The Prime Minister wants to revive Right to Buy. But a new report has found flaws in his plans to allow people to buy their council house.
Love her or loathe her The Iron Lady's legacy includes, among many other things, opening up property ownership to an entire swathe of society that had previously been excluded.
Council tenants were able to buy the properties they lived in at a significant discount, giving them a foot up on to the property ladder.
But can Cameron's revival of the Right to Buy scheme prove as popular or as transformational as Maggie's?
New approach
By revamping the Right to Buy scheme 30 years after it was launched the Coalition Government has pledged it “will unleash a new generation of homeownership and ensure every home sold is replaced”.
Right to Buy never went away, but the discounts are currently so low that in some parts of the country it just isn’t that appealing or affordable for Local Authority tenants. There were fewer than 3,700 sales last year compared to a peak of 84,000 less than 10 years ago.
Reviving the scheme is a compelling proposition, since homeownership is currently a pipe dream for many of the nation’s two million social housing tenants. Any initiative that makes buying your own home both affordable and achievable clearly offers some benefits.
The main gripe people had with the Right to Buy scheme in its first incarnation was the impact it had on social housing stock as a result of Thatcher (and successive governments) selling off 1.75 million council houses over the last 30 years.
As had been well documented, the scheme contributed to the decimation of social housing, leaving Local Authorities with the dregs after the good stuff had been sold off to the richest tenants.
Critics argue that the biggest failing of Right to Buy was the failure to adequately replace each home that was sold off. Yes, the scheme changed the lives of those who could take advantage of it, but led to less choice for those who still needed council houses.
So will it be different this time?
The proposals
Firstly the Coalition will make the scheme much more attractive to tenants by hugely increasing the discounts available to those wanting to buy their social housing property.
The Government proposes increasing the cap to £50,000, effectively trebling the discount in some parts of the country, so more tenants can get a foot on the property ladder.
Secondly, the money from the sales will be ploughed back into building more affordable housing. The Government claims that the revamped Right to Buy will deliver a new home for every one sold.
Still too expensive?
However, a new paper from property experts Hometrack claims that the numbers don’t stack up.
[SPOTLIGHT]It suggests that even the increased discount may not be enough to enable tenants to exercise their Right to Buy.
According to Hometrack the proposed cap of a maximum discount of £50,000 is too low to make Right to Buy affordable to average tenants and this will limit take-up, particularly in areas with expensive house prices.
It has worked out that the average discount required to make Right to Buy affordable to existing tenants is actually £50,800. And it reckons that just 65% of all council tenants could afford Right to Buy under the current proposals.
In some areas the problem would be more acute. In London the discount required to make Right to Buy affordable is £128,000. With the proposed £50,000 discount just 12% of council tenants in London would be able to afford to the scheme.
So Right to Buy may not prove as attractive or popular as the Government would hope. Plus, there is another problem with the proposals.
Funding gap
An important commitment of the proposed scheme is to deliver a new affordable home for every one sold to ensure no erosion of stock. But Hometrack reckons this will not be possible without extra funding.
It suggests that the Government will in fact need to sell off 1.4 council homes in order to raise the cash to deliver one new property.
In other words, without significant subsidy the Right to Buy scheme will result in fewer affordable homes to rent. And with a severe shortage of social housing already, that’s not going to be a politically popular move.
Hometrack calculated that the average capital raised per sale would be £64,725 – lower than the cost of delivering a new property. And much lower than the current average receipt for Right to Buy which was £77,470 in 2010/11.
Of course, it’s important to point out that the Right to Buy scheme is still in proposal stage and the Government could well change its plans to make the one-for-one pledge achievable, without leaving a funding gap.
But, based on the Hometrack report, something will need to be amended to ensure that the already scant stock of affordable housing is not further eroded by flogging it off.
What do you think? Is Cameron right to revive Right to Buy? Let us know your views via the comment box below.
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