With the ink on the Housing and Planning Act now dry, we will soon have the all clear to proceed with our first sales under the Voluntary Right to Buy (VRTB) pilot and we’re looking forward to congratulating the first purchasers soon.
So now is a good moment to update you on some of the interim findings drawn from our action research programme being undertaken by CRESR at Sheffield Hallam University. Already they have been able to crunch data drawn from application forms, as well as undertaking a survey of applicants and those expressing an interest, which has had a really strong response rate. However before we get too carried away, we do need to issue the normal disclaimer and remind you that we are still only four short months into the application process and, while sales are imminent, we haven’t yet sold a single property.
That said, there are some early messages emerging and it’s important to share them as work on the wider scheme proceeds at pace. Here are three reflections:
Demand is stronger than has been reported. Between the pilot HAs we have had over 4,000 expressions of interest and 500+ applications, so we believe we’re comfortably on course to achieve the agreed number of sales for the pilot, especially considering the restrictions around eligibility. We have had to carefully manage numbers throughout the pilot but we are getting a sense that there is genuine pent up demand, and it is sobering to note that the survey reveals that over 60% of those who have expressed an interest but not applied, claim they will! Of course it may be too late by then, but their interest will be picked up when the wider programme kicks in.
It’s a tale of two cities, and quite a few towns. So whilst demand is strong across the pilot, the extent to which this will turn into ‘effective demand’ – whether applicants can afford it – is a really interesting question. Let’s compare two extremes that reflect the variation in the country’s housing market: In Liverpool, where VRTB will be a very tempting opportunity with average sale prices (after discount) of less than £50k, an analysis of applicant income and savings suggests that practically everyone will be able to afford to follow through. By way of contrast in London, where there are similar levels of raw demand, in theory it will be much less affordable given that net purchase prices are six times higher. And this isn’t a result of applications driven by idle speculation – remember applicants have paid £250 of their own money to get to this point. So what’s going on?
The short answer is that we’re not really sure, although we’ll know soon enough as applicants start to seek mortgages – nearly 9 in 10 have told us they plan to do so. Is this wishful thinking fuelled by lack of understanding of the value of their home and the real cost of home ownership, or are there other sources of income that will support purchases, especially in London – friends and families etc? My hunch is that we will be surprised, with more buying in London than evidence about prices and income might suggest, and perhaps fewer than we expect purchasing in Liverpool, although applicant to sale conversion rates are still likely to be very high. Forecasting behaviour is notoriously difficult!
Managing expectations will be crucial to the credibility of the wider scheme. Interview and survey feedback on the application process has been fairly positive, however if there is one message we need to heed, it is about providing clarity at every step of the way. It seems that applicants are quite happy to wait as the process proceeds – buying a home on the private market usually takes a long time, giving purchasers time to think things through properly. But applicants are telling us they want upfront clarity about the rules of the game and early confirmation of whether they’re in or out. This means publishing detailed information about eligibility and exclusions from the outset – much of which will be bespoke to individual associations – and then being proactive in informing tenants where they are in the process. As we know, the British don’t mind queuing, as long as they know how long the queue is, and that they will get there in the end!
The early learning we’re gaining is extremely valuable, and underlines the benefits of piloting the voluntary RTB, with regular reports to the DCLG/NHF sounding board influencing the design of the wider scheme. However our understanding will only be complete once we have actual sales to go on. The wait is nearly over.
Director of Strategy and Public Affairs