Author: Martin Wicks

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Labour should commit to ending Right to Buy

From discussion with senior figures we know that the Labour Party leadership is hesitant about committing to ending Right to Buy because they expect the Tories to denounce them as being “opposed to aspiration”. RTB was never about aspiration. It was a means of the Tories weaning away electoral support from Labour on council estates. It was designed to mobilise self-interest; what used to be called getting-on or keeping up with the Joneses.

It is not difficult to challenge the argument on “aspiration”. Whilst RTB is a gift to the person buying (they are getting the property on the cheap) it has dire social consequences for others because it means one less home for the growing numbers on the waiting list. It also means a loss of rental stream to councils, leaving them with less income to pay for work on their depleted housing stock. 

There is nothing superior about a homeowner over a renter. Not wanting to own a home is not an expression of lack of aspiration. Being unable to afford one is not a sign of ‘failure’. The experience of the pandemic led millions of people to reconsider what is important in their lives. Personal acquisitions do not guarantee contentment. Owning a home is not a guarantee of ‘security’. As the current situation shows a mortgage can be an albatross around the neck. With interest rates above 6% more people will struggle, as they have to renew their fixed term mortgages.

Historically council housing can be said to have facilitated home ownership for those who wanted it. The reasonable rents enabled tenants to save up a deposit, buy a home on the market, and hand the keys back to the council for a new tenant from the waiting list.

RTB was one of the main causes of the housing crisis. As a result of its continuation in England there are now less than 1.6 million council homes left. The acute shortage of council housing, in combination with house price inflation (the ratio of prices to earnings for both median and lower quartile new build homes is more than 10 times) has forced millions of people into the insecure, expensive and often poor quality private rented sector. There are 4.8 million households in England in the PRS. 

In the last financial year more than 10,000 council homes were sold under RTB. Add around 2,000 demolished, and councils have to build at least 12,000 just to stop the loss of homes. That number has not been built since 1990. Since the discount on sales was increased, 107,000 homes have been sold and 26,000 demolished. Only 42,000 homes have been built or bought, to replace them.

Some people say that the problem is not selling homes but failing to replace them. But even if councils were able to keep all the receipts for RTB, the fact is that the cost of building new homes is far higher than selling existing homes. The difference between the receipt and the cost of replacement would come from the housing revenue account; that is, from existing tenants’ rent.

In 2019 and 2021 Labour Conference overwhelmingly passed resolutions which called for an end to RTB. At the 2021 conference Lucy Powell (then responsible for housing) said that ending RTB was the right thing to do, and it was what the members wanted. At the 2022 conference, Lisa Nandy told a fringe meeting that the policy was under review. The Labour Campaign for Council Housing has therefore produced a statement (see below) calling on Labour to commit to ending RTB. We want to get across the message to the leadership that ending RTB is a necessary precondition for tackling the housing crisis and it is what the membership wants.

What can you do to help?

  • Sign the statement yourself.
  • Get your branch and/or CLP to support it.
  • If you are a councillor get your Labour council group to support it.
  • Ask your trade union organisation to sign it.

RTB has been ended both in Scotland and Wales. It is a cost-free policy. It will mean that, for the first time since its introduction, new homes built will increase the stock numbers and open up the prospect of reducing the number of households on the waiting lists. Combined with funding for new build programmes it will liberate the rising generation from the PRS.

Martin Wicks

Secretary Labour Campaign for Council Housing 

To sign the statement (below) email [email protected] 

Statement: Labour should commit to ending Right to Buy

“We the undersigned agree with Lisa Nandy that “the idea of a home for life handed on in common ownership to future generations is an idea worth fighting for.” That requires the ending of the disastrous Right to Buy policy. In Scotland and Wales it has already been ended. 

In England there are now less than 1.6 million council homes left. Even if councils were able to keep all receipts for sales they would have to build more than 12,000 council homes a year just to replace homes sold and demolished. That many haven’t been built since 1990. 

RTB not only means the loss of homes but councils losing rental stream, leaving them with less money for the maintenance and renewal of their existing stock. 

Many homes sold under RTB end up in the private rented sector; an estimated 40%. This drives up the housing benefit bill because of the much higher private rents.

Labour conferences in 2019 and 2021 voted overwhelmingly for RTB to be ended. It was incorporated in the 2019 manifesto. At the 2021 conference Lucy Powell said that it is the right thing to do and that is what the members want.

Ending RTB will stop the loss of homes and ensure that for the first time since it was introduced all new council house building will increase the stock and enable the waiting lists to begin to fall. It is also without cost and will stop the loss of rental income to councils.

We therefore call on Labour to commit to ending RTB when in government.”

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Declaring a housing emergency

A model motion for CLPs and unions

The housing composite motion which was passed at Labour’s recent conference did not just focus on Labour policy for a future Manifesto. It called on the Party to “demand that the Government takes action now to end the housing crisis” by a series of measures listed (see How Labour must hold the Government’s feet to the fire on the housing crisis). These included a large scale council house building programme and ending Right to Buy.

