Former local authority properties can be an affordable step onto the housing ladder. But are they a sensible purchase?
I admit I was nervous as I walked down the dimly-lit street to my friend’s new flat. A scary-looking tower block loomed to my left and a row of almost-derelict garages stood to my right. My own flat in a tree-lined leafy suburb a few miles away seemed a different world.
Would we make it safely inside?
Fortunately we did and my attitude changed completely. Inside the flat was lovely – nice and big with a small conservatory and garden. I could almost relax and forget my perceived near-death experience.
Call me a snob, but I gave ex-local authority the swerve when I was looking for somewhere to buy. Perhaps I was wrong?
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Right to Buy explained
Right to Buy was a Conservative policy that begun in the 1980s. It gives some tenants of councils and some housing associations the legal right to buy, at a large discount, the home they live in. Around two million former council homes have been sold off this way.
Right to Buy has been through some changes over the years and is still being offered.
Current rules mean that if you want to sell a home bought under Right To Buy you must offer it to your old landlord (i.e. the council) or another social landlord first. If they don’t agree to buy it within eight weeks you can sell it on the open market. You’ll also have to pay back some of the discount if you sell within five years.
But those that bought under Right to Buy in the 1980s and 1990s, when it was most popular, are pretty much free to sell their properties however they choose. This means there is plenty of ex-local authority stock changing hands.
There are two big advantages to buying ex-council property: space and money.
Flats and houses built by local authorities can be twice the size of modern new-builds, which can be ridiculously small.
As well as getting more space, ex-council properties are significantly cheaper; the Royal Institution of Chartered Surveyors (RICS) reckons ex-local authority property is about 20% cheaper than comparable private properties.
Cheaper prices mean buyers can afford to live in an area otherwise out of their reach. This might mean living in a hip, happening area or just somewhere central and convenient. For Londoners, buying an ex-council property might be your best chance of living affordably in the holy grail of zones one or two.
For landlords, ex-local authority property can produce a good yield. Young tenants, in particular, will jump at the chance to live centrally and all the bedrooms tend to be suitable to rent, unlike the tiny second or third bedrooms of some newer homes.
Recent figures show that a third of ex-council homes sold in the 1980s are now owned by private landlords. Controversially many are rented back to the council.
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The obvious disadvantage to ex-council property can be the stigma. Tower blocks in particular can look daunting from the street and some ex-council estates are far from pretty. For this reason you’ll be unlikely to see the same house price inflation (assuming prices keep rising) as other properties in the same area.
Another big downside of flats is the local authority is likely to be the freeholder. This means it will have responsibility for the upkeep of the communal parts of the building. Flat owners (or leaseholders) will pay a service charge for this and also for “major works” which take place every few years.
In an estate where some flats are still owned by the council and some by private owners, some local authority freeholders will hike the service charges to subsidise the council flats. Be warned – these bills can cripple you.
Another downside is that some mortgage lenders aren’t keen on ex-local authority property, especially high-rise tower blocks. So you’ll have less choice of mortgage products than if you bought another type of property.
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