Right-to-Buy: The good, the bad and the ugly
14 Apr 2015 | COMMENTS: 0 | Author: Liberty Howard | News
This morning, in a bid to re-align themselves as the party of working people, the Conservatives set out a manifesto pledge to extend the Right-to-Buy scheme to a further 1.3 million housing association tenants across the country, providing them with discounts on the market-value of their properties of up to 70%.
David Cameron is hailing this policy as the foundation of a “property-owning democracy”, and with it is trying to appeal to the kind of voters that were won over by the scheme when Thatcher introduced it in 1979. Whilst allowing people – who might not otherwise have been able to afford it – to buy their own homes is always going to be a popular move with that part of the electorate, the scheme has some critics, who say extending it may make the housing crisis worse. There’s also no denying that it’s a costly policy to implement – and Labour have responded by saying that it’s “unfunded”. We’ve weighed up the pros and cons of a Right-to-Buy extension, and are bringing you our thoughts on who it might help and who it could hurt.
There’s no question that owning a home is something many aspire to. But with house prices continuing to rise, deposits and mortgage payments have to get bigger too; so getting on the property ladder can feel like it’s reserved for the wealthiest only.
An extended Right-to-Buy scheme will go some way to combating this, by enabling some of the most disadvantaged sections of our society to purchase a house – often the home they’ve lived in for many years already – giving them a secure place to live, at an affordable price.
In the property-owning democracy that Cameron speaks of, less families will be dependent on social housing as a result of Right-to-Buy, and it can be perceived to aid social mobility too – as the (relatively) small investment social housing tenants make in their property now, will result in a guaranteed home for future generations of their family – or a healthy return if they choose to sell it.
We live in a country where there’s not enough social housing to meet the current need, with almost 1.4 million families on the waiting list in 2014.
Although selling some council or housing association properties to their current tenants will reduce the number of people in social housing, local authorities will then lose those properties – taking Right-to-Buy tenants out of the social housing system in this way isn’t doing anything to free up properties for families on the waiting lists.
This wouldn’t matter if we were building affordable housing quickly enough, but currently, the state doesn’t commission and build homes for social housing, and it’s instead left to private developers – who will often focus on more lucrative projects such as properties for first-time buyers or buy-to-let investors. In 2013, the non-profit housing associations responsible for providing social housing only built 21,600 homes. If this trend continues, and the Right-to-Buy extension goes ahead after the election, we can realistically expect that far more than 21,600 tenants per year will take the government up on their offer – so the amount of available social housing will fall, and waiting lists will become even longer. However, the Government has stated that as part of the policy, local authorities will be required to sell off their most expensive properties when they become empty, and replace them with more affordable social homes; this is expected to raise £4.5bn, which could, in theory, be used to build up to 170,000 new homes.
As pointed out by many, this is a very expensive policy. The National Housing Federation estimates it would use approximately £5.8bn of taxpayer’s money – and even if we ignore the Labour Party’s accusation that this policy is “unfunded”, there’s still a lot of other things that much cash could be going on instead; the NHF suggests it would be enough to finance 300,000 new shared-ownership homes, which could be open to all for purchase.
Another thing is to consider that many of the 1.3 million poorest social housing tenants that this policy targets will be unable to afford or obtain a mortgage – even once the price of their house greatly is reduced, rendering the policy essentially worthless if only a few can actually participate in the scheme. Additionally, the Right-to-Buy scheme will still only apply to what’s known as “secure” council and housing association tenants – who, although they don’t own their properties outright, are not likely to be kicked out, and are already benefiting from some of the country’s cheapest rents – so they already have the secure place to live at the affordable price that the policy is trying to give them.
However, many others aren’t so lucky, and people frozen out of the property market in other ways – unable to save a deposit because of expensive private rents, or forced to live with parents due to low wages – will not be receiving any assistance despite, arguably, needing it more.
Finally, the reality is that many ex-council homes end up being sold for a huge profit – and often to buy-to-let investors. Across London, at least 36% of one-time council homes are now rented out privately – for as much as £230 more per week than they cost when they were still social housing – and oftentimes, these tenants are claiming housing benefit, so the state is effectively paying rent for a property it used to own. In the worst-case scenario, the result of a Right-to-Buy extension could perpetuate the housing crisis even further, by driving up house prices and rents even more, and making the property market even more impenetrable to first-time buyers and those on lower incomes – the opposite of Cameron’s vision of a property-owning democracy.