The Labour Campaign for Council Housing believes that conference vote should be used as a springboard for developing campaigning activity. We have drawn up a model resolution (see below) for CLPs/union branches which

  • Calls on Labour at the national level to implement the composite resolution as a matter of urgency and
  • Proposes that Labour council groups, be they in power or opposition, put a motion to their council declaring a housing emergency. Councils will therefore publicly call for large scale council house building, ending right to buy etc.

The idea of councils declaring a housing emergency came from our members in Cornwall where the crisis is particularly acute as a result of the second homes/holiday homes phenomenon. We think this is an idea which Labour and trade union members should pick up on. Councils should declare a housing emergency as a springboard for campaigning to pressure the Government to fund the building of social rent homes, end RTB and to adequately fund existing homes.

Since 2010 the number of council homes in England has declined by 203,000. There has been an increase in building by housing associations over that period but they have built more and more homes for sale/shared ownership and the social housing they have built has been largely at so-called affordable rent.

Anybody who is renting is facing a ‘perfect storm’ of increased gas prices, food price inflation (foodbanks are bracing themselves for a big increase of people approaching them), the loss of the extra £20 Universal credit and so on. We can expect rent arrears to rise. Social tenants face five years of above inflation increases courtesy of Government policy and London housing associations have even come up with the mad idea of above inflation rent increases for 30 years.

There are signs of a big increase in numbers on the housing waiting lists. My own local authority, Swindon, has seen the households on its list increase by 33% in the last year alone. The Local Government Association has warned that numbers on the list could double over the next year owing to the impact of the pandemic, the end of the furlough scheme, and increasing evictions. Councils are paying a fortune to place homeless people in private accommodation because of the acute shortage of council homes.

The ratio of earnings to prices for median market homes in England is 7.65 times median earnings and 6.91 times lower quartile earnings for lower quartile homes. For new builds there has been an extraordinary increase to 9.60 times median earnings and 9.77 times lower quartile. The average price for median new build in England increased from £190,000 in 2012 to £304,000 in September 2020, the latest available statistics.

Even lower quartile homes increased over that period from £142,995 to £223,995. Promises to turn generation rent into generation home ownership are ridiculous at these prices. Housing is not a competitive market. The big builders are not going to build on a large enough scale for prices to fall since that would erode their profit margins. They have never built for social need.

According to a recent Yougov poll 61% of Tory MPs are in favour of the Government funding more social housing. The Local Government Association, with a Tory majority has said that there can be no resolution of the housing crisis without councils once again being large scale builders. They have called for the Government to fund 100,000 social rent homes a year.

Yet there is a gulf between the word and the deed. They have relied on private lobbying which will not shift the Government. To shift them mass pressure is required, combining councillors with tenant groups, campaigns like Shelter and those directly suffering the consequences of the housing crisis. The pandemic has given us a sharp reminder of the connection between housing and health. Covid has had a far greater impact in poorer and over-crowded homes.

“Generation Rent” will only be liberated from its current circumstances, being forced to live in the private rented sector, with high rents and often poor living conditions, living at home with parents, or sofa surfing, by the building of social rent homes on a large scale.

We are asking branches/CLPs and union branches to move our resolution and use it as a means of promoting campaigning activity aimed at building pressure on this Government of U-turns to make another one on funding of council housing, existing and new build.

Model resolution

“This CLP welcomes the housing composite resolution passed at the Labour Party conference which included the main demands of the Labour Campaign for Council Housing. It called on the Labour Party to “demand that the Government takes action now to end the housing crisis by”

➢ Fully funding councils to deliver the building of 150,000 social rent homes each year, including 100,000 council homes

➢ Ending Right to Buy

➢ Reviewing council housing debt to address underfunding of housing revenue accounts

➢ Fund the retro-fitting of council housing to cut greenhouse gases, provide jobs and promote a shift from outsourcing to Direct Labour Organisations

➢ Ending Section 21 (no fault) evictions

It also said: “Conference also calls upon Labour to place these actions at the centre of its housing policies.”

The passing of the composite resolution needs to be a launching pad for campaigning activity. We therefore

➢ Call on the Party nationally to implement the composite resolution as a matter of urgency.

➢ Call on our Labour Group to propose that our council declares a housing emergency to campaign for those key demands. This may include lobbying local MPs, the Local Government Association and other organisations, working with tenant groups and trades unions.

The CLP agrees to affiliate to the Labour Campaign for Council Housing.”

<strong><span class="has-inline-color has-accent-color">Martin Wicks</span></strong>
Martin Wicks

Secretary, Labour Campaign for Council Housing.

