An open letter to David Cameron and the Conservative Party.
Chair of Leazes Homes, Bill Midgley
Dear Prime Minister,
I write to express my grave concern at your proposals to extend the Right to Buy scheme to include tenants of Registered Providers. I agree with many of the social housing commentators who have already identified many flaws in this plan and believe this extension would have a dramatic impact on the number of existing affordable homes to rent.
It would also jeopardise the potential for organisations like Leazes Homes, which I Chair, to build more and therefore impact on even more people for whom affordable renting is the only realistic option.
The extension would see valuable assets, which have been largely funded by the tax payer, being sold off without a return of comparable value to the tax payer. I really question whether the legalities of this proposal have been thought through, given that:
- Many Registered Providers have charitable status and, if this policy is brought in to apply to homes that have already been built, this could cause problems with their existing charitable registrations;
- In a number of instances, Registered Providers use assets, usually existing but in some instances planned, to secure loan funding to build affordable homes. Loan funding is usually secured from the private sector and not the public sector. If this policy is applied to existing homes and as a result Registered Providers breach their loan covenants, then the banks could foreclose on the loans they have made and demand repayment. This would cause financial chaos in the sector. In addition it could cause problems with securing loan funding for future affordable homes.
Leazes Homes, like other Registered Providers, not only build much needed family homes but also supported accommodation for the most vulnerable people in society – older people, those with learning disabilities and those with mental health problems for example. The rental income we bring in from our general needs housing helps fund the services we provide to people living in our supported housing developments, and underpins our applications for loan funding for new supported housing. If organisations like us are unable to secure loan funding for supported housing properties then the potential damage is unthinkable. It is essential that such accommodation can be provided by the affordable housing sector.
I suggest that Registered Providers receive full financial compensation; otherwise it’s likely they will stop building affordable family homes for rent.
This is because, for Registered Providers like us, the cost of developing a new family home for affordable rent, net of Affordable Homes Programme grant and excluding any land acquisition cost, is around £80,000. We would have to be compensated to at least that sum to be able to replace the home and the income that we have surrendered.
If this is not possible, the ability of Registered Providers to develop much needed new supported and general housing developments will be severely reduced, which is an entirely counter-productive move at a time when parties of all political persuasions have recognised the housing problems that the country faces.
I urge you to reconsider this proposal. We have a duty as a society to provide our citizens with good-quality, affordable housing, but the sanctity of a person’s home is not something to be used as a bargaining chip to secure election votes.
Bill Midgley OBE
Chair, Leazes Homes