Social homebuy could cost corporation millions

The Housing Corporation is facing a multi-million pound bill to fund discounts for the 15,000 social housing tenants the government predicts will want to buy homes under its “social homebuy” scheme.

The corporation will administer the programme, which was launched on Monday by deputy prime minister John Prescott as a key plank of the ODPM’s five-year plan “Homes for All”.

Jon Rouse, the corporation’s chief executive, hinted that the corporation would get extra funds from the Treasury to cover new costs. “Figures are constrained by the 2004 comprehensive spending review settlement, but this will clearly change as most of the social homebuy requirement will fall in the 2006 spending review period,” he said.

The ODPM declined to say whether it would give more money to the corporation to fund social homebuy and said the proposals would go out for consultation.

Senior sources have indicated that the level of discount on offer to tenants of councils and housing associations who choose to buy either all or a percentage share of their homes would be about £16,000. This sum would be subtracted from the market value of the property before calculating the value of the share the tenant wanted to buy.

The £16,000 would be reimbursed to the association or council by the corporation.

Serious concerns have been expressed at the corporation that this figure could run to “hundreds of millions of pounds”. Even if only 5% of the 300,000 people the ODPM believes could afford the scheme went ahead with it, the corporation could face discount payments of more than £240m.

But Rouse stressed there were no figures at present and that these would be worked out in upcoming discussions with the ODPM. He said talks would include whether associations would reimburse the corporation and how they might use social homebuy proceeds to build new homes or buy homes back when they were offered for sale.

The homebuy scheme has provoked mixed reactions in the sector. There are concerns about whether homes that were sold could be replaced and how banks whose loans to landlords are secured on the properties will react. Associations also wondered how they could predict sales and set budgets for future years.

Roy Wallington, director of Yorkshire Metropolitan Housing, said: “Where do we find the replacement homes? Where do we get the land from?”

With the ODPM indicating the scheme will only “initially” be voluntary another worry is it may not be optional in the long run.

Others have welcomed the proposals. David Cowans, from Places for People, said: “It’s something we should explore if we want to give people choice.”

But chair of the Tenant and Residents Organisation of England Michael Gelling said: “If the ODPM intends to get rid of the rented sector, it should just come out and be clear about it.”