We are very pleased to see the publication of the findings from the pilot programme and hope it provides a valuable assessment of what has been learned, and some of the implications for housing associations.
Prof Ian Cole is Principal Research Fellow in the Centre for Regional Social & Economic Research at Sheffield Hallam University
10 January 2017
Our research team has been working with housing associations and the National Housing Federation over the last year to undertake an action-learning study of the Voluntary Right to Buy (VRTB) pilot programme. This has involved ongoing reflection on how the pilot evolved, some of the unresolved questions that had to be overcome, and the wider ramifications for the full VRTB programme.
Our study found that the pilot programme was an effective and valuable testing ground for the VRTB process. It highlights the diversity of local housing market conditions and the different types of housing associations.
We should make clear that our study is not an evaluation of VRTB as a policy initiative in itself – instead, it is concerned with issues of take up, process and impact in delivering the scheme. There were three main focuses to our research over the last year:
- An assessment of the programme as a pilot – whether it provided a useful baseline for learning in contrasting organisational and housing market contexts.
- The response of those households eligible to apply for VRTB – the level of interest, motivations for applying and the question of affordability if they wanted to go ahead.
- The wider implications of the programme when it is rolled out more widely – initially, as we learned in the Autumn Statement announcement, to a regional pilot involving up to 3,000 completed sales.
Contrasting housing markets
We cannot emphasise enough that the impact of VRTB will vary significantly from one locality to another. To illustrate this, the average valuation figure for purchase in one of the associations operating in central London (L&Q) was, at £375,000, four times greater than in one of the other pilots in Liverpool (Riverside), at £94,000.
This clearly sets up quite different scenarios over affordability, the level of discounts and the ability of tenants to realise aspirations to purchase.
The level of interest
Many tenants were very strongly motivated to purchase based on a mix of reasons. These included a desire to own one's home, a sense that it would offer future security for the family as a legacy and the view that this was a once-in-a-lifetime opportunity for affordable home ownership.
Tenants expressed the view that this opportunity, with maximum discounts rising up to £103,900 in London, should not be passed up. Only 16% of our respondents said they would have looked to buy on the open market if VRTB had not been on offer.
Because of the strong desire to purchase, most applicants were able to overcome any administrative hurdles involved in the process (such as proof of past tenancies or paying the £250 administration fee).
The level of take up
At present, tenants are still in the process of completing their purchase. From the evidence available so far it appears that mortgage lenders are willing to treat the discount as a deposit for mortgages. This meant they were prepared to offer loans at relatively high multiples of household income. While this enables more tenants to purchase it raises concerns about future financial risk for some applicants.
In terms of wider implications, we have to be cautious on one point that is of direct interest to the sector: the likely level of take up. In the pilot programme, by November 2016, 6% of eligible households had made an application to buy.
However, we think this is likely to be an underestimate of the eventual level of demand for a variety of reasons. These include the absence of a 'portable discount' in the pilots and the need for one of the pilots (L&Q) to ration demand in order to make the process more manageable.
We are undertaking further modelling work on take-up once more completions are made. It is already clear that there will be substantial variation across different housing markets in terms of the demand from tenants and their ability to finance a purchase.
Main lessons learned
A range of learning points have emerged from the research. These include:
- The need for clarity over the reasons for excluding certain types of property from the programme.
- The risk of too much variation in practice between one association and another in areas where there is territorial overlap between their properties.
- The need to manage the queue of applicants according to very clear timetable. This management of applicants will be particularly important given the level of interest and pro-active engagement from tenants.
- The need to review systems for fraud protection and investigation, in the light of the high values involved in the VRTB scheme.
Finally, housing associations will need to reflect on any advice they give to applicants. The popularity of the VRTB scheme to those tenants who never thought they would ever be able to own their homes is testimony to the rewards on offer to those who qualify. However, securing that reward may also carry future risks for some applicants who may underestimate the longer term consequences of their purchase.