If the devil is in the detail, then the new Tory right to buy (RTB) policy announced today is positively satanic. It is well known that the 1980s policy reduced the amount of social housing, and others will detail how this will do the same.  I give few different initial observations on the policy, which I predict will unravel in the next few days. This RTB policy is likely to produce an avalanche of litigation, appropriates private property, and will probably massively inflate the national debt.

Housing Associations are venerable independent organisations who jealously guard their independence. Many are also charitable. This RTB policy is a Venezuela style theft of private property. Imagine if Tesco were forced to sell their sites at below cost, or the RSPB forced to sell their carefully nurtured wetlands? There would be an understandable outcry. I imagine wealthy philanthropist Mr Peabody who founded his London association is currently turning in his grave. Other charities will look askance at this move. If the state believes it can help itself to charitable Housing Association assets, then why not asset rich ‘Guide Dogs for the Blind’ or others? Trustees across the Country will be in despair and the big society seemingly in tatters.

In all but totalitarian States, the government can only lawfully seize the property of others when giving full compensation with legal safeguards. As all familiar with compulsory purchase orders will know, these legal battles can last for decades. After all the legal aid cuts,  at least the legal profession will be grateful for this lucrative source of new work. The inevitable litigation will freeze any funds for well over the next parliamentary cycle, and won’t be available to fund new builds.

The Tory’s say that (forced?) Council house sales will fund the discount. Well, they obviously haven’t noticed that many Councils like Liverpool do not have any Council houses. Will there be no RTB in Liverpool? Or will scheme be funded from sales in Tory District Councils in the asset rich South East and South West? Labour Candidates in Tory areas, please feel free to cut and paste this concern for your local leaflets.

If Councils are compelled to sell their priciest 1/3 of Council homes to fund this policy, do they sell them tenanted? If so they will get a tiny fraction of the full value – a massive fire sale of public assets to private property speculators. Do they evict the sitting tenants to get full value to fund the scheme – I will be on the picket lines with the old lady tenants as will 99% of the British population. Not such a popular policy now.

Back to the Housing Associations (HAs) who will not take this lying down. They have £billions of loans with institutions who since the financial crash have wanted to reduce their lending to the sector. The forced sale of these mortgaged properties will result in the formal breach  of many of the Lender’s loan covenants meaning the loans will be called in and the HA’s technically made insolvent. At best, this default will be used to massively increase the cost of existing and future borrowing to the HA sector – and thus fewer social and affordable homes being built. At worst we could see insolvencies ripple across the HA sector.

The Treasury is rumoured to have argued against this policy for good reason. The UK needs massively more social and affordable homes – all parties agree on that. For every £1 of state money, the HA’s have levered in much more at very low cost. This RTB policy reduces the leverage and increases the cost – result is fewer homes will be built. A lose – lose policy.

And here’s the big one. For a while, a quiet behind the scene’s battle has raged to ensure that the massive Housing Association borrowings are not classed as part of the national debt. Classification depends on the degree of state control over the borrowings. This RTB policy is likely to tip the balance in favour of the debt being seen as controlled by the State and thus will result in a huge inflation of the national debt. Hey presto George Osbourne continues to massively increase the size of the national debt, and destroys the basis of sensible housing policy.

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