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A third of all Islington council homes which become empty every year are set to be part of a £200million sell-off to pay for government housing reforms.

Senior Town Hall officers estimate that the council will have to sell to private buyers around 340 of the thousand dwellings that become vacant each year – homes which would normally be handed to people on the borough’s 18,000-strong waiting list.

The forced sale of “higher value” properties is part of the government’s strategy to cover the cost of expanding right-to-buy discounts to housing ­association tenants and to replace the homes sold off under the policy with new “affordable” homes.

Islington will not see a ­penny of the sale receipts as the money will go straight to the Treasury. And, despite ­government assurances that every house sold in London will be replaced by two new ones, there are no guarantees the new properties will be built in Islington, or will be ­available for social rent.

“It’s a huge cash grab by the Treasury to fund Tory election promises which will devastate council housing in Islington,” said Islington’s housing chief, Councillor James Murray.

“The money from homes is going back to central government and there’s no guarantee there will be any money going to new affordable homes in Islington.

“It will mean that there are fewer homes for people living in overcrowding who desperately need a home.”

He added: “For all of the government’s comments about replacing affordable housing, actually their promises are pretty weak and meaningless and won’t undo the massive damage this bill will do.”

The plans are set out in the Housing and Planning Bill, which has had a bumpy ride through Parliament so far, with the Lords passing 13 amendments. They were rejected by MPs on Tuesday night but the bill returned to the Lords on Wednesday, with members expected to try and reinstate some amendments. It will be back in the Commons next week.

Cllr Murray added: “I really hope that the Lords can hold their nerve and try to knock out as many of the damaging aspects of the bill as possible. The government seems determined to go ahead with the forced sales, but I want to see it dropped.”

Under the reforms, the Town Hall will be expected to pay a quarterly levy to the Treasury by selling a share of its homes as they become empty. The first payment could be due as early as January.

Islington is bracing itself for a £22.5m drop in rental income over 10 years due to the loss of the homes. This comes in addition to the impact of a 1 per cent cut in social rents announced in last year’s budget, further reducing Islington’s ability to invest in social housing. Cllr Murray said: “The loss of income means that there’s less money to be invested in homes, housing services and in building new affordable homes. It will mean a severe squeeze in our ability to provide housing services in Islington.”

Asked whether the Town Hall could join other councils in a potential legal challenge against forced sales, Cllr Murray added: “Let’s see the detail and work out the options then.”

Housing association tenants are now also able to benefit from the right-to-buy process previously open only to council tenants, who can access a £103,900 discount on market rates.

Asked to comment on Islington’s £200m figure, a spokesman for the Department for Communities and Local Government said: “We have yet to announce how the sale of higher-value vacant council homes will work. However there are billions of pounds locked up in local authority housing assets so it’s only right that when higher-value homes become vacant they are sold to build new homes that better meet local needs.

“It means every home sold will be replaced with at least one new affordable home and two for one in London.”