An umbrella group called London Councils has expressed “extreme concern” at the government’s decision to stop letting local authorities keep money raised from council house sales.

London Councils warns that it will undermine efforts to deliver replacement homes – and indirectly increase demand on a private rental sector already suffering from insufficient supply.

The government says that its policy of allowing councils to retain 100% of Right to Buy sales receipts will not be extended beyond this month into the 2024-25 financial year. 

This means potentially 20-25% of the funds generated from a council home sold under Right to Buy will instead go to the Treasury.   

Borough councils in the capital have been urging increased flexibility over Right to Buy receipts so that every penny raised from sales can contribute towards the cost of building new social housing.

A spokesperson for London Councils says: “With London’s homelessness crisis worsening and boroughs’ temporary accommodation costs posing a critical risk to their financial stability, it’s more important than ever to invest in new social housing. 

“In the capital we have over 300,000 Londoners on waiting lists for a social home, but we’re also struggling with immense pressures on boroughs’ social housing budgets and viability challenges making housebuilding increasingly difficult. 

“We’re therefore extremely concerned that the government will stop letting councils keep 100% of the money raised through Right to Buy sales. 

“This will undermine boroughs’ resources for delivering desperately needed social housing and replacing stock lost through Right to Buy. 

“The government should be doing everything it can to boost boroughs’ ability to invest in new social homes – but instead we could see our funding reduced.” 

Over 316,000 council homes have been sold in the capital since Right to Buy was introduced in 1980.

The umbrella group claims insufficient capital funding is a key factor holding back delivery of more affordable homes in the capital. Other issues include the scarcity of land, the need for additional infrastructure investment, and construction skills shortages.