Local Authority Right to Buy: Using, not losing your RTB receipts

liz_andersonLiz Anderson breaks down the rules governing how local authorities can use right to buy (RTB) receipts.

The Government introduced a new RTB policy in March 2012 “Reinvigorating RTB”. This increased the maximum RTB discount to £75,000 (which was then increased to £100,000 in London in March 2013 and this now increases by CPI in April each year). It also introduced the idea that Councils could retain all surplus RTB receipts (rather than just 25% as previously) if the receipts were used for one–to-one replacement. In order to retain these surplus RTB receipts, each authority had to enter into a RTB Agreement with the Government.

The original RTB Agreements were updated in May 2013 and revised guidance issued by DCLG in March 2014, with some responses to Frequently Asked Questions supplied in September 2015.

However, interpretation is an art, not a science.

Our understanding is that RTB receipts are apportioned as follows:

  1. RTB Admin allowance (transaction cost) £1,300 per property (£2,850 in London)
  2. Attributable debt – assessment of the debt that could have been supported by the additional homes sold under RTB due to the increased discounts (to compensate the Council)
  3. Local Authority Assumed income – to reflect the 25% share the Council would have retained under the previous RTB pooling system
  4. Buyback Allowance – up to 6.5% of the remaining surplus can be used to fund 50% of the cost of buying back former Council properties
  5. Government Assumed Income – to compensate the Government for the 75% share of the RTB receipts under the previous pooling system
  6. RTB Receipts for Replacement Homes – the balance of RTB receipts after deducting the above. The Council can enter into a RTB Agreement to use these receipts locally.

The RTB Receipts from categories 1 to 4 can be retained by the Council and used freely. Category 5 must be paid to the Government, and category 6 can be retained by the Council and used in accordance with the RTB Agreement.

The RTB Receipts for Replacement Homes (known as 1-4-1 Receipts) retained through a RTB Agreement must be used as follows:

  1. Amount to no more than 30% of the total scheme cost of new affordable rented housing for the benefit of the Authority’s area (does not include Shared Ownership units).
  2. Can be used on the Council’s own spend or that of an external body (but not a body in which the Council has a controlling interest) for up to 30% of the total scheme development cost.
  3. Spent within 3 years of receipt, or returned to Government with interest.

Perhaps importantly for the effective use of receipts, DCLG have confirmed that a Council can gift land to a body in addition to funding up to 30% of the total scheme costs from the 1-4-1 Receipts. They would also be entitled to provide additional funding from s106 money, though DCLG have expressed a preference for this to be put towards additional homes, rather than those funded from 1-4-1 RTB Receipts.

We’ve worked with a number of local authorities advising on how best to use their RTB receipts to ensure that local provision is maximised.

For more information, please contact Liz Anderson, Susan Kane or one of the Directors:

Liz Anderson, Senior Consultant – Altair       07833 469476 | liz.anderson@altairltd.co.uk
Susan Kane, Partner – Altair                          07870 685 891 | susan.kane@altairltd.co.uk
Jim Lashmar, Director – Altair                        07968 616 550 | jim.lashmar@altairltd.co.uk
Sarah Parr, Director – Altair                           07766 563 068 | sarah.parr@altairltd.co.uk
Gill Powell, Director – Altair                            07887 791 381 | gill.powell@altairltd.co.uk