‘Right to buy’ – right or wrong?
What’s ‘Right To Buy’?
The Right to Buy policy, which hit the news at the start of May when it was revealed that Boris Johnson was considering reviving it (a tidbit dangled just before the local council elections), finds its origins in the early 1980s. It was unveiled by Margaret Thatcher at the start of the decade as part of the Housing Act – millions of council properties were transferred to housing associations and their occupants were given the chance to buy them at heavily discounted prices. But since fewer than five per cent of the houses lost to the social/council sector were ever replaced, it’s always been a controversial measure. While it was a huge social mobility catalyst for nearly two million households, it left the social housing stock impoverished, leading to enormous waiting lists and ever more restrictive eligibility criteria. Now, according to press reports, it’s under consideration for revival by the current government in an attempt to “help generation-rent get on the property ladder”. Currently, around five million people rent from housing associations in England.
Right to Buy in 2022
What’s slightly confusing about the recent reports is that Right to Buy never went away. Council tenants with secure tenancies are still eligible. As of May 2022, the maximum discount for Londoners is £116,200, increasing each year commensurate with the consumer price index. The full discount will be determined by how long you’ve lived in the property, the type of property (ie flat or house) and the overall value of the home. For houses, the discount is 35%, provided you’ve been a public housing tenant for three to five years. The discount then rises by 1% for every additional year you’ve been a public sector tenant. The discount is then capped when it reaches 70% (unless it’s already hit the £116,200 London maximum). For flats, the discount is 50% and, after the same initial period, it rises by 2% a year, maxing out at the same levels (70% or £116, 200). Some factors negatively impact the discount. For example, if the landlord has spent money on maintenance of the property, this will reduce the available discount. Right to Buy works differently in Scotland, Wales and Northern Ireland. In Scotland, it was suspended in 2016 to prevent further depletion of social housing stock.
Right To Acquire
With housing associations, the government scheme is called Right to Acquire, and comes with more stringent eligibility conditions. To acquire a housing association property, the property has to have been built or purchased by the housing association after 31st March 1997 or transferred from council ownership to housing association ownership after 31 March 1997. Your housing association has to be registered with the Regulator of Social Housing. Right to Acquire is open to people whose properties are owned not just by housing associations but also the armed services and NHS trusts/foundation trusts.
Preserved Right to Buy
What happens to the Right to Buy rights of council tenants whose properties are transferred to another landlord? In many cases, they retain the right to buy under a condition known as ‘preserved right to buy’. Not only that, the right to buy remains with that tenant if they end up moving home to another property owned by the new landlord.
Voluntary Right to Buy
So – it’s not entirely clear exactly what the government would be bringing back when they speak of reviving Right to Buy. Most likely, as has been reported, it could be that they plan to extend Right to Buy to housing association tenants currently only eligible for the more restrictive Right to Acquire scheme. Judging by a pilot scheme they launched in the Midlands in 2018, known as Voluntary Right to Buy, this would seem to be the case. Voluntary Right to Buy, an idea that arose during the David Cameron era, entitled some housing association tenants to buy their homes at discounts similar to those of the Right to Buy scheme. It’s possible that the government mutterings of 2022 pertain to plans to extend this new scheme. The findings of the original Midlands pilot can be read here.
What Does it Mean for the Housing Market and Removals?
It’s not immediately clear what, if any, impact an extension of Right to Buy to housing association tenants would have on the wider market, though it’s possible, if take-up were comparable to the original 1980s scheme, that an additional two million people would become owners. Of these, some would eventually sell up, moving home to properties with no social housing history, adding energy and movement to the housing market, and the removals and storage industry. Between 1980 and 2014, 1.8 million properties were bought via Right to Buy. It enabled people with below-average incomes to become owner-occupiers, with mortgage repayments that were similar to their rent payments. People who’d have otherwise been unable to afford it, managed to get a first foot on the property ladder. It led to increased mobility not only in the housing, removals and storage markets, but also in social terms because, after three years, Right to Buy owners are allowed to sell up without paying back the discount. This means they can move to a completely different area, rather than being consigned to the one decided for them by the housing authority. However, there were unintended consequences, too. Right to Buy properties often ended up in the private rented sector; Housing Benefit expenditure grew as people who once might have been eligible for social housing were forced, instead, to look to the private sector; some Right to Buy owners struggled with repair costs they hadn’t foreseen and service charges they hadn’t anticipated; in some remote areas, whole villages lost 100 per cent of their affordable housing; Right to Buy owners sometimes fell victim to property market slumps, ending up saddled with negative equity. And, most notoriously, failure to replace social housing stock has exacerbated the widespread problem of housing affordability.
And What About the Impact of Interest Rates?
The news of the Right to Buy revival comes just as interest rates are expected to rise, plus inflation due to exceed 10 per cent in 2022. In April, before the Bank of England raised rates, house prices increased by 1.1% compared to March. And despite what lies ahead, that buoyancy is expected to continue, just at a slower pace. Experts say we’re nearing the end of an era of double-digit annual growth, but not on the cusp of a crash. Home removals, storage and housing look set to remain resilient through the year and beyond.