Revived right-to-buy scheme will fail to deliver, says Hometrack
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The government’s plans for a revived right-to-buy scheme will fail to deliver the one-for-one replacement rate promised, according to a report on the initiative by Hometrack.
The insight paper, published today, says the scheme is likely to result in a shortfall because the average capital raised per sale would be less than the cost of building a new property.
The government is proposing to reinvest capital from right-to-buy sales in new housing to ensure the level of stock does not fall - a so-called one-for-one replacement.
But Hometrack estimates that to deliver one new home would require on average 1.4 right-to-buy sales, meaning a one-for-one replacement would require extra subsidy in the form of low cost public land or a reliance on right-to-buy sales of above average value property.
It says the average discount required to make right-to-buy affordable to existing tenants is 40% or £50,800 – significantly higher than the current average of 25% but also more than the government’s proposed cap of £50,000 on discounts.
In London the discount required to make right-to-buy affordable is as high as 58% or £128,000, so Hometrack argues the proposed cap will limit take-up in areas where property is valued higher.
The firm also raises concerns about the number of people able to take up right-to-buy.
It says that access to mortgage finance and the fact that less than a fifth of tenants are in full-time employment mean that only a small proportion are likely to be able to access right-to-buy scheme.
Richard Donnell, director of research at Hometrack, says: “Our figures point to a shortfall in the government’s anticipated replacement housing with the right-to-buy reforms as they stand.
“The £50,000 cap means that take-up is more likely to be in the most affordable areas of the country but with a lower level of receipt per sale than currently.
“This impacts on the ability to achieve a one-for-one replacement rate and it seems likely that extra subsidy in the form of development on low-cost public land will play a vital role in fulfilling this policy objective.”
He adds: “A higher discount is likely to see an increase in right-to-buy sales but the real challenge will be ensuring a one-for-one replacement at a time when the pressure is to grow the overall stock of affordable housing.”
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Readers' comments (1)
stephen budden | 3 Feb 2012 3:22 pm
i live in the south of england where there is a cap of 38,000, a 50,000 cap meaning an extra 12,000 will still put me out of reach of buying my home. My home is presantly valued at 200,000 meaning a a morgage of 150,000 which on the open lending market would be fine but you are penalized with a right to buy morgage with higher interest rates.
I feel if i could get 50% uncapped i would be in a position to buy plus give 100,000 towards a new home plus giving susidy to another home where property prices are lower.
Regards Steve
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