Sarah Rowe, director and head of social housing at Freeths law firm, examines the extended Right to Buy policy and whether the government can deliver on their promise
Before the leadership election was called, the Government under Boris Johnson, announced that it was considering whether to extend the Right to Buy policy to the circa 2.5 million people currently living in housing association properties. The timing of the announcement, just before the Local Elections back in May, did make some wonder whether it was purely headline grabbing by the Government.
The idea, however is nothing new; David Cameron made this a manifesto pledge in 2015, but it wasn’t until 2018 that Theresa May’s government launched a pilot in the West Midlands to test the policy. The pilot was not a particular success and only 1,892 homes were sold against the target of 3,000.
How much money will housing associations’ be able to borrow against their existing stock?
The Government’s strapline is that the policy was all about helping “Generation Rent” but behind the politics, there are serious questions to be asked including how this would impact how much money housing associations’ would be able to borrow against their existing stock. For most providers, this is a major element of how they fund the development of affordable housing. If their ability to borrow is reduced alongside the loss of units under a Right to Buy scheme, the result will surely be a worsening of the affordable housing shortage?
I don’t believe anyone questions the notion that homeownership should be available to all those who want to achieve it, but there are existing mechanisms, such as shared ownership, (which allows ‘staircasing’ to full ownership) and Rent to Buy, as well as the generous subsidies available through Help to Buy and other similar schemes already. The statistics also show that the number of first-time buyers is at a 20-year high, due in part to the Help to Buy and Mortgage Guarantee Schemes. Contrast that against the fact that we have 120,000 children across the country in temporary accommodation awaiting a more permanent home.
Lack of affordable rental tenure
According to Homes England figures, a total of 5,606 affordable homes started in 2021-22 were for Affordable Rent. There were 4,778 starts under schemes including Shared Ownership and Rent to Buy. The remaining 1,981 were for Social Rent. This low delivery of Social Rent homes combined with a lack of Government funding for the tenure between 2011 and 2016 has resulted in a real lack of more affordable rental tenure. This has left people struggling to find somewhere truly affordable to rent which would then give them a greater chance of saving a deposit to buy their own home.
Local Government Association slams Right to Buy extension
The Local Government Association, which represents councils who are all too aware of the impact of the original Right to Buy policy, has slammed plans to expand it. Those using the existing Right to Buy get an average discount of 42% on the property. This means councils receive little more than half the market value of homes sold which according to the LGA has resulted in the taxpayer spending £6bn on “unsustainable” Right to Buy discounts in the last 10 years.
The LGA has been urging the Government to give councils new powers to set Right to Buy discounts locally and to be able to keep all the sales receipts with the subsequent ability to combine them with other grant funding to fund replacements. Amendment of the existing Right to Buy, therefore appears to be where the focus needs to be as opposed to looking at any extension of it.
Turning to the issue of replacements, Michael Gove, Housing Minister until June 2022, acknowledged that the policy could not result in the depletion of housing stock and for every property sold under the right to buy another had to be built. Agreed, but the Government isn’t however in charge of selling or building so it has no way of guaranteeing this and it isn’t even as simple as selling one, building one, what is even more crucial is that the replacement is like for like. This fly-in the ointment combined with a planning system at breaking point, inflation-linked rising build costs and the added costs for housing associations of decarbonising their existing housing stock to meet government net zero carbon targets means stock replacement is a pipe dream.
Unstable cabinet of housing ministers
The grasping at straws that this proposed policy show has undoubtedly been contributed to by the fact that we have seen 12 different housing ministers in 12 years. Truss, so far, has remained quiet on this topic and in general on how she would tackle the housing crisis. Truss’ only foray into the topic has been to promise a review of the system to look at allowing rent payments to be used as part of the affordability assessment for a mortgage. It’s a positive step but alone would simply be tinkering at the edges.
So, what are the alternatives? If elected, Labour has said they would look to redefine affordable rent at around 30% of household income as opposed to it based on up to 80% of local market rent as they quite rightly point out that in an overheated rental market even 50% of market rent, which is what Social Rent is, isn’t affordable. The Home Builders Federation has endorsed the policy of reducing “affordable rent” and called it “workable”, but they did go on to say that other policies such as giving priority to first-time buyers needed more consideration. As always, the devil is in the detail.
