PART 1
(OPEN TO THE
PUBLIC)
ITEM
NO.
REPORT OF THE Assistant Director Strategy and Renewal
To
Lead Member for Housing
22nd June 2004
TITLE: BRIEFING PAPER
Right to Buy Consultation Paper
RECOMMENDATIONS:
1. That the briefing paper is noted.
2. That the proposals outlined in the report are approved.
EXECUTIVE SUMMARY:
This Briefing provides an overview of three consultation documents released by the Office of the Deputy Prime Minister
(ODPM) regarding Right to Buy (RTB). The three proposals were put forward in the Government’s Housing Bill that was introduced to Parliament in December 2003. The Government is requesting responses to the first two consultations by 30th June 2004, and the third consultation by 6 th August 2004. This Briefing will outline the key proposals within the three consultation papers.
The first two proposals within the Government’s Housing Bill, which is currently before Parliament, are that:


Social landlords should have the opportunity to buy back homes sold under the Right to Buy scheme, and,.

Right to Buy landlords should be under a duty to provide information to their tenants on the implications of home ownership.
Right of first refusal for social landlords to buy back homes offered for resale.
Clause 152 requires that a covenant should be inserted into all conveyances or grants to tenants selling their homes to them under the Right to Buy to buy schemes. The covenant will require them, if they wish to resell within 10 years, to offer the property back to the former landlord, or to another social landlord, at market value.
Info to help tenants decide whether to exercise their Right to
Buy.
Clause 153 of the Housing Bill requires landlords to provide their secure tenants with information on the responsibilities and consequences of being a homeowner to help them decide whether to exercise their Right to Buy.
The requirement to provide certain information to tenants is intended to come into effect two months after the Bill receives
Royal Assent in August 2004 assuming that it does so, the regulations will be made in respect of England by the Secretary of
State.
Note that under clause 153, landlords will be required to prepare a document containing information about the specified matters, to publish this, to supply copies to tenants and to keep the document up to date. Landlords may provide information in the form that they consider appropriate, so long as it covers the specified matters.

Costs:
Further work is necessary to determine actual costs incurred as a result of the proposals, namely the following:

cost implication of the production of the information to tenants

cost implication of including this information in the in sellers pack

cost implication of usable receipts as a result of changes
 under the Local Government Act 2003 cost implication of buying back the properties after the 10 year period.
Benefits
The policy goal is to reduce the impact of the RtB on the availability of affordable housing (benefiting people in housing need) by restricting the returns on early resales and on deferred resale deals, and to make home ownership under the scheme more sustainable.
In addition to these two proposals the government has also requested comments on another of their proposals for revising Part II of Department of the Environment Circular
13/93.
Under paragraph 11 of Schedule 5 to the Housing Act 1985, the Right to Buy does not arise if the property concerned is particularly suitable for occupation by elderly persons.
The Housing Bill proposes that appeals by tenants against being denied the Right to Buy on these grounds should, in future be determined by a residential property tribunal rather than by the Secretary of State. The reasoning being that this will lead to administrative benefits, but will make no substantive difference to the determination of appeals.

Conclusion
We welcome the proposals set out in these consultation documents particularly as regeneration schemes involving demolition/new build have been shown to have been damaged financially by RtB being exercised by tenants at a discount and then them being entitled to full market value plus home loss compensation when the property has to be purchased compulsory.
Buying to let is putting upward pressures on rents. In some areas ‘Incentive Companies’ are encouraging buyers to agree to resell to them after the three years to avoid repaying the discount. These companies can let properties bought under
RtB on the tenants’ behalf. This then impacts on the availability of affordable housing and penalises those in housing need.
We need to plan for and anticipate the proposals set out in the consultation paper, specifically in term of the process of buy back options, future arrangements in terms of dwelling use, costs related to RtB information and whether we need to consult on the changes proposed to the dwelling for elderly persons
BACKGROUND DOCUMENTS:
The Right to Buy Scheme Information to help tenants decide whether to exercise their right to buy. A
Consultation Paper. March 2004
The Right to Buy and Right to Acquire schemes, and voluntary sales to social tenants. Right of first refusal for social landlords to buy back homes offered for sale. A
Consultation Paper. March 2004

