Right to Buy income reviewed by new working group

Improvements to the monitoring and reporting procedures for our Right To Buy income and Housing Revenue Account (HRA) programme will be drafted by our new Right To Buy Review Executive Working Group.

The group, which will hold its first meeting next week (w/c Monday 1 March), will be Chaired by Lead Councillor for Resources, Cllr Tim Anderson, with Lead Councillor for Housing and Development Control, Cllr Caroline Reeves, and Cllr Nigel Manning, former Lead Councillor for Finance. The group will use the expertise of senior officers across the council to develop a more robust housing development strategy and reporting process which will ensure repayment to the government is not repeated.

Auditors KPMG have also been commissioned to write an independent report on our HRA monitoring and the timely use of RTB receipts.

The Working Group has been formed following last week's announcement that £2.7 million of RTB receipts were repaid to the government. 

Cllr Anderson says: 

"The Working Group has already made substantial progress. We have started to identify ways to reduce and eliminate future re-payments to the government. We will also develop a system which will ensure automatic reporting and monitoring in the future, to identify repayment risks to our Corporate Governance and Standards Committee, the Lead Councillors for Resources and Housing and Development Control, our Executive and ultimately the council."

The payments were made because we didn't build enough houses to use all of our Right to Buy income. We identified housing schemes and properties to spend the income on but they were not enough. RTB income can only fund 30% of the total cost of replacement housing, with the remaining 70% funded by ourselves. 

The number of houses built was included in a report to our Corporate Governance and Standards Committee in November 2020, but the possibility of having to return the income was not highlighted. 

The findings of the Working Group will be presented to the Executive on 23 March and to the Council on 13 April. It is expected that the KPMG report will be received by June. 

Cllr Anderson continues: 

"There is national concern that replacement housing is not being built fast enough. The time frame of 3 years within which we need to spend the money is difficult given that it typically takes 1-2 years to design a scheme and obtain planning permission and building consent for it. The Local Government Association has recommended to the government that they extend the time limit to spend the income from 3 to 5 years." 

The government's Right to Buy (RTB) Scheme enables those who have been a local authority or housing association tenant for at least three years the chance to buy their rented home at a discounted price.  

Before 2012, Councils were only allowed to keep 25% of capital receipts generated by this scheme, with the government using the other 75% to fund national housing programmes through Homes England. Since 2012, Councils have been able to keep all of their Right to Buy income providing it is spent on new affordable housing or related transaction costs within three years. 

RTB receipts can be spent on: 

  • Transaction costs involved in selling property under RTB 
  • Repaying a % of HRA debt attributable to the property sold 
  • Capital expenditure on New Build affordable housing - either delivered by the HRA or outside of the HRA (i.e. we could potentially pass the receipts to a local housing association to use) 
  • Purchase of new build affordable housing from developers into the HRA 
  • Repurchasing housing previously sold under RTB  
  • Purchasing market property to be turned into affordable housing 

Published 26 February 2021