operated by the former social landlord which ensures that they make regular contributions towards the cost of necessary repair and maintenance. This proposal would link with other planned changes in property legislation stemming from the recommendations of the Scottish Law Commission on the law of the tenement and the law on real burdens.
ensuring that no one area is in future disadvantaged by the extension of the right to buy by re-aligning the Scottish Homes Development Budget including the provision of 18,000 new houses over the next three years, with the objective of creating mixed communities in all parts of Scotland, and in particular strengthening the socially rented sector in rural Scotland.
ensuring that adjustments to the right to buy do not create significant problems for the capacity of social landlords to borrow to fund new developments.
developing the housing planning function within local authority areas and ensuring effective links to the development plannng process.
Strategic Approach
If we are to achieve our vision of economically and socially mixed communities in all parts of Scotland, we recognise that our proposals for a modernised right to buy require a strategic response to address specific impacts in particular areas or on specific organisations.
Firstly, we need to recognise the clear distinction between large areas of mostly urban Scotland which are characterised by mono-tenure estates and high percentages of social rented housing. This contrasts sharply with other areas, mostly rural, in which there is a shortage of social rented housing. Table 7 gives the percentage of stock that is socially rented in each local authority area. It reveals current imbalances across Scotland with only 14% of Orkney’s stock being socially rented, but 50% of Glasgow’s. There are, however, some urban authorities where there have been low levels of social rented housing as well. The pattern of houses available for rent is a result of longstanding trends in local housing markets. It has not come about as a direct result of the right to buy, rather it has resulted from a combination of sales and investment patterns.
It is typically assumed that the right to buy has been much more dominant in rural areas. In fact, available evidence indicates that the percentage of right to buy sales has been spread relatively evenly between urban and rural areas (34% v 36%). However, it has been quite variable at the level of investment by local authorities. The percentage for each local authority is shown in tables 2 and 3 (attached). It reveals highest proportionate sales in areas such as Orkney, South Ayrshire and East Dunbartonshire and lowest sales in Shetland, Glasgow and East Renfrewshire.
Since 1980 the net loss of socially rented stock (i.e. sales from RTB less additions to social stock through housing associations) has resulted in the reductions set out in tables 2 and 3 attached (summarised below). The pattern of development has varied widely across Scotland leading to a situation where the net reduction in social housing since 1980 is as little as 10% in the City of Glasgow and as high as 41% in East Dunbartonshire.
|
Urban |
Rural |
|||
|
High |
East Dunbartonshire
|
41% |
South Ayrshire |
40% |
|
Low
|
East Renfrewshire Glasgow
|
17% |
Argyll and Bute |
21% |
|
Average
|
|
27% |
30% |
These figures show that the right to buy is not the primary cause of the imbalance between urban and rural provision. There are a number of factors which can explain the evident variation in right to buy sales patterns. These will include the economic and social characteristics of households in different areas, the availability of housing of a particular type and size, and the quality of the public rented stock..
We intend to address the longstanding historic imbalance between urban and rural provision by reviewing investment in new social housing and the extent to which this should be directed towards rural areas facing shortages of social rented housing. Public investment in new housing theough Scottish Homes is expected to produce 18,000 new and improved houses over the next few years. Of which, on current plans, over 1300 would be in rural areas. Although this is an improvement, we accept that more needs to be done if we are to create and sustain economically and socially balanced communities in rural Scotland. We have asked Scottish Homes to consider these priorities inr elation to future priorities for its development funding.
Impact of extending right to buy
Since 1980 around 360,000 tenants have exercised the right to buy. Housing association sales have been modest (as table 1 demonstrates). Under present arrangements just over a third of housing association tenants (pre-1989 tenancies) have the right to buy. A further third have no such right because the association landlord has a charitable legal status. If right to buy were to be extended to all tenants of non-charitable housing associations in general needs houses then a further 43,000 households would become eligible.
Housing association tenants have, in broad terms, aspirations and socio-economic profiles quite similar to the council sector so it can be expected that take-up will rise. Analysis of past and present use of right to buy by housing associations and council tenants suggests that the overall housing association take-up rate is unlikely to exceed 2% per annum for the newly eligible population. The concern that granting right to buy to tenants currently with assured tenancies will lead to a rapid switch, on their part, into ownership is not supported on the basis of past patterns. Our research indicates an eventual flow of around 850 properties per year, of which around 120 might be in rural Scotland.
This rate of change is unlikely to destabilise organisations and, in itself, denude areas of social rental housing. However, we do recognise that past change, when there was no strategic right to buy response policy in place, has already created some adverse patterns. Three particular issues have to be addressed in framing a strategic response to right to buy:
the extent to which right to buy reduces social rental opportunities in areas where there are obvious needs waiting to be met including rural areas.
the effects of right to buy sales on the financial viability of associations.
the impacts of right to buy take-up on the maintenance of multi-unit buildings, especially their common parts.
These issues are now examined in more detail.
In the absence of other actions it is self-evident that right to buy sales reduce the social rental stock in an area. But before concluding that right to buy sales exacerbate waiting list problems for others we need to examine three major assumptions. These are that:
purchasers would not have remained in the home as tenants
There are no replacements of sold dwellings
There is a significant need for social rental housing in the area.