Exemption from the Right to Buy of dwellings that are particularly suitable for occupation by elderly persons.
Revision of Part 11 Circular 13/93. A Consultation Paper
May 2004
ASSESSMENT OF RISK : medium
THE SOURCE OF FUNDING IS :
This is not appropriate at this stage, however, it is assumed that this will be resources from the HRA .
LEGAL ADVICE OBTAINED : No
FINANCIAL ADVICE OBTAINED : No
CONTACT OFFICERS:
Paul Longshaw
Tel 0161 925 1314 e-mail paul.longshaw@salford
WARD (S) TO WHICH REPORT RELATE (S ): All
KEY COUNCIL POLICIES :
Housing Strategy Statement 2004
– 2007
HRA Business Plan 2004
Housing Market Assessment: Understanding Change
–
Housing Markets in Salford
2004

1.3
1.2
1.1
DETAILS:
1.0 Background
The Housing Market
Housing market conditions have changed significantly since
Right to Buy introduced in 1980. Social housing stock reduced, owner occupation has increased, and rising property prices are encouraging, early resales (evidence suggests that these might be the equivalent to as much as
20% of annual sales i.e. more than 10,000 per year.
National assumptions suggest that ex RtB homes are often popular, as such resales are putting upward pressure on prices in some areas, affecting the availability of affordable housing and penalising those in housing need.
In terms of the regional market our initial analysis indicates that Right to Buy sales sub-regionally range from highest in
Trafford at 28% down to the lowest in Manchester and
Oldham with 16%. Salford has the third lowest number of sales of Right to Buy at 18%, representing a total sales figure of 8,621 to date. All Local Authorities in the Greater
Manchester region saw a large increase in sales during
2003 as a result of both the buoyant housing market and the impending changes in the Right to Buy legislation. Salford was not unusual in this. What is more difficult to quantify is whether the increased incidence of Right to Buy is linked directly to areas where regeneration activity is imminent, as national research suggests.
However, we have reviewed activity at a local level and we have found that when looking at one area of central Salford,
Broughton and Blackfriars, it was found that there was no unusual trend (other than lower in percentage terms), in comparison to the citywide figure, of Right to Buy activity in this area. Similarly, we analysed Worsley and Boothstown, the rate of Right to Buy activity, in terms of percentage of the stock, is far in excess of Broughton, but no discernable trend. Therefore, at this stage, no definite conclusions can

1.5
1.4 be made other than the incidence of Right to Buy is affected purely by the nuances of the economic climate and the resultant changes in the housing market. What is clear is that Rtb alone cannot be used as an indicator of the economic climate, it can however be a useful indicator within a rounded Housing Market Assessment. We intend to continue to track sale and application by Central and West
Salford areas to specifically monitor the impact of Housing
Market Renewal activity.
Find attached an appendices analysis of actual RtB sales from 1981 and the current number (June04) of RtB applications as determined by the integrated management system (Saffron). This help to illustrate of how RtB trends both from a perspective of our current position in terms of numbers of actual right to buy sales and the number of RtB applications made but not determined
Right To Buy Consultation Paper
The main reason for this briefing paper is to provide an overview of three consultation documents recently released by the Office of the Deputy Prime Minister (ODPM) regarding Right to Buy (RTB). The three proposals were put forward in the Government’s Housing Bill that was introduced to Parliament in December 2003.
The first of the three to be summarised is the document inviting views on the procedures and timescales that should apply when homeowners offer homes, originally bought under the RTB scheme, back to a social landlord under the
‘right to first refusal’. The second consultation outlines proposals to require landlords to provide social tenants who have the RTB with information on the responsibilities and consequences of being a homeowner. These two measures are intended to come into effect two months after the Bill receives Royal Assent. The third is related to changes in one of the exemptions from the Right to Buy relating to any tenant applying to purchase their home under the Right to
Buy scheme, if their landlord considers the property to be

