Judith Barnes was the Leader of the Conservative Group on Camden Council for eight years and practised as a lawyer for most of her professional life.
Housing regularly comes high on the list when the public’s concerns are canvassed. This has turned the spotlight back onto social housing, reviving questions about the sale of council houses. Time, perhaps, for a rethink on how Right to Buy operates?
Right to Buy has never been without its critics but it has proved its worth over the years. The benefits are undeniable. Hundreds of thousands of council tenants have been given the chance to own their home and pass it on to their children. Many of them were doubtless in need of a subsidised home when they first became council tenants, but had long ceased to qualify, so it removed the burden of subsidising their housing from the taxpayer.
It all came at a price of course, and not just the cost to the public purse of the discount allowed; it removed a home from the stock of council housing available for those who did need a subsidy from the taxpayer. For many years governments, whether Conservative or Labour, largely addressed this (if at all) by switching provision of affordable housing to housing associations rather than councils.
The result was that, by the mid-2000s, the amount of social housing in the hands of housing associations was beginning to outstrip that provided by councils and the total social housing stock in England had reduced from some five million in the early 1980s to just under four million. It did not, of course, follow that a million households in need went without homes; housing benefit was available for those renting in the private sector.
Then came the expansion of the EU in 2004, which led to a marked increase in the population of the UK, while the financial crisis saw a drop in the number of houses built in the private sector. So housing generally has been in short supply in recent times, pushing the cost of buying beyond the means of an increasing proportion of the population and driving up rents.
This prompted a pivot back towards council housing by the Coalition Government and subsequently the Conservative Government. Since 2012 controls on the use of receipts from Right to Buy sales for replacement housing have been loosened, the Government has made grants for new social housing available and relaxed the restrictions on local authority borrowing to build social housing. This year’s February budget cut interest rates for investment in social housing by one per cent.
But to many, it will not make sense that local authorities are empowered to build social housing and at the same time forced to sell it. There is a way to avoid this contradiction, while preserving Right to Buy and the benefits it brings. It would involve revamping Right to Buy so that it is no longer a right to buy the home the tenant occupies, but a right to use the discount to buy a home in the private sector.
This is the way it would work:
- The tenant would get a valuation from the Council of the market value of the council-owned property the tenant occupies and the amount of the discount for which the tenant is eligible – just as the tenant would now, if thinking of exercising the Right to Buy.
- Instead of buying the council-owned property for its market value less the discount, the council would pay an amount equal to the discount towards the price of a property the tenant has chosen to buy in the private sector.
- The tenant would finance the balance of the purchase price by getting a mortgage – just as the tenant would if exercising Right to Buy in its current form.
This reform would deliver many benefits. The home vacated by the outgoing tenant would become immediately available for a new tenant. The proceeds of a sale would be foregone, but, with the sale price discounted, those proceeds of sale are likely to be less than the cost of building a new home; so the change would mean savings for councils in delivering vacant homes for rent. It would increase the number of people able to buy in the long term, as a tenant exercising the Right to Buy would free up a home, whose new tenant could, in turn, be eligible for Right to Buy.
There are obvious benefits for the tenant, who would have greater choice in what to buy and where, and, in particular, the size of the property. Those looking to downsize after raising a family could opt to buy a smaller home, thus reducing the proportion of the price they would otherwise have to finance themselves (and also mitigating the under-occupation of homes by older people, a problem which affects all sectors of housing). Of course, buying in the private sector might have been difficult in recent times, given the shortage of housing. This is changing though, with the number of houses started and completed in the private sector in England in 2017/18 at its highest since 2007/8.
Would tenants still buy if they had to look for a home in the private sector? Experience to date suggests they would. Some councils run schemes under which council tenants are offered a payment towards a home in the private sector if they agree to move out of their council home. These schemes have, according to Shelter, proved popular even though the payment offered is less in many cases than the discount obtainable on exercising the Right to Buy. (Such schemes, which have been a valuable adjunct to Right to Buy, would no longer be necessary if this proposed reform is adopted.)
Here, then, is a reform that could appeal to council tenants – and play a valuable part in providing social housing faster and more cheaply than under current policy.