In a Large Scale Voluntary Transfer (LSVT), council homes are transferred to a registered social landlord.

How it started

In the first wave of voluntary transfers from 1988, under Thatcher's Conservative government, many rural councils got rid of their housing stock. Most of these homes were in good condition and in popular areas. In 1988 Chiltern district council, Buckinghamshire was the first to transfer its rural homes. Ten years later, 75 transfers had taken place - 338,500 council homes had gone by 1999 - most of them in rural areas.

Financing transfers

Many urban councils found they couldn't get enough money from the transfer to pay off the cost of building the houses. This is called "over-hanging debt". So in 1997 the Conservative government agreed to pay the costs of "over-hanging debt". This gave the green light to urban transfers. The Estates Renewal Challenge was set up in the late 1990s to subsidise transfers of council housing in the urban areas. Financial support for the transfer programme continued under New Labour. In 2004/05 the government paid around £500 million in order to wipe out debt charges so that councils could transfer their homes to registered social landlords. Since 1988, the transfer programme has raised £11.6 billion in private finance. Out of that £5.4 billion went to purchase the transferred stock and the rest went into financing improvement programmes. As the programme moved into the inner cities, the price of stock went down and then went into negative figures. By 2004 the amount of private finance raised through transfers had slumped to less than £1 billion.

Transfers stampede under New Labour

Under New Labour, transfers really took off. The transfer programme for 1999/2000 was 80,000 homes across 26 councils. In 2000/2001 it was 200,000 homes. In 2002/03 the transfer programme was 166,000. By April 2004, 131 councils out of 233 had transferred their stock. Councils were required by New Labour to carry out an investment option appraisal by July 2005 to show how they planned to meet the Decent Homes target. This increased the pressure on councils to show that they were considering transfers or planning to involve private finance in the ownership of estates. They were told there was no other source of investment for housing - and with a repair backlog estimated at £18 billion for England, tenants had little choice but to agree to transfer. Between 1997 and 2003, 86 local authorities carried out 117 tenants ballots on the transfer of council stock. Tenants voted against transfer in 23 ballots. Since 1989, around three quarters of a million council homes have been transferred to registered social landlords. Since 1979, between them, Right to Buy and LSVT have taken 50% of all council stock in England and 40% in Wales and Scotland out of council ownership.

Are transfers value for money?

The House of Commons Public Accounts Committee reported in 2003 that the average cost of improving a home to decent standard through stock transfers was £1,300 per home more than the cost of retaining them and improving them under council ownership. The extra bill for the taxpayer amounts to something like £1.3 billion for the whole transfer programme. Transfers cost more because borrowing costs are higher in the private sector, rents rise steeply - costing more in housing benefit, and because the transfer process itself - all those consultants to pay - costs about £1.7m or £430 per property.

What's in it for tenants?

In voting for transfers tenants get improvements to their home and potential improvements in management at the cost of losing their rights as secure tenants. Transfer tenants can negotiate to keep their Right to Buy and other rights of secure tenancy and agree a rent guarantee limiting rent rises for the first few years of the company. New tenants, however, do not have these rights and are assured tenants with less protection from eviction, and normally pay a higher rent from the start. They all lose the statutory Right to Manage, and the new company does not have to produce a Tenant Compact, although it has to meet the Housing Corporation's standards for resident involvement. During the options process, tenants will be advised by a "tenants friend" and no transfer can go ahead without a majority tenant vote in favour (although some tenants have been balloted several times until they finally said yes). The new company will have a board including tenant directors and this is often said to improve tenants involvement, although the Audit Commission warns against giving tenants this impression (see under ALMOs)

Look back in transfer

The National Audit Office reported in 2003 that transfer companies had generally performed well in delivering their promises to tenants in terms of improvements to homes but have done less well on building new homes or regenerating areas. Around 83% of new RSLs had kept the promises they made on keeping their rent rises within guideline figures. Most tenants who were consulted thought they had benefited through the transfer. However, the report pointed out that some transfer organisations - around 19% according to the Housing Corporation - had experienced financial problems. Within one year of transferring, four transfer companies were in such serious trouble that the Housing Corporation had to step in and take over. A small number of transfer companies have had to merge with other more successful Registered Social Landlords to overcome severe financial problems.

How do you do the transfer?

£ A council carries out an options study and selects transfer as the way forward

£ The council applies to the ODPM for a place on the transfer programme

£ A new Housing Company (Registered Social Landlord) set up by council or housing associations are invited to express interest in taking over the stock

£ The new housing company approaches banks with a Business Plan

£ The Government approves the bid and agrees to pay off any overhanging debt

£ Tenants are balloted - if they vote yes, then..

£ The new Housing Company is registered with the Housing Corporation as a registered social landlord

£ The new Housing Company borrows from the banks and private lenders

£ It pays the council for the houses (or not, depending on the valuation)

£ The council pays off its debt with the capital receipt from the sale or government payment

£ The new housing company finances modernisation and new build from borrowing