Right To Buy is Being Extended To Private Tenants. What does it Mean For The UK Build To Rent Sector?

Devised by then Prime Minister Margaret Thatcher in 1980, Right To Buy was a program introduced for council housing tenants. It is now widely regarded as the key reason for the housing shortage in the rented sectors. In 1980, the Thatcher government passed the Right to Buy legislation. The act allowed many local authority tenants to buy their homes at a discounted rate. It was conditional on the length of tenancy. A discount was announced to assist tenants with low incomes.

They had to pay back these discounts if they sold the property within five years of purchase. The Right To Buy housing scheme may now be extended to non-council tenants. After months of ambiguity and speculation, the UK PM announced the plan to extend the scheme to housing association tenants on 9 June 2022. The scheme allows people living in social housing to buy their homes at a discounted price ranging up to 70 percent of their market value.

Not surprisingly, many questions are being raised about whether expanding the Right to Buy is a good idea. Is it truly a good policy? And more importantly, can it solve the housing crisis? As usual, there are supporters and detractors of the scheme.

Expanding the Right to Buy Scheme Can It Aggravate The Social Housing Deficit?

Reports state that more than a million people are waiting for social housing. Currently, they are living in a sorry state in temporary accommodation or privately rented homes that are expensive, perhaps run down, not professional managed, not energy efficient, and not easy to sustain. Since Right to Buy was introduced, tens of thousands of council homes have been sold through the scheme.

The waiting list for social housing keeps growing because most social homes lost in this expansion process are not replaced. But it is easier said than done. Worse those Councils that are now building often build to sell (at full market price) to replenish the public purse, rather than for social good. 

Replacing Sold-Off Social Homes Will Be Costly

While the government has asserted that any social homes lost to this new policy will be replaced, it will not be easy. Housing associations must be provided compensation for the homes they will lose. Also, the government must find money for compensation purposes. From the announcement, it is clear that the funding for the purpose will not come from the Affordable Homes Programme, as that is earmarked for new social homes. Its also not clear what kind of discount will be available to housing association tenants.

The growth of housing association homes has not gone unnoticed, whilst their grant funding has been reduced, their ability to build for profit, ability to raise cash cheaply on the bond market and outbid other developers and unrivalled access to Council regeneration areas as well as belated digital transformation programs are all contributing factors.  So if one counts both housing association homes and council homes net growth is still positive.  The challenge is that the divergence between market rent and affordable rent is widening, in part due to single households and young professional sharers driving demand.

Expanding the Right to Buy May Not Boost Home Ownership

Right to Buy helped many households buy their homes back when it was first introduced. In recent years, however, there has been a dip in the number of people buying their council homes. There is no precise data on how many housing association tenants could benefit from the offer with the high cost of living, relatively stagnant wage growth, spiraling inflation, and surging interest rates.

Why Are Housing Experts Worried?

Many leading housing experts say they are not impressed with the decision to extend the Right to Buy scheme. They say the move looks more political than practical. If not handled properly, it can benefit private landlords more. It is no secret that homes sold under the scheme in recent years have ended up with private landlords.  It is debatable whether clawing back discounts should early resale occur is wholly effective.

Conclusion

There is clear evidence that extending the Right To Buy scheme to private tenants will not achieve the desired goals or benefits. Experts say the government must focus more on building secure social homes. The country needs more such homes to deal with the ever-growing problems in this sector.

References:

https://www.theplanner.co.uk/news/right-to-buy-to-be-extended-to-housing-association-tenants

https://www.scottrees.com/right-to-buy-scheme-extended-to-housing-association-tenants/

https://inews.co.uk/news/expanding-right-to-buy-helps-private-landlords-hurts-social-renters-and-wont-fix-the-problem-1678702

https://www.landlordtoday.co.uk/breaking-news/2022/7/charity-wants-thatchers-right-to-buy-extended-to-private-tenants

https://www.gov.uk/right-to-buy-buying-your-council-home