The UK is suffering from a chronic undersupply of new homes
Ultimately all roads lead back to the fundamental issue we have in the UK of a chronic undersupply of new homes both market and affordable exacerbated by an expanding population. Add to this mix, record low-interest rates and other recent government policies which have sought to prop up house values and the result is a truly toxic mix that has resulted in house prices increasing by 74% in only ten years.
In September 2021 Lucy Powell, the then Shadow Housing Minister, announced that to help tackle the chronic undersupply “Labour will give local authorities new powers to buy and develop land for housing, and revitalise town centres, by reforming arcane compensation rules. This could generate up to 100,000 new homes a year, much of which would be social and affordable.” The principle is sound (although I am not sure where the 100,000 figure has been plucked from) but everyone in the profession knows it won’t be a quick or easy fix and certainly won’t be enough on its own. We are still, therefore, left with what is clearly the hardest nut to crack, the actual delivery of these homes.
Selling the country’s existing social housing stock will create more problems
The consensus is that opening the door to selling off the country’s existing social housing stock will almost certainly create more of a problem than a solution. This is precisely what happened when the Right to Buy policy was first introduced and part of the reason why we are in the midst of the housing crisis that the country currently finds itself in – perhaps another case where the powers that be have failed to learn from past mistakes?
What we really need is for any future Government to think beyond winning votes so that housing policy is formed based on helping future generations, not just the next one. This combined with some continuity and dare I dream, cross-party collaboration, is what is really needed to help fix a problem that continues to plague us.
“ has resulted in the taxpayer spending £6bn on “unsustainable” Right to Buy discounts in the last 10 years”.
Both myself and husband work and hope to buy my housing association home and I’m also the taxpayer! The way I see it, I would have spent much less on a mortgage for this property but couldn’t afford to save for a deposit. I’ve spent more in rent, hence I would have paid off more than the discount amount on a mortgage amount had I have been able to buy. The housing association and council do profit from its tenants. The ones that work at least. I plan to stay here and should have the right other people have to buy a property but due to circumstances not everyone is able to do so.
The housing crisis would be there regardless. UK population doesn’t help. We’re getting jam packed like sardines, but let’s just blame the housing…
Irene
I agreed with you Georgina, I have been in my property for 12 years and never missed my rent payments. As you rightly said, the council and housing association do benefits from the working tenants and we should have the right to buy our house like the council tenants . The housing problem has nothing to do with housing association tenants having the right to buy, but government policies are the issues.
I have found it is all in moral. Because the housing stock can be sold of if the housing association does not want to carry out the work . But won’t sell to family’s trying to get on the ladder. As a tenant it is so frustrating when the work is out of your control and never dun to a standard. When you spend so much money trying to build a family home . And in the long run the more you try to get people on the ladder the more tax is pain in . People get updated houses instead of being given property s that need so much work just because they can not get a large deposit together. If it comes out know the way the market is it will only be giving us off what it’s gone up the last few years . Waiting for this I think has pushed us completely away from ever owing our own home . As 10 years ago when I voted for this was going to be hard I think I need to give up hope . As our jobs haven’t gone up in the last 10 years
I find that this discussion goes on ahead without the consent or even interest of those that would potentially benefit by it:
I have yet to have someone explain how HA s lose money on homes sold in London in particular given the overinflated value that these homes currently are sold for, in comparison with the cost of building them originally.
Many of these homes were made for the equivalent of around £30k or below. Now with the same homes being sold for 10x the amount, HAs are gaslighting prospective buyers by claiming that this would somehow impact their model. Well perhaps the HA executives ought to consider their pay and how much they are spending on new builds and whether they are getting value for money.
The claim that homes sold mean that homes are now no longer available to renters on a waiting list is more gaslighting: residents who can’t and don’t buy remain in the same property they would otherwise purchase and continue to live in, or purchase and later sell, the proceeds allowing multiple properties built as a replacement and a tenant no longer being housed by the housing association or dependant on indirect government subsidy and otherwise a net contributor.
What we hear instead is envy politics, or arguments that don’t make sense. All without the perspective of potential buyers, which undercuts the contradicts the condescending primer for such articles which claim to empathise with the desire to own a property, to obtain capital within society and in many cases become more financially secure – the empathy only goes so far as to acknowledge this, but not far enough to seek the views of the people they claim to empathise with.