The analysis of SHCS 1996 data and other Scottish material reveals most right to buy purchasers remain in situ for considerable periods, so that sales effects on stock for letting are likely to be minimal until at least a decade has passed.
Secondly, right to buy sales will continue to meet tenant’s aspirations for ownership continue. In all but five authorities more than one in five houses are in the socially rented sector — and in some areas like Glasgow, as much as 50% is in the socially rented sector. To some extent this pattern reflects different demands and needs across Scotland — but our commitment to build 6,000 homes per year gives an opportunity to create more mixed communities in every part of Scotland. For example, building 14,000 homes for rent would raise to one in four the number of socially rented houses in Orkney, Comhairle nan Eilean Siar, Aberdeenshire, Perth and Kinross, Argyll and Bute, Moray, Highland and Scottish Borders.
We wish to address these issues. Our proposed approach is to align new investment programmes to the imbalances of net loss and need identified in local housing plans.
Table 7 shows the percentage of social rented stock in each local authority area. There are 12 authorities where social rented housing is less than 25% of total stock. In the main these are rural areas, but include City of Edinburgh (20%) and East Renfrewshire (15%). This confirms our view that we need a strategic approach to the allocation of national resources which recognises the imbalance between urban and rural Scotland - but one which is sufficiently flexible to address the housing needs of individual authorities. We further recognise that because the lack of social rented housing will not be uniform in different geographical areas within a local authority boundary, there will be a need for local authorities to make investment decisions reflecting these differences.
As part of our commitment to address the impacts of right to buy (see further below) we want to consider exempting all Special Needs housing and to realign new provision in accordance with identified needs.
Right to buy sales could impact on the organisational viability of some housing associations. It has been argued that sales of association stock, with receipts attenuated by heavy discounts, could erode the asset base of associations and, thereby, their capacity to borrow and develop. We have made a careful study with Scottish Homes of the issues. This indicates that the estimated asset value of association stock is £4 billion and housing associations have outstanding loans of £0.77 billion. It is unlikely that sales, at the rates envisaged above, will have significant impact on the asset cover available to associations in general. Table 4 shows certain relevant financial information.
A further, potential channel of impact on associations is that the removal of right to buy stock from the management and maintenance activities of associations may reduce cash flow and raise costs. At this stage the research suggests that rural associations (per se) are not more vulnerable than their urban counterparts but, as would be expected, small organisations are likely to be most affected.
The availability and affordability of land is also cited as a constraint, particularly in rural areas, although it is not a uniform problem throughout rural Scotland. Scottish Homes and the Scottish Landowners Federation have jointly commissioned research.. The report should be available in February 2000. Scottish Homes is also investigating ways of increasing the supply of land, including encouraging initiatives such as local authorities transferring land at nil value, the direct purchase of sites and working with local enterprise companies to bring land back into use for housing purposes. The Green Paper also invited comments on any changes to the planning system that could help ease the problem and we are looking at any additional measures that may be required. However, local authority development plans should play a key role in the provision of land to meet local housing requirements.
Where right to buy sales highlight the difficulties of small organisations then, again, a strategic response is required from the organisation, Scottish Homes and the Executive. In a situation where the aggregate asset cover is substantial and the projected value of receipts post-discount comfortably exceeds the present value of the projected revenue from rental income, this approach provides a real opportunity for the housing associations. Receipts from sales will be kept within housing budgets and further consideration given to how exactly they should be used. In such circumstances, new private loans will not be compromised by a low, predictable right to buy take-up.
The New Housing Partnerships programme, by attracting new large scale investment from new funding sources, will facilitate stock transfers from council to community ownership. Stock transfers are likely to offer many associations the capacity to expand their scale significantly and in ways which would swamp the effects of and right to buy sales. Secure tenancies (with right to buy rights) make stock transfer more likely.
The Executive also believes that there are important instances where associations making right to buy sales need not lose all business contact with buyers. It would make much sense if right to buy purchasers continued to use associations as ‘property managers’, (on a paid basis). This is particularly true in relation to major and common repairs. We intend to examine the scope for delivering a mechanism to allow for all right to buy purchasers to join a factoring scheme operated by the former social landlord which ensures they make regular contributions towards the cost of necessary repair and maintenance. This proposal would link with other planned changes in property legislation stemming from the recommendations of the Scottish Law Commission on the law of the tenement and the law on real burdens.
In addition, there have been a number of important instances in Scotland where ex-council tenants purchasing via right to buy have failed to allow for and participate in major repairs schemes, usually in flatted properties. New ideas are under discussion in a number of areas in Scotland, including in areas facing large scale investment needs, which involve right to buy owners contributing to a repairs sinking fund, with management and repairs delivery by associations. The Executive, and Scottish Homes, are currently reflecting on the design of such a scheme to improve post right to buy stock quality.
A number of housing associations already have charitable status, and as a result, are exempt from right to buy. It is open to housing associations to seek charitable status. They would need to discuss this with the Inland Revenue and carefully consider the implications for their activities as a whole.
|
|
|