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The Systemic Tory Under Funding of Council Housing

Housing Revenue Accounts (HRAs) manage council housing. They receive no subsidy. Their income is overwhelmingly from tenants’ rent and service charges; 94% of the collective income of all HRAs. The quality of the homes, and hence the living conditions of tenants, depends upon key housing components (bathrooms, kitchens, central heating, roofs etc) being renewed in good time. If they are left beyond their useful life then the homes deteriorate.

Today, HRAs have insufficient funding to renew existing homes over the long term. My own council, Swindon, has a shortage of capital funding of £80 million over the next five years alone. This is unexceptional amongst councils. Whatever the differences between them all HRAs are short of sufficient resources.

Why are they short of funding? In 2012 a new council housing finance system was introduced – self-financing. It involved a ‘debt settlement’ in which what was deemed by government to be the national council housing debt was disaggregated and shared out amongst stock owning councils. £13 billion extra bogus debt was imposed on 136 councils.

In this fraudulent paper exercise the Public Works Loans Board (an agency of the Treasury) ‘loaned’ them £13 billion. Together with ‘historic debt’ councils owning housing are burdened with around £26 billion debt.

This isn’t in any real sense debt. It is the result of what you might call creative accounting by the Treasury. It’s a means of fleecing tenants whose rent pays off the loans and the interest charges. Currently, it costs councils £1.25 billion a year – 15% of the £8 billion total income of HRAs – to service this debt. Only 12%, £970 million, was budgeted for capital spending last year. That covers renewal of existing stock, cost of new build and purchases.

We can say this debt is bogus because we know that council tenants have paid more rent than the costs of borrowing for past building programmes. The House of Commons Council Housing Group discovered that in the 25 years to 2008, tenants paid £91 billion in rent but councils only received £60 billion ‘allowances’1. The £31 billion difference was more than outstanding debt for past building programmes. That’s why the demand to cancel this so-called debt was made by Defend Council Housing, the House of Commons group, even the LGA. Unfortunately John Healey refused to agree, as did the Tories when elected.

Grant Shapps, Housing Minister in 2012, said that it would provide sufficient funding for councils to be able to maintain their stock to the Decent Homes Standard, over the 30 years of their business plans. This wasn’t true. The previous government’s own research showed that if funding was based on actual need, it would require a 67% increase. Yet the increase was just 24%. So under-funding was built into the system from the very start. Then from 2012 the coalition and Tory governments introduced policies which resulted in the amount of income councils collected being much less than projected in the ‘debt settlement’.

The amount of so-called debt which each council was given was based on an estimate of their rental income over 30 years and the number of RTB sales (each home sold is rent income lost to HRAs). However, the government

  • increased discounts on RTB as a result of which there was a five-fold increase in sales. This meant that councils lost far more rent than estimated in 2012.
  • introduced a 4 year rent cut of 1% a year.

Since HRA business plans were based on projections which are now completely out of synch with actual income, councils are collecting hundreds of millions of pounds less rent than incorporated in their business plans. For example, Swindon is projected to collect approximately £360 million less rent over the course of the business plan than the 2012 estimate, Newcastle in the region of £500 million less. Overall, councils will take in many billions less rent income than estimated in 2012.

The result of this is that HRAs have insufficient funds to renew their existing stock in the long-run. Key components which are left in place beyond their useful life not only lead to worse living conditions for tenants and the irritation of repeated job requests as components fail regularly, but they also drive up responsive repair costs.

Labour’s 2019 general election Manifesto included a commitment to review council housing debt. Obviously it cannot do that directly without being in government. However, it is time for Labour to end its silence on this issue. It can challenge the Tories under-funding of HRAs. Under the 2011 Localities Act the government has the power to reopen the ‘debt settlement’ and readjust the debt if there are significant changes in income or costs. Labour should be demanding that the government do just that and write off debt at least in line with the projected losses that have resulted from their policies since 2012. Through its group in the LGA, Labour could collect statistics which highlight the scale of the shortfall faced by councils over the course of their business plans and organise a national campaign.

Labour should also make a commitment itself, to cancel the debt if elected. The Labour Campaign for Council Housing has just published a pamphlet, The case for cancelling council housing debt, which examines the historical reason for this financial crisis in more detail than I have space for here.

Debt cancellation would address the under-funding of HRAs in relation to the existing stock. The extra £1.25 billion would enable more than double the level of investment in renewal of key components to be spent. Labour should be demanding from the government funding sufficient to maintain and improve the standard of existing homes. Moreover, with a Decent Homes Standard review currently taking place Labour has a duty to highlight the consequences of this under-funding. Proposals to improve the standard of the DHS would be worthless without councils having the wherewith-all to carry out the necessary work.

<strong><span class="has-inline-color has-accent-color">Martin Wicks</span></strong>
Martin Wicks

Martin is the Secretary of the Labour Campaign for Council Housing.

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1 This was not government money. The ‘allowances’ were in reality councils’ rental income. The government decided how much of it they could keep.