2.4
2.3
2.2
2.0
2.1 subject to the requirements of paragraph 11 to Schedule 5 of the Housing Act 1985 - i.e. particularly suitable for occupation by elderly persons.
Detail
Consultation 1
– Right of First Refusal for Social
Landlords
This measure is being proposed to give housing providers the ability to regain lost stock in the future, with the owner of a property bought through RTB being required to offer it to their former landlord (or another body prescribed by the
Secretary of State) if they decide to sell within 10 years of buying the property. The price will be at market value and can be ultimately determined by a district valuer.
Following the outcome of the stock option appraisal it may be that in practice the former landlord may not be an appropriate body to receive the first refusal of their former property, if for example they have transferred their stock. In such cases the right to buy back will be passed on to a more appropriate body, such as the transfer housing organisation or another registered social landlord (RSL) in the area, which has been nominated to receive first refusal. The operation of the right of first refusal will differ according to whether the properties are leasehold or freehold.
Owner is a Leaseholder - Where the owner is a leaseholder and they want to sell, they will have to offer their home to their former landlord or his successor in title and to the local housing authority for the area. If the offer is not accepted by one of these bodies or by a nominated RSL within 8 weeks the owner will be free to sell on the open market.
Where the local housing authority is the former landlord or successor in title, it will have 8 weeks in which to serve notice on the owner either accepting the offer itself or nominating a registered social landlord to accept the offer. If no notice is served on the owner they can sell on the open

2.9
2.10
2.7
2.8
2.6
2.5 market.
Where the former landlord or successor is not the local housing authority, it will have 4 weeks in which to serve notice on the owner and the local authority, informing them that they are accepting the offer. If it does not do so, the local housing authority may consider accepting the offer. It will have a further 4 weeks to serve notice on either the owner if accepting the offer itself or on the owner and a RSL that has been consulted about taking up the opportunity.
Owner is a Freeholder - Freeholders wishing to resell will have to offer their homes to their former landlord (if that body is in existence) and also inform the local housing authority in the area.
The same 8 week period of acceptance applies as above, although the former landlord must consider within 2 weeks of receiving the offer whether it should notify another body of the offer, on the basis that another body may be more appropriate to receive the offer.
The criterion for assessing whether another body is ‘more appropriate’ will be that the property concerned would have fallen within the boundaries of any stock transfer from the former landlord.
If the former landlord decides to notify a more appropriate body, they will do so within a two week period as well as notifying the owner and the local housing authority (in cases when it is not the former landlord or the more relevant body).
The more appropriate body then has four weeks to serve notice on the owner of their acceptance. If they do not the former landlord has two weeks in which to choose to buy the property. If the former landlord decides against purchasing the property, the local housing authority or a nominated RSL may serve notice to purchase the property. They have a 4 week period to decide, if they decided against serving notice to buy the property the owners can sell on the open market.

2.11
2.12
2.13
2.14
2.15
2.16
If the former landlord originally decides that there is not a
‘more appropriate’ body, they will have 4 weeks to accept the offer themselves. If they do not accept, the local housing authority will have 4 weeks to accept. If they also decline the offer, they will nominate an RSL which wishes to accept the offer.
Completion of Purchase
All notifications will be made by written notice. Due to potentially serious consequences of non-notification, all notices will have to be sent by registered letter or recorded delivery.
Time periods prescribed should exclude official public holidays and will start from the date which the initial offer notice served by the owner is received by the former landlord. The purchasing body will have to complete within
12 weeks of serving notice accepting the owner’s offer, or within 4 weeks from the receipt of notification that the owner is ready to complete, whichever is the longer. If these deadlines are not met the owner can resell on the open market. This ‘right of refusal’ will only apply to properties bought on or after the commencement of this measure.
Consultation 2
– Information to Help Tenants Decide
Whether to Exercise the Right to Buy
This consultation paper looks to address the concern that some tenants exercise their RTB without being fully aware of the ongoing responsibilities and costs of being a homeowner. This has lead in some cases to owners ending up in financial difficulties.
Clause 153 of the Housing Bill therefore supplements the existing duty upon landlords under section 104 of the
Housing Act 1985 to provide general information about the express terms of their secure tenancies and landlords’ repairing obligations. It also replaces the duty in section 104

