Use of Right to Buy receipts – new rules


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The Ministry of Housing, Communities and Local Government (MHCLG) has published the results of its consultation on the use of Right to Buy (RTB) receipts. The two and a half years that have elapsed since the consultation closed have admittedly been very turbulent, but the delay must have been disappointing for local authorities and they may be also disappointed that a number of interesting proposals have not been adopted.  But there is still plenty in MHCLG's response to get to grips with and consider how to make the new rules work best for each local authority. 

The changes

  • Increasing the time limit for the use of the receipts from three to five years – this covers not just future receipts but existing ones (i.e. back to 2017-18).  
  • Requiring yearly rather than quarterly pooling returns and payments – this adds to the benefit of the extra two years by removing the complexity of four rolling deadlines each year. 
  • Increasing the cap on the cost of a replacement home that can be met from RTB receipts from 30 percent to 40 percent – this covers social and affordable rent homes "across the board", i.e. for existing and future receipts, for all eligible tenures (see below) and throughout England.  
  • Allowing RTB receipts to be used to deliver shared ownership homes and First Homes – this applies the new 40 percent cap to these tenures as well as social and affordable rent.  Guidance will be provided on how the RTB receipts can be used for these two additional tenures.  MHCLG emphasises that there is no obligation on authorities to extend the use of receipts like this.
  • Setting a percentage cap on the use of RTB receipts for acquisitions – i.e. "a percentage of a local authority's total delivery each year using Right to Buy receipts".  This will be phased in:  50 per cent in 2022/23, 40 per cent in 2023/4 and 30 per cent from 2024/25 onwards. The first 20 units each year will be excluded.  MHCLG wants to limit the purchase of existing housing, especially open market acquisitions.  On the other hand, acquisitions which add to overall housing supply will be excluded from the cap – including acquisitions from an authority's housing company and the acquisition of commercial buildings to be redeveloped as housing as part of a regeneration programme. Details will be confirmed before the cap is introduced.

Implementing the changes

MHCLG will amend the current Retention Agreements and introduce new requirements from 1 April, except for the acquisitions cap which (as noted above) is being phased in from the following year. The introduction of annual returns and payments will require amendments to the Capital Finance Regulations. As noted above, there will be guidance on certain technical issues, i.e. the additional tenures and acquisitions. 

Issues

From our discussions with clients so far we expect local authority officers will be considering:

  • Revisiting previous scheme calculations – could receipts be 'liberated' by the higher (40 per cent) cap to pay for more qualifying homes?
  • Reworking their planned expenditure – to take advantage of the additional two years – and the switch from quarterly to yearly deadlines.    
  • The demand for shared ownership homes in their areas – bearing in mind that MHCLG is promising guidance on the treatment of shared ownership receipts.
  • How the new First Homes scheme suits local demand – and if it does how MHCLG envisage the new rules applying to it.
  • Devising an acquisitions strategy based on the new restrictions and exclusions.

No doubt other issues will come to the fore and we will be pleased to help address these. Please contact any of our following local authority housing experts or your other contacts in Trowers & Hamlins.

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