Right to Buy scheme to blame for housing shortage?

Supporters of the Right to Buy scheme say that it frees up social housing for those in more need, and feeds society’s aspiration to be a country of home-owners.

Critics say that it actually reduces the overall housing stock available for the disadvantaged and for low income households, because new ‘affordable’ housing isn’t being built at a high enough rate to keep up with demand.

The history

In the 1980’s, Margaret Thatcher and the Conservative Party introduced a policy whereby some council tenants had the right to buy the property they were renting, at a 33% to 50% discount on market value, depending on how long they had been tenants.  In addition, the government would provide the mortgage required by the tenant. If the property was sold on, part of the discount would have to be repaid.

Until the 1970’s, local councils had had the ability to sell properties to their tenants, but it was uncommon. By 1987, over 1 million homes had been sold off.

Half of the proceeds of sale of each house/flat were given to the local authority, but they were only allowed to use the funds to pay off debts, and not to invest in new housing until the debts were cleared.

Fast forward to the ‘New Labour’ Government of 1997 and the discounts offered to tenants were reduced from the original levels. In 2005, the rules were changed again to restrict sale only to tenants who had been renting for at least 5 years. Even then, if the property was sold on within the next 5 years, it had to be offered back to the council first.

Today, only 3 years’ tenancy is required, and the maximum discount offered in England is 70% on a house or a flat, or £73,900 (whichever is lowest). In London, the maximum discount is £103,900. (This goes up each year in line with the Consumer Price Index.)

The current position

In the next couple of years, an extension to this legislation will include Housing Authorities as well as local councils. This is called the Right to Acquire, and has been in existence for a while, but with much smaller discounts.

The government say that under the new scheme, homes sold will be replaced on a one-to-one basis by new properties with ‘affordable rents’. However, the National Housing Association say that since 2012, only 46% of sold properties have been replaced nationally – perhaps reflecting the time lag inherent in sourcing land and completing extensive construction projects.

Furthermore, the Department of Communities and Local Government (DCLG) confirm that although 1.88m council homes have been sold off in England since 1980 (37% of the total number), only 345,000 new properties have been built by local authorities to replace them.

Scotland is already scrapping this scheme, saying it can’t afford to lose the social housing, and Wales is following suit.

The waiting list for a council house currently stands at 1.36m households – some 3.4m people. Ironically, many are now renting privately from landlords who bought the very properties sold by the council in the first place.


PP                                                                                                                                10.08.15

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