How RTB can work and deliver more than 1:1

I dont like the right-to-buy never have and never will.  Its heyday in the 1980s was in my view simply to buy votes for the Thatcher governments and it is a direct cause of the current chronic shortage of truly affordable housing in the UK. That said, the last Labour conference saw Ed Milliband embracing RTB so it is here to stay despite my view on its huge causal effect on the national housing shortage.

The latest situation is that the RTB2 launch at the last Tory conference and subsequent further relaunch by Shapps in the last week or so has a significant and universally acknowledged problem – it cant ensure the 1 for 1 replacement basis on which it was sold to the public.  This is because after the discount and THEN paying back the original ‘loan’ to government – the RTB receipt – there is not enough left to ensure a 1 for 1 replacement hapens.

So why are we paying the receipt back to central government?  Just abandon the receipt altogether!

Surely not I here you cry this is taxpayers money put into social housing and it should, indeed must, be paid back.  No, that makes no financial sense at all and the argument is fundamentally flawed!

In a previous post that has never been challenged I said the current £1.2bn per year of subsidy saves central government £5.26bn per year.  Even allowing for the fact that the current subsidy is about half of previous decades, or £2.4bn in todays terms, this means that central government has for decades paid out in todays terms a subsidy of £2.4bn each year but received £5.26bn per year back in savings.

The initial money and the cost of that money has been more than recovered as it equates to a 120% return each and every year on this subsidy.  So why is the government insisting this subsidy is paid back?  They have more than made money out of this subsidy every single year havent they?

Im pretty sure that if the government did not take back the capital receipt then it is relativeely straightforward to ensure a 1 to 1 replacement happens and is financially feasible.  It also means that the ridiculously named Affordable Homes Programme would not be needed to.  This AHP costs the government more money as its rent levels known as the affordable (sic) rent model incur far higher HB costs as well as transferring huge risk to AHP social landlord developer meaning they become necessarily too risk averse and hence develop fewer properties.  Of course it also means that non-working and working tenants find employment less affordable and so AHP acts to increase benefit dependency.

Get rid of the capital receipt payment back to government and RTB will work at least financially.  It will also see the non-need for the AHP which is also fundaamentally flawed and promotes benefit dependency so much that it will persuade current working tenants that they are financially better off on benefit and not working.  But then next year the overall benefits cap kicks in and as HB is the ONLY benefit to be cut in all cases excepting those with 6 or more children and makes AHP even less affordable and viable.

So scrapping the capital receipt is the only way to ensure a 1 or 1 replacement with RTB and the replacement can be a truly affordable replacement and not the financially-inept ‘affordable (sic) rent’ model. It even means that the capital with its ridiculous land prices and rent levels can benefit too and more so than they could under AHP.

So if Cameron and Shapps are so enamoured with the aspirant family in council housing and so want to help them and others achieve home ownership then the answer is simple – dont take the RTB receipt.  After all you are already giving away up to £75k in discount which will be far more than any outstanding receipt so why is your government hampering its own policy and political ideology?  It doesnt make sense…unless of course your real rationale is to ensure the erosion of council housing !

 

 

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