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6. RIGHT TO BUY PRESSURED AREA DESIGNATIONS

6.1 The pressured area mechanism

6.1.1 The Housing (Scotland) Act 2001 introduced some significant changes to the Right to Buy in Scotland, as described elsewhere in this report. One of these changes was the introduction of a mechanism for designating 'pressured areas'. The effect of the pressured area mechanism is to suspend the Right to Buy for modernised tenancies in designated areas, thus preserving units in the social rented sector for the duration of the designation. This chapter explores the use of the pressured area mechanism to date.

6.1.2 The pressured area mechanism is a tool which local authorities can use to strike a better balance between the needs of the individual and the needs of the community in specific localities. Chapter 4 set out the effects of the Right to Buy policy on stock availability, and described the significant reduction in the social rented housing stock which has taken place as a result of the Right to Buy. The 2001 Act introduced the pressured area mechanism in recognition of the potential need for social rented properties to be retained in some areas.

6.1.3 A 'pressured area' relates to a defined geographical area designated by the Scottish Ministers for a period of up to five years. In the context of the Right to Buy, the term 'pressured area' has a statutory definition, as set out in section 61B of the Housing (Scotland) Act 1987 (as inserted by section 45 of the Housing (Scotland) Act 2001). The term has a specific meaning, and does not refer to any generic pressures on housing which might be found in particular areas.

6.1.4 It is for local authorities to decide if they wish to make applications for pressured area designation(s), and it is the responsibility of the Scottish Ministers to decide whether or not to designate. The 2001 Act specifies two criteria which must be met before the Scottish Ministers can consider whether to designate an area as pressured. These are:

(a) the needs of that part ( i.e. that area) for housing accommodation in houses provided by the authority or by RSLs exceed substantially, or are likely to exceed substantially, the amount of such housing accommodation which is, or is likely to be, available in that part; and

(b) the exercise by tenants of houses in that part of the right under section 61(1) to purchase such houses is likely to increase the extent by which such needs exceed the amount of such housing accommodation.

6.2 Pressured area designations in Scotland

6.2.1 Although the pressured area option has been available since September 2002, the Executive did not receive applications during the first couple of years of the mechanism's operation. This is, perhaps, unsurprising. It is really from October 2007 that Right to Buy sales under modernised terms might begin to take place in any number, as new tenants since September 2002 complete their qualifying period and become eligible to buy. For the mechanism to have most effect, local authorities wishing to apply for pressured area designations might be expected to do so before October 2007, but from current experience it appears that there is no particular urgency to do so.

6.2.2 Pressured areas have been designated in six local authority areas to date, and all six designations have been granted over the course of a recent nine-month period. The first designation took place in East Renfrewshire in October 2005, and the most recent was in Dumfries & Galloway in June 2006. Further details of the designations are presented in Box 6.1 below.

6.2.3 As is intended in the legislation, the approach to selecting areas for applications has varied across the six local authorities. Highland Council, for example, opted to apply for a significant proportion of its geographical area, but to exclude specific localities from the application. The large areas of Caithness and Sutherland were excluded, as were some smaller settlements, estates and streets.

6.2.4 The converse approach was taken by Dumfries & Galloway Council, where 69 small areas were carefully pinpointed. All rural settlements with a population of 400 or less were identified, and were then assessed against other criteria which aimed to identify those experiencing particular pressure. Dumfries & Galloway Council focused on rural villages, and did not attempt to capture urban areas - which might be at least as pressured - in its application, in line with commitments within its Local Housing Strategy. In all other cases, local authorities selected the areas which they believed to be most pressured - whether urban or rural - and were therefore most likely to meet the statutory criteria.

6.2.5 Once local authorities have designations in place, they can make applications for further areas. A local authority could therefore have several designations in place at any one time. It is open to the local authority to seek an extension to a designation upon expiry, in order to ensure that a designation remains in place for a further period of up to five years. Securing an extension before the designation expires would ensure that the Right to Buy remained suspended for modernised tenancies without interruption. Local authorities can also apply to the Scottish Ministers to have designations revoked, should they wish existing designations to cease.

6.3 The scope of pressured areas

6.3.1 The effect of a pressured area designation is to suspend the Right to Buy in the designated area for all modernised tenancies. Preserved tenancies are unaffected. Pressured area designations can affect both local authority and RSL tenancies. It is likely that the majority of tenants affected by designations over the next few years will be local authority tenants, though RSL tenancies will, increasingly, also be affected.

6.3.2 Although the majority of those RSL tenants entitled to the Right to Buy ³⁸ are subject to a ten-year exemption, and are unable to buy before 2012, ³⁹ there is a small number who are entitled to buy - on modernised terms - as a result of a past stock transfer from a local authority or from Scottish Homes. It is worth noting that stock transferred from a local authority to a RSL is not subject to the ten-year exemption - whilst this does not affect either Scottish Borders Housing Association or Glasgow Housing Association tenants, non-charitable Dumfries & Galloway Housing Partnership tenants are entitled to the Right to Buy and are unaffected by the ten-year exemption. Furthermore, tenants of eligible housing association properties built after September 2002 ⁴⁰ can buy after five years (subject to the cost floor rules ⁴¹). Thus from September 2007 more and more housing association tenants of properties built since September 2002 will have the opportunity to buy.

6.3.3 The total number of social rented tenancies in Scotland at March 2006 was around 588,500. Around 347,000 of these can be estimated to be local authority tenancies ⁴² (59% of the total number), and around 241,500 were RSL tenancies (41% of the total number). ⁴³

6.3.4 Looking specifically at local authority tenancies, data is not available centrally on the numbers of local authority tenancies which are on modernised or preserved terms. The most recent Scottish Household Survey (2003/04) indicates that around one third (34%) of local authority tenancies could be estimated to be on modernised terms and two thirds (66%) could be estimated to be on preserved terms. This would mean that around 229,000 local authority tenancies were on preserved terms and around 118,000 were on modernised terms.

