Right-to-buy: A good thing or a relic of the past?
Right-to-buy, scheme introduced 45 years ago at a very different political time, has cost UK taxpayers almost £200bn, according to a report into the policy’s contribution to Britain’s housing crisis. To give context, the end of WWII was 35 years before 1980 when this policy was introduced, and the policy is now 45 years old. Is it therefore still a good thing or a relic of the past that needs scrapping?
The Commonwealth Institute recently published a report that described RTB (as it is known in housing circles) is one of the “largest giveaways in UK history”, it said the sale of 1.9m council homes in England had contributed to a situation where one in six private tenants in England now rents a former local authority home.
Right-to-buy was launched by the Thatcher Government as an incentive to older working-class voters (predominantly those who were bombed out in the War) to build a “property-owning democracy”. Although it helped millions of families into home ownership, it also dramatically depleted Britain’s affordable housing stock as the homes were not replaced. It also had another side-effect… a somewhat unexpected one.
As a Councillor I dealt with a reoccurring situation. Let me explain. A Council tenant (at the time paying £88 per week for their rent) would be approached by a loan shark. The loan shark would lend them the money to exercise their right-to-buy. Everything then goes fine for the first 12 months… The loan shark keeps the repayments manageable but then they hike the repayments. The former tenant, now the person who owes money to the loan shark then ends up in a situation where they can’t repay the loan. The loan shark then threatens them with eviction and the resident who is living there ends up on a vastly inflated housing benefit to cover the payments of the loan. The loan shark pockets the huge increase to fund their business and repeat the exercise. Over and over and over.
And there was absolutely NOTHING we could do. The properties are now rented out, often to tenants on housing benefit at a cost to Councils of more than £20bn year, while councils have lacked funding to replace the homes sold. The reality is that we’re in a housing emergency. Millions of people are stuck on waiting lists. Tens of thousands living in temporary accommodation that’s unfit and unsafe. All while homes that were once publicly owned are now profit-generating assets for private landlords and those opportunistic loan sharks.
Calculating the “opportunity cost” of these (legitimate or more questionable) sales, the Report said the former council homes were now worth an estimated £430bn after taking account of inflation and the surge in property prices since 1980. Of this sum, the thinktank said £194bn represented the value that was effectively given away when the homes were sold at a discount. Between the years 1980-81 and 2023-24, the discount averaged 43% on the prevailing market price.
The problem then was that Councils were not incentivised to build more homes. Historically, the London Borough of Enfield where I served as a Councillor had a construction arm that not only built thousands of homes in Enfield but also in other parts of London (and even further afield). That arm was dismantled at the time and for decades no new units were added to the housing stock. Our stock gradually depleted.
Then came the Blair Government with their PFI schemes and “Decent Homes Standard” (DHS). This again opened a can of brand-new worms. On order to qualify for the Government funding for DHS, every Council had to set up an Arms-Length Management Organisation (known as an ALMO). The Council tenants got new windows and doors and kitchens and bathrooms etc. but the leaseholders had to pay. I sat through so many surgeries with leaseholders who purchased their leases years ago under RTB who were now faced with unexpected bills.
The only way the DHS could be implemented required all the properties to be brought up to DHS. I remember one specific surgery where an 83 year old holocaust survivor came in and told me she is suicidal due to the £37k bill the ALMO sent her for the works. She didn’t owe a penny on her lease and her state pension ensured that she could live in relative comfort but there was no way she could get £37k to have all the work done to her flat. In the end all that could be done was for her to sell the lease (of course on the open market as neither the Council nor the ALMO had the money to buy her out.) She moved into a Council care home and six months later, I attended her funeral.
Home ownership rates have fallen since 2004, and have collapsed among young adults. From a peak of more than half of 25- to 34-year-olds owning their own home in 1990, less than a quarter of young adults are now property owners, leading to a boom in the vastly inflated private renting sector and many choosing to live with parents (if they have room but remember that there is now a generation of parents whose children are leaving home and the parents are still in rented accommodation).
The reports also said: “The severe financial straits facing councils should be seen in the context of a decades-long assault on local government, in which right-to-buy was a central pillar, denying councils discretion over how best to use assets that they had built… Now those assets are in dire shortage and councils still bear the heightened cost of seeing people through the housing crisis.”
Local government has been in “net disinvestment” in every year but one since 1988-89 – meaning it sells more assets than it builds. A report earlier this year by the Centre for Cities found that returning the number of affordable homes back to 2010 levels would cost the government £50bn.
The Labour Government has pledged a “social rent revolution”, allocating £39bn of social and affordable homes over the next 10 years, alongside a long promised (but yet to be revealed) reform of planning rules to support private sector housebuilding. However, critics have warned that the government could struggle to hit its target to build 1.5m new homes in total.
Angela Rayner is pushing to tackle Britain’s housing crisis by making sweeping changes to right to buy, including making it harder for tenants in England to buy their council home. Under the planned changes, eligibility for the scheme will be tightened. This will include extending the minimum time a council tenant must live in their home from three to 10 years before they can buy it at a discount.
But this is not going quite far enough. Right-to-buy is a relic of the past that should be displayed in a museum in the gallery of “catastrophic disasters”.