Right to buy: how will it work?
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Version 0 of 1. What are the Conservatives proposing? Extending the right to buy to housing association tenants, offering discounts worth up to £102,700 in London and £77,000 in the rest of England, but not in Scotland or Wales, where right to buy is being abolished. There are around 2.5 million housing association tenants, and of those around 1.3 million have lived in the property for three or more years and would be given the opportunity to buy. The Conservatives will also require councils to sell the most valuable 200,000 homes from their remaining stock. Cash from the sale proceeds will, say the Conservatives, be used to create a £1bn Brownfield Regeneration Fund “to unlock 400,000 new homes on brownfield land”. Can the government force housing associations to do this? Yes, and it already does. About 800,000 housing association tenants already have a “right to acquire” their homes, but the discounts are relatively small, ranging from £9,000 in areas of relatively low house prices, such as Plymouth and Peterborough, to £16,000 in London. The new policy will extend the right to buy to a further 500,000 tenants, and give much higher discounts. How will it work in practice for tenants? Tenants will be able to apply once they have rented their housing association property for three years. If they are in a house, the discount from the market price will be 35%, rising to 50% if they occupy a flat. The longer they have lived in the property, the greater the discount; for every additional year someone has rented a house, they will qualify for an extra 1% discount, or 2% if they live in a flat. But the total discount will be capped in cash terms. Related: Conservative manifesto to offer 1.3m families right to buy housing association homes These terms are in line with the 2012 changes to right-to-buy legislation for council homes, which cut the rental period from five to three years and raised maximum discounts. After that, council house sales jumped from about 2,500 a year to about 11,000 a year. In high house price areas, tenants on low incomes will struggle to afford a mortgage even with the discounts. For example, a council home in south London could easily fetch £500,000 on an open market valuation. A 50% discount would be £250,000 but with the cap set at £102,700 it means the tenant would still need a mortgage of £397,300. This would cost the tenant about £2,100 a month to service before adding council tax and insurances. Tenants will also have to meet strict new mortgage affordability rules introduced under the Conservatives since the financial crisis. The sale of the more valuable council house stock will be handled differently. The Conservatives say that 15,000 high-value council homes fall vacant annually, and the forced sale of these will net around £4.5bn a year, which they say will help fund the new policy. How much will this policy cost? Precise figures are impossible, as it can’t be known how many tenants will take up the offer and exercise their right to buy. Initial estimates suggest a cost of £5.8bn, but critics say the total bill could rise to £20bn or more. To put these figures in context, total government spending on housing and the environment in 2013 was £25bn. The National Housing Federation says £5.8bn could finance 300,000 shared ownerships homes. Will this reduce the number of homes available for social housing? Almost inevitably. The Conservatives say every house purchased will be replaced “on a one-for-one basis” with more affordable homes and no one will be forced to leave their home. But the National Housing Federation, which represents housing associations, says that since 2012 only 46% of properties sold under recent right-to-buy legislation have been replaced. According to the Department for Communities and Local Government itself, 1.88m council homes in England have been sold since right to buy was introduced in 1980 by Margaret Thatcher – 37% of the total stock of council homes – while local authorities have built just 345,000 homes over the same period. Most housing associations have told the National Housing Federation that they expect to only replace half the homes currently being lost to right to buy, with one in 10 saying they don’t expect to be in a position to replace any at all. For example, Phoenix Community Housing, a housing association in Lewisham, south-east London, retains only a small proportion of the proceeds from each right-to-buy sale under current legislation. One of its homes valued at £205,000 in 2014 was sold through right to buy for £105,000, so the housing association only received £27,332 – far short of the amount needed to build a replacement. The national waiting list for social housing in England now stands at 1.36m households, covering around 3.4 million people. Mortgage brokers and estate agents, traditionally the strongest supporters of right to buy, also question whether it would increase the amount of housing stock. “It is a quick win to help boost a flagging home ownership sector and stimulate turnover in a market where transaction levels are now three times slower than in the 1980s. However, it carries no guarantee of greater house building as a result. The danger is that it will weaken the future capacity of the social renting sector to provide a safety net for those who cannot afford to house themselves via the private market,” said the Intermediary Mortgage Lenders Association. Will the sold-off homes end up in the hands of landlords? It is estimated – again there aren’t precise figures – that just over a third of properties sold under right to buy in London may now be in the hands of private landlords. An analysis by Tom Copley, a Labour London assembly member, estimates that at least 36% of right-to-buy homes in the capital are owned by landlords, who are in turn benefitting from housing benefit payments. “Substantial numbers of these are being let to tenants who are now supported by housing benefit, while many would-be council tenants have now been forced into the private rented sector because of the dwindling supply of council homes. The consequence of both phenomena has been that taxpayers are again being charged more to subsidise higher private rents.” Is right to buy popular with the electorate? Tory strategists hope that the policy represents a “right to buy votes” among traditional Labour supporters. Thatcher’s original right-to-buy policy is credited with helping her to win vital blue-collar swing votes. But that was before the extraordinary rise in house prices, and the parallel rise in private renting. Private tenants now number around 9 million and will feel excluded from a policy that benefits social tenants but not them. Polling by the NHF found that 60% of the public believe that it’s unfair that social housing tenants get a discount to buy their home while private renters do not. A YouGov poll carried out just a week ago found that Conservative voters are more likely than Labour voters to consider an extension to right to buy unfair, and more likely to consider it not a good use of taxpayer money. Ukip voters find it most unfair of all. |