2.19
2.20
2.17 regarding information in connection with RTB.
Clause 153 places a duty upon such landlords to prepare a document containing information about the specified matters, to publish this, to supply copies to its secure tenants, and to keep it up to date.
2.18 Information to be Provided
Landlords will have to provide information on a number of matters;
- Terms of the RTB scheme
- Purchase costs involved e.g. Stamp duty, legal costs
- Ongoing Costs e.g. insurance, council tax, utility bills
- Maintenance costs
The landlord will not however have to provide information specific to an individual property. It is envisaged that the information should be in the form of a short factsheet covering the specific matters, with indicative examples.
Notifying Owners
The information will be provided by landlords to existing customers as soon as reasonably practicable after clause
153 comes into effect and to all new secure tenants as soon as they take up their tenancy.
After the initial issue, it is expected that the information will be distributed once every 5 years or whenever substantive changes are made to the RTB scheme.
To Summarise the main proposals under first refusal and information to tenants consultations are:

Homeowners who wish to resell their home under the right to buy within ten years will be required to offer it
(at market value) to their former landlord or, if it is appropriate, to some other social landlord.

An offer should also be made to the local housing authority for the area (if different from the former landlord) who will maintain a list of social landlords who

2.21
2.22
2.23 are interested in buying properties and will be able to nominate them to accept an offer.

The former landlord (or their successor in title) will also be able to nominate an alternative more appropriate social landlord to receive the offer provided that landlord operates within the boundary of the original stock transfer.

The time limit for a former landlord to accept an offer for will be eight weeks.

The time limit for the former landlord to notify an alternative landlord of an offer will be two weeks and that landlord will have four weeks to accept.

If the alternative landlord does not accept within four weeks the former landlord, local housing authority or
RSL nominated by the local housing authority will have a further two weeks to accept the offer. The former landlord’s acceptance would take priority.

If the former landlord does not nominate an alternative it will four weeks to accept and if it does not do so the local housing authority will have a further four weeks to accept itself or nominate an RSL to accept.

All notices must be in writing and in a prescribed form.
Consultation 3 - Exemption from the Right to Buy of dwellings that are particularly suitable for occupation by elderly persons.
In addition to the two proposals mentioned above, the government has also requested comments on another of their proposals for revising Part II of Department of the
Environment Circular 13/93
Under paragraph 11 of Schedule 5 to the Housing Act 1985, the Right to Buy does not arise if the property concerned is particularly suitable for occupation by elderly persons.
The consultation paper comments on the steady increase in the number of appeals, nationally, received from tenants applying to exercise RtB for occupation by elderly persons

2.26
2.24
2.25 together with analysis of the issues raised during consideration of these appeals suggest that parts of the current guidance may be ambiguous, confusing to landlords and tenants, and out-of-date.
The Housing Bill currently proposes that appeals by tenants against being denied the Right to Buy on these grounds should, in future be determined by a residential property tribunal rather than by the Secretary of State. The reasoning being that this will lead to administrative benefits, but will make no substantive difference to the determination of appeals.
The new Housing Bill currently proposes a requirement that any landlord that lets properties under secure tenancies to provide information to help its tenants decide whether to exercise the Right to Buy.
This proposal may well initially place an increased administrative requirement on landlords.
But in the long run there should be fewer abortive Right to
Buy applications in respect of properties that landlords consider to be particularly suitable for occupation by elderly persons, and fewer subsequent appeals against denial on these grounds.
The main impact of these proposals will fall upon landlords, however, tenants will also have an interest. We may wish to seek the views of local tenants’ and residents’ associations on these proposals. If this consultation is deemed necessary then we should follow government set criteria for effective consultation. In brief we would need to:

