Valuations will be crucial in determining the impact of extending the right to buy to all tenants of English housing associations, as set out in the Conservative manifesto.
Valuations will be crucial in determining the impact of extending the right to buy to all tenants of English housing associations, as set out in the Conservative manifesto.
The party also proposes the sale of vacant, high-value council homes, which it suggests would raise £4.5 billion annually, but Savills analysis suggests this is uncertain.
The Conservatives have said this money would be used to fund the discounts of up to £103,000 that would be offered to housing association tenants to help them buy their homes, were the party to be re-elected on 7 May.
At present, English housing associations use two main methods of valuing their homes: ‘Existing Use Value for Social Housing’ and ‘Market Value Subject to Tenancy’.
Under the former approach, EUVSH, if the sum received by a housing association for a home sold under the extended right to buy is less than the value of future lost rent from the property, EUVSH values might fall.
Anne Johnson, director of housing valuations at Savills, said: ‘This would require housing association business plans to be reviewed to ensure that lending covenants were not breached.
‘On the other hand, values could rise if the sums receivable are more valuable and there are no restrictions on the use of the sales receipts by associations.’
Under the second method, MVST, if existing tenants were granted the right to buy and this right was preserved were the properties to be sold to a private landlord, the value of the home would be likely to fall if the sum receivable was less than its market value. If the right to buy were not preserved upon sale then values would be unaffected.
Ms Johnson added: ‘However, housing associations would have to face the practical problem of providing their lenders with replacement security when homes were sold. Assessing the impact on housing association asset values and business plans is not straightforward and will depend on the fine detail of any legislation.’
Further analysis by Savills suggests the Conservative plan to raise £4.5 billion a year from the anticipated sale of 15,000 vacant council homes in higher-value areas of England might prove tricky.
Savills calculates the total value of housing in the UK is £5.75 trillion and that social housing accounts for £374 billion on an existing use, or EUVSH, basis.
On this basis, Savills research calculates that the average value of a socially rented home in England is just under £208,000, ranging from £99,452 in North East to £437,000 in London.
The Conservatives say the policy will be funded through the sale of the most expensive local authority homes once they become vacant. The party estimates that this would involve 15,000 homes a year and would raise £4.5 billion – which assumes the average sale would raise £300,000.
Susan Emmett, director of Savills residential research, said: ‘There is no certainty that receipts from sales of local authority homes would be as high as projected. It is also not clear at this stage what would happen if receipts are not as high as expected.’
Mervyn Jones, director of the Savills Housing Consultancy, said: ‘There is currently more pressure than ever before on the executive teams and boards of housing associations to push their organisations to use their financial capacity to build more homes.
‘The regulator also requires this to be done with a greater degree of financial rigour than ever before. The requirement to conduct regular business plan stress tests is a key part of this and the impact of the extension of the right to buy would seem likely to give rise to serious uncertainty for the business plans of most landlords.
‘As such it would seem wise for housing associations to incorporate the possible extension of the right to buy in future stress testing scenarios as soon as possible,’ Mr Jones added.