Right to Buy, but Right Solution?

Sean Hallam, Freeths, Nottingham

The new government’s legislative agenda for the year ahead was unveiled in the Queen’s Speech to Parliament last week. Amongst the proposed bills revealed in the speech is the Housing Bill, which will see an extension to the Right to Buy scheme.

Under the previous incarnation of the Right to Buy scheme it was only council tenants who had the right to buy the homes they had previously rented. But when the Housing Bill becomes law housing association tenants will acquire that same right.

Who is eligible? 

Potential buyers must have been housing association tenants for at least three years meaning up to 1.3m housing association tenants will be eligible in England. Around 500,000 housing association tenants are already eligible for some discounts. So the new scheme will extend rights to a further 800,000 tenants, and increase the discounts available.

How much of a discount will be offered?

For those eligible, discounts start at 35% on a house and 50% on a flat. The maximum is 70%, but that is currently capped at £77,900 outside London, and £103,900 in the capital.

How will it be funded?

Under the government’s new Housing Bill, Local Authorities will be required to sell off their most valuable council houses, whenever they become vacant. The government estimates this would raise £4.5bn. The councils will then have to build replacement homes with the money raised, and the surplus will be used to fund Right to Buy. The government will make up any difference.

Will it mean fewer homes for social rent? 

The government argues that by selling off housing association homes, but by requiring a replacement to be built, the scheme will, in effect, double the number of homes available. It will also raise the proportion of home-owners in England, which has fallen over the last few years. But the National Housing Federation (which represents all the UK’s housing associations) argues that since 2012, only 46% of homes sold off have been replaced by new ones, despite a requirement for local authorities to do so. One problem is that councils – particularly those in urban areas – cannot find enough land to build on.

How many tenants will be able to afford to buy their homes?

Around 15% to 35% of housing tenants eligible for the new scheme will be able to afford to pay a mortgage, according to the NHF. That means around 221,000 households might be keen to take up the offer – but potentially fewer than that if mortgage rates begin to rise, as expected, over the next couple of years.

It will be interesting to see the uptake in the scheme and the effect it will have on the social housing market.