Industry Comment | Right to Buy — the case for reform

Industry Comment | Right to Buy — the case for reform

Matthew Warburton, Policy Advisor at the Association of Retained Council Housing, discusses the findings of research commissioned from Savills by ARCH, the LGA and NFA into Right to Buy, which presents a powerful case for review and reform of the current policy.

“Revitalisation” of the Right to Buy for council tenants was one of the major policy initiatives of the Coalition Government. From 2012, discounts for buyers were raised to 35% (houses) and 50% flats after three years tenancy, and the maximum discount substantially increased. The pre-existing regional maximum discounts were abolished and replaced by just two, one for London and another for all other English regions. The maximum discount has been increased annually in line with CPI since then. With these reforms came a policy commitment to one-for-one replacement of the resulting additional homes sold.

Over the next four years, the policy had a major impact on sales in all regions, which peaked at 13,433 in 2016/17. London sales peaked earlier, in 2014/15 and have since declined in numbers, but in the Midlands and Northern regions, a substantial rise in sales numbers has been sustained into the current period. Nationally, sales are now running at around 11,000 a year. Research commissioned from Savills by ARCH with the LGA and NFA estimates that, on current policy, this annual rate of sales is likely to be sustained into the future, with a further 100,000 sales in the period 2021 to 2030.

It is widely known that the one-for-one replacement policy has not been a success. Fewer than half of sold homes have been replaced in any year since 2012. Recent changes to the rules on use of RTB receipts are unlikely to reverse this trend. Without more radical reform, only 43,000 replacement homes are likely to be built by 2030, leading to a net loss of 3.61% of the council housing stock.

One major reason for this is that, in areas of the Midlands and North where house prices are low, the same maximum discount applies as in the South and East, yet sales receipts are insufficient to fund construction of replacement homes. At the same time, the discounts available are more than enough to make house purchase affordable to typical local tenants; they could be significantly reduced without having much impact on the volume of sales, but generate substantially greater receipts to fund new homes.

Right to Buy is an expensive policy, although its cost to the public purse is not visible in the public accounts. RTB discounts to council tenants totalled £6.7bn in the 10 years to March 2022. Yet Savills’ analysis suggests discounts are poorly targeted and more than are needed by many of those who receive them. At the same time, over-generous discounts are making it all-but impossible in many areas for local authorities to replace the homes they sell. Taken together, these findings add up to a powerful case for review and reform of the current policy. The case for reform will become even stronger from April, when the maximum discounts are raised in line with CPI by over 10%, at a time when house prices are falling while the cost of building replacements continues to rise.

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