Right to Buy

The Right to buy scheme is a policy in the United Kingdom which gives tenants of council housing the right to buy the home they are living in. Currently, there is also a right to acquire for the tenants of housing associations. Between 1980 and 1998, it is estimated that approximately 2 million homes in the UK were sold in this manner.

History

Council-type housing stock in Weaverham, now mostly owner-occupied

Individual local authorities have always had the ability to sell council houses to their tenants, but until the early 1970s such sales were extremely rare. However, the Conservative-controlled Greater London Council of the late 1960s was persuaded by Horace Cutler, its Chairman of Housing, to create a general sales scheme. Cutler disagreed with the concept of local authorities as providers of housing and supported a free market approach. GLC housing sales were not allowed during the Labour administration of the mid-1970s but picked up again once Cutler became Leader in 1977. They proved extremely popular, and Cutler was close to Margaret Thatcher (a London MP) who made the right to buy council housing a Conservative Party policy nationally.

After Margaret Thatcher became Prime Minister, the legislation to implement the Right to Buy was passed in the Housing Act 1980. The sale price of a council house was based on its market valuation but also included a discount to reflect the rents paid by tenants and also to encourage take-up. The legislation gave council tenants the right to buy their council house at a discounted value, depending on how long they had been living in the house, with the proviso that if they sold their house before a minimum period had expired they would have to pay back a proportion of the discount. The sales were an attractive deal for tenants and hundreds of thousands of homes were sold. The policy is regarded as one of the major points of Thatcherism.

Proceeds of the sales were paid to the local authorities, but they were restricted to spending the money to reduce their debt until it was cleared, rather than being able to spend it on building more homes. The effect was to reduce the council housing stock, especially in areas where property prices were high such as London and the south-east of England.

200,000 council houses were sold to their tenants in 1982, and by 1987, more than 1,000,000 council houses in Britain had been sold to their tenants, although the number of council houses purchased by tenants declined during the 1990s.

The Labour Party was initially against the sales and pledged to oppose them in the 1983 and 1987 general elections, but had dropped this policy by the 1992 election because it was perceived as losing votes.

When Labour finally returned to power in 1997, it reduced the discount available to tenants in local authorities which have severe pressure on their housing stock; this includes almost the whole of London.

Some more recent ideas from the Localis think tank suggests that right to buy should be extended into equity slivers, which could be part earned through being a good tenant. This was part of a review of principles for social housing reform.

Right to buy rules after 2005

The Right to Buy rules were changed in 2005. Five years' tenancy is now required for new tenants to qualify, and properties purchased after October 2004 can no longer immediately be placed on the open market should the owner decide to sell. Such owners must now approach their previous landlord (Registered Social Landlords RSLs) and offer them "first right of refusal". If the RSL is unable to offer a realistic purchase price, then that landlord still has the right to offer the property to an alternative RSL.

All RSLs are now legally obligated to offer Right to Buy advice including advice on high fee-charging Mortgage Brokers. The time in which Right to Buy conveyancing should take place has been reduced from 12 months to 3 months. The Financial Services Authority now governs and regulates most types of mortgage-selling.

The Financial Services Authority's governance of Right to Buy purchases was partly to solve the widespread problem of Right to Buy mis selling from brokers and solicitors alike. Each had their own agenda and many were actively charging excessive fees which were then taken out of their client's discount. Fortunately, the above actions that have been taken coupled with the end of the boom period seem to have brought this problem under control.

Criticisms

The right-to-buy scheme has been criticised for the following reasons:

• Speculating investors were able to buy up council properties through deferred transaction agreements, hastening the rise in property costs;
• Commercially and socially valuable council assets being sold at below their market value or replacement cost;
• The remaining stock of council housing was concentrated in undesirable areas with little employment opportunity, further isolating and stigmatising the tenants.

Notes and references

• Salman, Saba (2006-09-20), "Opportunity knocks on the right doors", The Guardian
• Toynbee, Polly (2002-10-11), "It's on the house", The Guardian
• Jones, Colin; Murie, Alan (1999), Reviewing the Right to Buy (PDF), Birmingham: University of Birmingham
• Lord Evans of Temple Guiting. "Housing: Right-to-Buy Scheme," United Kingdom. Parliament. House of Lords. House of Lords Debates (Hansard), 642:4-6 (9 December 2002)

Further reading

• Jones, Colin & Murie, Alan. The Right to Buy: Analysis & Evaluation of a Housing Policy (Blackwell Publishing Ltd., 2006).

External links

• Financial Services Authority
• Right to Buy Changes (CTAB Mortgage Desk)
• The Right to Buy (Dept. for Communities and Local Government - formerly ODPM).
• House Price Crash
• The Conservatives Start Selling Council Houses (haroldhill.org)