Housing associations may carry the can for Tories' sales plan

The Conservatives' high-profile election promise to extend the Right To Buy to housing associations could get bogged down by legal wrangling, experts have warned.

The plan is the biggest extension to date of one of Margaret Thatcher's best-known policies, which has seen nearly 2m council tenants become homeowners in the past three decades.

Now 1.3m housing association tenants are set to get the same opportunity.

But before the election the CBI employers' group warned that the Right To Buy plan "doesn't solve the problem of boosting the supply of affordable homes". The Institute for Fiscal Studies said the plan was "a significant giveaway to tenants" which "would worsen the UK's underlying public finance position".

Senior figures in the sector have sought legal advice in recent weeks on how to challenge any government move to force them to sell homes.

Housing associations are independent not-for-profit private organisations and many are registered charities. Any move to control their activities risks bringing their finances on to the public sector balance sheet; housing associations have borrowed more than £62bn from banks and bond investors to date.

Credit rating agency Moody's, which rates 43 of the country's largest housing associations, said the move could hit their financial viability, risking their ability to raise private finance to pay for new housebuilding.

Jeanne Harrison, a Moody's analyst, said that Right To Buy sales would "give housing associations short term cash flow upside", but could also "erode their rental income streams and potentially impair both their balance sheets and future borrowing capacity" if they could not afford to replace the homes they sold.

The government has vowed to ensure that all homes sold are replaced, with councils being ordered to sell their homes in order to subsidise housing associations' Right To Buy sales.

Gavin Smart, deputy chief executive of the Chartered Institute of Housing, said the timing of these sales could be difficult to synchronise.

"The original introduction of Right To Buy (in the 1980s) produced a larger demand than policy makers were expecting," he said. "If there is a timing gap between housing association sales and the council sales, can the Treasury's books take the strain, or will they make housing associations carry the can?"

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