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Many councils will be unable to replace homes sold off by 2023

Two thirds of councils in England will have no chance of replacing homes sold off under the Right to Buy scheme on a one for one basis in five years’ time unless a significant restructuring takes place.

New research reveals that as the current system only allows councils to keep a third of each Right to Buy receipt to build a replacement home and prevents them from borrowing to make up the shortfall, the ability to replace sold homes will cease by 2023.

The analysis by real estate firm Savills for the Local Government Association (LGA) reveals that around 12,224 homes were sold under Right to Buy last year. Faced with ongoing borrowing restrictions and based on the levels of sales remaining consistent, it estimates that in 2023 councils would only be able to replace approximately 2,000 of these homes.

Additional rules applied to Right to Buy, including a significant portion of all receipts being handed over to the Treasury rather than the communities in which the homes are sold, are hampering the ability of local authorities to re-invest in housing, it points out.

The LGA said that, in the last six years, more than 60,000 homes have been sold off under the scheme at a price which is, on average, half the market rate, leaving councils with enough funding to build or buy just 14,000 new homes to replace them. This leaves a shortfall of 46,000 homes.

The LGA is warning that without a fundamental re-examination of how the scheme is funded, the Right to Buy, which helps families and individuals who otherwise wouldn’t be able to get on the housing ladder into home ownership, faces becoming a thing of the past.

Councils are therefore calling for a comprehensive package of reform to the funding of Right to Buy, including allowing all councils to borrow to build new homes, enabling local authorities to keep 100% of all sales receipts, and for councils to have the ability to set Right to Buy discounts locally to reflect community needs.

‘We know that the Right to Buy changes lives as it helps people who otherwise wouldn’t be able to get on the ladder experience the security and independence of home ownership. It is essential that it continues to do so,’ said Martin Tett, LGA housing spokesman.

‘However, we are now in a situation where without fundamental reform of the way the scheme is funded, this vital stepping stone into home ownership is under threat. Councils urgently need funding to support the replacement of homes sold off under the scheme, or there’s a real chance they could be all but eliminated. Without a pipeline of new homes, future generations cannot benefit from the scheme,’ he explained.

‘Enabling all councils to borrow to build and to keep 100% of their Right to Buy receipts will be critical to delivering a renaissance in house building by councils. However, if we’re to truly make Right to Buy sustainable, we must also move towards greater flexibility on discounts locally so we can reflect local community need,’ he pointed out.

‘Councils are closest to their communities and it’s essential this money is reinvested in homes in those areas so our residents can access secure, affordable housing. This money is badly needed to deliver homes for our residents, instead of resting in an account in Whitehall, it should be sent back to where it belongs,’ he added.