Should Right to Buy be scrapped?
Melanie Rees, head of policy and external affairs, Chartered Institute of Housing
Our analysis shows that more than 165,000 of the most affordable rented homes have been lost across England in just six years.
We are predicting that loss will reach 199,000 by 2020 – making it increasingly difficult for people on lower incomes to access a decent home at a price they can afford.
What is behind these stark figures? While some homes have been demolished and many more have been converted to ‘affordable rent’ by housing associations, the biggest factor in the continued loss of homes for social rent is the Right to Buy scheme.
That is why we believe the time is right to suspend it – to stem the loss of homes for social rent, which are often the only genuinely affordable option for people on lower incomes. Right to Buy has already been abolished in Scotland and Wales, and new legislation to bring it to an end in Northern Ireland (where it is known as the ‘house sales scheme’) is on the way, too.
In England, more than 1.9 million homes have been sold under Right to Buy since it was introduced in 1980. That would not necessarily be an issue if they were being replaced – existing council tenants would be able to buy their home while another home for social rent would become available for the many people on the waiting list.
However, that is simply not happening. According to the government’s latest figures, since Right to Buy discounts were increased in April 2012, 72,929 homes have been sold, while just 20,746 have been started or acquired to replace them.
We support the principle of helping tenants move into home ownership if that is what they want, but it cannot be at the expense of other people in need. We know that the government is consulting on ways to make it easier for councils to replace the homes they sell under Right to Buy, which is welcome. However, we still believe ministers should suspend Right to Buy to stem the loss of social rented homes, remove the barriers stopping councils from replacing homes sold and look at more effective ways to help people access home ownership.
Not only are we failing to build enough homes for social rent, but Right to Buy means we are losing them when millions need genuinely affordable housing more than ever.
Nicola Arbon, managing director, The Mortgage Hut
Back when Margaret Thatcher introduced Right to Buy, it was seen as an opportunity for those who struggled to get on to the property ladder to have that opportunity. It generated cash for the government and the purpose behind it was to allow people to buy a property and the government to help build more social housing. As time has moved on, the Right to Buy scheme has continued to work as an effective means for long-term tenants in social housing to take that step up and acquire their own home.
In England, you can get a maximum discount of £80,900. Inside London that rises to £108,000 off the market value of the property, giving social housing tenants an amazing opportunity to own their own property, the house that they have enjoyed living in for, in some cases, over 20 years and with no need for a deposit.
For lenders, Right to Buy is sometimes seen as low risk because the equity that is given away by the council is seen as the purchaser’s deposit. That deposit enables the social housing tenant to not only own their own property but generally allows for a lower rate of interest, which in some cases can be even lower than the heavily subsidised rent that they are already paying the local council.
In a market where such a high upfront deposit is required it takes a social housing tenant long enough to get in to the social housing itself, with some councils having waiting lists of up to 10 years. Once they are in there, being able to save the deposit to purchase a property could take years, if not decades.
The Right to Buy scheme effectively allows people to transition to home ownership, providing more stability and security.
In our view, the Right to Buy scheme is one of the best things that the government has ever done for the general public. A lack of knowledge and awareness of it does the scheme a huge disservice.