Consult widely

Allow a minimum of 12 weeks for any written consultation

Be clear who proposals affect

Ensure consultation is clear, concise and widely accessible

Give feedback

Have a consultation co-ordinator

Follows best practice

3.3
3.4
3.2
3.0
3.1
Conclusion & Proposals
The three consultation papers outlined in this briefing give us the chance to comment on the proposals to alter RTB outlined in the Housing Bill. Measures to provide former landlords with the opportunity of first refusal are a reaction to government concern about the availability of affordable homes. Whether this measure would have the impact of increasing the supply of affordable homes, as landlords would have to buy the properties back at market value, remains to be seen.
We welcome the proposals set out in these consultation documents particularly as regeneration schemes involving demolition/new build have been shown to have been damaged financially by RtB being exercised by tenants at a discount and then them being entitled to full market value plus home loss compensation when the property has to be purchased compulsory.
Furthermore, Buying to let is putting upward pressures on rents. In some areas ‘Incentive Companies’ are encouraging buyers to agree to resell to them after the three years to avoid repaying the discount. These companies can let properties bought under RtB on the tenants’ behalf. This then impacts on the availability of affordable housing and penalises those in housing need.
The provision of further information to tenants about RTB will provide them with more opportunity to come to an informed decision, the implications of purchase need to be fully explained as we have experienced many former residents getting into financial trouble.

3.6
3.7
3.5
3.8
We need to plan for and anticipate the proposals set out in the consultation paper, specifically in term of the process of buy back options, future arrangements in terms of dwelling use, costs related to RtB information and whether we need to consult on the changes proposed to the dwelling for elderly persons
To sum up we feel that, generally, with levels of growth in
RTB sales continuing to grow at an alarming rate in the north, it can be argued that these changes do not go far enough to protect the current stock of social housing and providing replacement social housing in the future.
The Business Planning Team has suggested that over the next 10 years RTB sales could reduce the stock by an estimated 3,100 homes, or about 11% of the current stock.
As a related issue, we feel that we need to fully review and explore investment in housing in light of the changes in the
Local Government Act 2003 surrounding the use of usable capital receipts being recycled into regeneration activity.
As part of our Housing Market Assessment function, we intend to continue to track sale and application by Central and West Salford areas to specifically monitor the impact of
Housing Market Renewal activity.
Report by – Paul Longshaw, Strategy and Planning
Manager (Policy & Resources)
Reviewed by - Kevin Scarlett, Assistant Director
Strategy and Renewal

% of properties sold under RTB by ward ( pre june04 boudary changes) in central salford
40
35
30
25
50
45
20
15
10
5
0
1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
City-wide
Blackfriars
Broughton
Claremont
Kersal
Langworthy
Ordsall
Pendleton
Weaste & Seedley

% of properties sold under RTB by ( pre june04 boudary changes) ward in the west of Salford
60
50
40
30
20
10
0
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
City-wide
Barton
Cadishead
Eccles
Irlam
Little Hulton
Pendlebury
Swinton North
Swinton South
Walkden North
Walkden South
Winton
Worsley & Boothstown

12.00
10.00
8.00
6.00
4.00
2.00
0.00
C ity
-w id e
B ar to n
B la ck fri ar s
B ro ug ht on
C ad is he ad
C la re m on t
E cc le s
Irl am
K er sa l
La ng w or th y
Li ttl e
H ul to n
O rd sa ll
P en dl eb ur y
P en dl et on
S w in to n
N or th
S w in to n
So ut
W al h kd en
N or th
W al kd en
W ea
S ou th
&
S ee st e dl ey
W or sl ey
&
W in to n
B oo th st ow n wards (preJune04 changes)