6.3.5 Turning to RSL tenancies, the designation of a pressured area will affect the majority of RSL tenancies in that area which are eligible for the Right to Buy. To determine the proportion of RSL tenancies which are entitled to the Right to Buy, the most recent data (March 2006) held by Communities Scotland on RSLs' charitable status and registration has been analysed. All tenancies with non-charitable RSLs are entitled to the Right to Buy (albeit suspended until 2012), and in March 2005 these totalled 41,113. The vast majority of tenancies with charitable RSLs (166,510) were held with RSLs which were registered as charities prior to 18 July 2001, and these are exempt from the Right to Buy. A smaller number (33,819) of tenancies were held with charitable RSLs which were registered as charities after 18 July 2001, and these are not exempt from the Right to Buy, and future new tenancies held with these RSLs will be entitled to the Right to Buy.

6.3.6 Taking all local authority and RSL tenancies together, it is possible to estimate the proportions of all Scotland's tenancies which are entitled to the Right to Buy and which would be affected by pressured area designations. The proportions of local authority tenancies and RSL tenancies and the various types of Right to Buy entitlement are illustrated in Figure 6.1.

Figure 6.1: All Social Sector Tenancies' eligibility for right to buy by landlord

6.3.7 Around 28% of all Scotland's social sector tenancies are not eligible for the Right to Buy at all. These are tenancies with a RSL which was registered as a charity prior to 18 July 2001. All remaining Scottish tenancies (72% of the total) are entitled to the Right to Buy in one form or another. Pressured area designations cannot affect tenancies held on preserved terms but, in theory, pressured area designations could affect the 33% of all Scotland's tenancies that are held on modernised terms. This 33% comprises:

• local authority tenancies on modernised terms (20%);
• non-charitable RSL tenancies (7%); and
• charitable RSL tenancies whose registration as charities occurred after 18 July 2001 (6%).

6.3.8 The proportion of local authority tenancies on modernised terms is increasing as they replace preserved tenancies over time, but this is a gradual process. It is not possible to predict with any certainty how the proportion will change from year to year, but on current trends approximately 10% of all rented properties in the sector have new tenants each year.

6.3.9 Across the six designations currently in place, 3,790 existing tenancies are affected. This is a very small proportion of all current tenancies in Scotland (0.6%). There are, however, around 16,300 units in the designated areas which could, during the period of the designations, become occupied by new tenants who are eligible to buy on modernised terms, and who have served suitable qualifying periods in previous tenancies. Some of these units could therefore, potentially, be suspended from sale under the Right to Buy by the current designations. Any new units being built in designated areas would similarly be protected.

6.3.10 Given the wide variations in pressure across Scotland, and even within local authority areas, it is unlikely that the whole of Scotland would be subject to designations. Levels of need in local authority areas vary greatly. Some areas have a high annual net need for affordable housing, and the net need in other local authorities can be for a low number of units each year.

6.3.11 Blanket pressured area designations would not necessarily be appropriate across all local authority areas with a net need for affordable housing, as areas of low and high demand will undoubtedly be found within many local authority boundaries. Similarly, there will be hotspots of pressure in many of the local authorities which have a surplus of affordable housing. Designations may therefore be appropriate in some parts of these local authority areas, should the authorities consider the mechanism a useful tool in securing affordable housing availability, as part of a wider, strategic approach to meeting affordable housing need.

6.3.12 There is no limit upon the number of applications which local authorities can make. A local authority could, potentially, have in place a number of designations at any one time, all with different cessation dates, should it opt to apply separately for different parts of the local authority area. Indeed, some local authorities which have been successful in attaining designations have indicated that they might wish to make further applications for other areas. The Executive is aware that a number of local authorities are giving active consideration to making applications, and that several make reference to this in their Local Housing Strategies.

6.3.13 It is open to local authorities to apply for re-designation of an area before the expiry of its status if they wish to continue to suspend the Right to Buy in that area. The cumulative effect of the designations that have now been granted across Scotland goes some way to demonstrating the impact that the pressured area mechanism could have on a bigger scale, as modernised tenancies replace those on preserved terms. In later years, of course, repeat designations could compound these effects.

Pressured area designations - summary of key findings

• Around one third (33%) of all Scottish social rented sector tenancies are on modernised terms and can, potentially, be affected by pressured area designations, whilst just over one quarter (28%) of Scottish social rented sector tenancies do not have the Right to Buy at all.
• Pressured area designations cannot affect around 40% of current Scottish tenancies which have the 'preserved' Right to Buy, although this proportion is decreasing gradually over time.
• The six current designations affect 3,790 tenancies - less than 1% of all tenancies. However, there are 16,300 units in the designated areas that would have the Right to Buy suspended if they were to become occupied under modernised tenancies during the designation period. Repeat designations in these areas would ensure that the units would continue to be protected over time, as would any units built since the designation was granted.
• A significant number of RSL tenants will be able to exercise the Right to Buy when the current suspension ceases in 2012. Any pressured area designations in place in 2012 would suspend the Right to Buy for these tenants, and so the effects of the mechanism will be heightened after 2012.
• It is unlikely that the whole of Scotland will be subject to pressured area designations, but there is the potential for local authorities to make greater use of the mechanism. A number of local authorities are known to be actively considering making applications for parts of their areas.
• The pressured area mechanism can be a useful tool for local authorities experiencing particular pressures on affordable housing as part of a wider, strategic approach to meeting affordable housing need.

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