In recent weeks, there have been rumblings from the government about introducing a new Right to Buy scheme to allow housing association tenants the right to buy their homes.
The government say this would help counteract the issue of ‘generation rent’ and give millions of people the chance to get a hold on the property ladder. Critics have pointed out that the policy has the added benefit of appeasing disgruntled tory backbenchers by revitalising one of Margaret Thatcher’s most popular policies.
Whatever the motivation behind it, just like the original Right to Buy scheme, this new iteration is likely to become something of a political hot potato.
Right to Buy: a primer
Before we go any further, let us whisk you back to 1980, when Margaret Thatcher first introduced Right to Buy. Don’t worry, we’ll give you a moment to adjust your shoulder pads.
Designed, by the Government, as a way to continue the tradition of Britain as a nation of homeowners, the Right to Buy Scheme gave council house tenants the opportunity to purchase their home from the council at a sizable discount. Depending on how long they’d been in residence, this could be up to 70%. The proviso was that if the new homeowners decided to sell up within ten years of the purchase, they’d need to give the council first refusal on buying the property back.
The scheme was hugely popular. Between 1980 and 2021, 2.6 million families have used it to buy their home. Though this has no doubt been a great opportunity for many of those families… unfortunately you’d have to be wearing some pretty strong rose-coloured spectacles to hail the whole thing as a success.
How would the new scheme work?
The idea of extending the scheme to cover housing association properties isn’t a new one. It was first floated by David Cameron’s government in 2015. A pilot scheme was launched in the midlands in 2018, despite growing costs and opposition. The Conservative Party promised more pilots in their 2019 election manifesto, though nothing has yet come of that.
Under the new scheme, eligible tenants will be able to access discounts of up to 70% on the market value of the property (or so we expect). Like the current scheme, this will depend on how long they’ve been living in it.
There is, of course, the question of how tenants might be expected to afford a deposit and a mortgage on even a heavily-discounted property. The government are reportedly considering whether banks should take regular housing benefits into account when assessing an individual’s income as part of a mortgage application. Unfortunately, we expect banks will also need to take into account the gargantuan growth of energy bills, which could well be rather a sticking point.
Actual affordability aside, it’s expected that around 2.5 million people could become eligible for the new scheme.
What about the critics?
We didn’t call this whole thing a political hot potato for nothing. There are lots of critics, and, as far as we can tell, they’re coming in from all directions. In truth, it’s difficult to know where to start here, but perhaps Polly Neate, the chief executive of Shelter, summed things up pretty well when she called the scheme ‘hare-brained’ and ‘the opposite of what the country needs.’
Below, in no particular order, is a taste of some of the criticism:
- It’s sadly fairly doubtful that housing association tenants will actually be able to afford to buy even heavily-discounted property without some significant government action to address the growing cost of living crisis.
- Given that they live in privately rented properties, large proportions of ‘Generation rent’ wouldn’t be eligible for the scheme. It might make more sense to explore options for offering home-buying support to these people.
- Some of the snarkier critics have pointed out that the housing associations have already sold off a lot of ‘more desirable’ properties .
- Significant numbers of any social housing sold off will not stay in the hands of the people who need it. Rather, as of 2017, Private Landlords own around 40% of former Right to Buy homes , most of whom will be charging more than double council rents (and, we don’t doubt, in some areas, it’ll be more like triple).
Of course, all this is before we’ve really got to the crux of the issue. Should local authorities and housing associations even sell social housing in the first place?
Isn’t giving more people the chance to become homeowners through Right to Buy a good thing?
Well, yes. Being of the conveyancing persuasion, we are generally very in favour of people buying homes. There are some excellent benefits to owning your own home. Clearly, we’d love to think that more people harbouring happy home-owner dreams would be able to realise them.
However, this is really a basic matter of subtraction. There are a finite number of social housing properties available in the UK. The more that social housing properties that are sold off, the fewer we’ll have left. And that means less homes in which to house the people who need them.
The sad reality is that the social housing sector is already in crisis. There were one million fewer social housing properties available in 2021 than there were before the first Right to Buy scheme was introduced in 1980. It would be nice to think that local councils might invest Right to Buy funds into building more social housing. However, history suggests otherwise. Local Authorities have only replaced a small proportion of council homes sold as part of the Right to Buy scheme .
Heavily reducing the amount of social housing available is clearly bad news for low-income families. Its also shocking for people at risk of homelessness. This is reason enough to secure its protection, but, alas, that doesn’t seem to be the reality of the world. Private landlords are also likely to see the affects on their portfolio in the long run. Indeed, it may have more of an impact if we point that out.
Taking away the safety net of social housing meansthat private landlords will struggle even more with the eviction processes. This can result in a year or more of lost rental income.
If you’re keen to buy a home and need advice about doing so, you know where to find us. You can rely on us to know our Right to Buy from our Shared Ownership from our Help to Buy. We’ll always do our level best to point you in the direction that’s right for you.