Right To Acquire is based on housing stock that associations have already bought or developed, which they then offer back to their tenants at a rate that was previously much less discounted than that of the Right To Buy scheme for council tenants
At the end of his premiership, Boris Johnson announced a plan to extend the current changes to the Right to Acquire scheme, in a move to allow housing association tenants to buy homes that they have rented for a period of more than three years.
The change was designed to place housing association tenants on a more even footing with council tenants, allowing them access to the same rate of discount on their homes (up to £87,200 or £116,200 if located in London).
Housing associations may encounter significant problems with Right to Buy
Whilst the Right to Buy scheme is good for their tenants, housing associations may encounter significant problems. Firstly, the increased discount will lead to substantially higher numbers of tenants applying, leading to potential infrastructure problems as housing associations are inundated with new requests. Secondly, due to the rate of discount increasing, housing associations will find that the premium achieved for their sales will decrease in comparison to what they have historically received.
Without significant government investment housing associations may see their rental stock levels significantly reduced
Lastly, the Government has stated that, for each property sold, it must be replaced on a 1:1 basis, ensuring that rental stock remains stable. However, without significant investment from the Government to reimburse associations for selling houses at a discounted rate, some may find their rental stock levels significantly reduced, leading to availability issues in the medium to long-term.
It is important to note that the proposed changes have been brought in at a time when the country is heading into a huge cost of living crisis. Mortgage offers are being vastly impacted by rising inflation, particularly as tenants may be applying for mortgages worth up to one hundred per cent of the purchase price. If a mortgage is secured, the tenant then faces a lengthy application process, which in some cases may well time out.
If this happens, problems could arise for the tenant, as they will not be allowed to take advantage of any rises in the property price, whereas mortgage lenders may use this as a chance to reissue a mortgage in line with the higher price, rendering the property unaffordable once again. Additionally, housing associations are allowed to cancel sales if they deem them to be taking too long, which means they may benefit from the rising house prices whilst buyers will lose out.
Whether the scheme will be changed – or even be introduced at all – remains to be seen, as the Government is going through such significant changes. However, the proposals have both benefits and concerns, which will need to be considered before any decision can be made. Whilst this is a worthwhile initiative for tenants and the public to help them purchase homes and get on to the property ladder, there are downsides.
Additionally, to make the Right to Acquire scheme function and fit in with the current Right to Buy scheme would entail an enormous amount of legislative work, as well as work with mortgage lenders that many might not be willing to take on.
For the moment, the Government seems to be determined to continue, but the sheer amount of legislative change involved may lead to a few surprises when it comes to implementation.
The discount will give tenants a chance to get on the property ladder
The Government will have to seriously weigh up whether extending the Right to Buy scheme to cover Right to Acquire is the right thing to do, as there are pros and cons throughout. In general, the scheme is good for tenants as it makes home ownership a possibility; something that is currently out of reach for many.
The discount will give tenants a chance to get on the property ladder, as well as a chance to leave behind any potential social stigma that arises as part of being an housing association or council tenant. However, some tenants who are on the council Right to Buy scheme may be unhappy with this new development, particularly as Right to Acquire tenants will receive the same discount on the property, despite having to have lived in it for a significantly lower period of time.
This must be taken into consideration, to ensure that what is designed as an advancement to equality doesn’t pit one group of tenants against another.
How will housing associations get back the stock they sell?
Similarly, the Government will need to conduct in-depth discussions with housing associations to ensure that they have the infrastructure and ability to see this scheme through. It will take a great deal of collaboration to plan out exactly how the scheme would work, how it will be implemented and, importantly, how the housing associations will get back the housing stock that they sell.
Before the scheme begins, it is vital that housing associations are in a position where they are able to handle the extra work that will come as a result of more customers and applications, as well as being financially sound to meet all the fees of the sale process.
There are also concerns about the legal side of the sales; for example, there would need to be a robust process in place to ensure that the tenants who crowdfund from family and friends have assurances that they are the owners of the property and named on the title.
Similarly, family members may buy a property for an elderly relative but seek to name a member of a younger generation in the title. If a tenant buys a house and passes away within a few years, it may well be sold by the family at a profit. Whilst this is of course legal, there may need to be some requirements within the application process to ensure that these houses are acquired for their original purpose: for families to live in and make their home.
The developing political situation will have a large effect on the proposals, and as such it is difficult to predict what may happen in the future. However, if the new prime minister decides to go ahead with the plan to extend the scheme, it will be in their interest to ensure that the effects of this legislation on all stakeholders, both positive and negative, is addressed thoroughly before it is rolled out nationwide.
