The right to buy has become a big issue again. The new Housing Minister, Brandon Lewis, has taken a bullish stance, as reported widely in the newspapers yesterday, for example here and here.
The new controversy follows endless reports about Councils being unable to meet their housing responsibilities due to the lack of new social lettings becoming available, and a particular story from Harrow in outer London which illustrated the perverse outcome of councils selling homes under the right to buy only to rent them back as private rented dwellings to meet urgent needs. Harrow estimated that it was now spending half a million pounds renting back homes it has been forced to sell. The Council loses twice – selling an asset at a huge discount from its true value – now over £100,000 in London – then paying over the odds to get it back again. This is true now in many council areas and is a huge waste of money.
Lewis claimed that ‘every additional home sold is now being replaced with a new affordable home for a new social tenant’ and that ‘Critics of right to buy are enemies of home ownership’.
There have always been two major criticisms of right to buy, and neither is about the principle that tenants should be allowed to buy. The first is that large discounts are totally unjustified and unfair. Council tenants get pilloried for being subsidised when they are not, but these new home owners get a subsidy/gift of £100,000 or more without a word of criticism. In fairness, why does the Government not give everyone who wants to own a home £100,000, why is it restricted to social tenants? The answer is that the policy is not about promoting home ownership: the ‘rejuvenated’ right to buy is just one of many Government policies aimed at getting rid of social rented housing altogether.
Government gives people £100K! Policy a great success!
It is also not about promoting home ownership in another way – as illustrated by the Harrow example. Increasingly right to buy purchasers take their discount then either become a private landlord themselves or sell on to the many private landlords waiting in the wings wanting to snap up flats for letting. It is estimated that a third of London sales go this way. Of course, privately-let flats on estates are much more expensive than social rents if they are let to people on housing benefit – so the taxpayer pays again. Frequently they are over-occupied by sharers and become a source of nuisance to neighbours. And in some cases Councils have no option but to lease them back to meet their own needs. What folly!
Lewis’s assertion about replacement needs a specific challenge. The Government never releases real evidence to show how its claim about replacement stacks up but commentators are united that it is nowhere near one for one replacement. However, as with any policy brought in by Grant Shapps, there is a trick. Lewis’s comment refers to replacing the ‘additional’ homes being sold – ie the increase due to the change in policy – rather than the total homes sold. And the other trick is that the replacement homes are at ‘affordable rents’ – at up to 80% of market rents – not ‘social rents’.
It’s not one for one and it certainly is not like for like.
There is plenty of previous Red Brick commentary on RTB – just search in the box near the top of the page – for example Monimbo’s excellent article here.