Property

Could Right to Buy 2.0 trigger a home ownership revolution?

Property Reporter
|
9th June 2022
Sold 205

One of the most transformative policies of the 20th century, Right to Buy, which made the dream of home ownership a reality for millions, is now all but dead.

Since its introduction in the 1980s, approximately 4.5 million social tenants took up the opportunity to buy their homes from the state, before the numbers fell off a cliff, hitting a low of 9,319 in 2020/21.

According to the Centre for Policy Studies, the collapse of the scheme is one of the reasons Britain now has the fifth-lowest homeownership rate in Europe, alongside a lack of supply and restrictions on first-time buyer mortgages. Yet ownership remains overwhelmingly popular.

A major new Centre for Policy Studies paper, published today, welcomes the Government’s reported commitment to restoring the Right to Buy to the two million housing association households currently denied a chance to own. It also sets out the scale of the discrimination within the benefits system against low-income owners as opposed to working renters.

The paper, by former No 10 housing advisor Alex Morton, demolishes many of the myths that have grown up around the Right to Buy. It shows that waiting lists for social housing actually fell when the policy was most popular. It shows that rather than having sold off too much social housing, we still have the fourth highest stock in Europe. And it explains that rather than costing the Government money, the policy delivers long-term savings for the Treasury of around £140,000 per house sold, largely due to the reduced cost of housing benefit when someone becomes an owner.

It also shows that the benefits system is fundamentally biased towards keeping people as tenants rather than owners, with CPS calculations finding that just 2.3p is spent on incentivising ownership among low and middle earners for every pound that subsidises renting. It calls for this imbalance to be redressed by making the benefits system as tenure neutral as possible.

While the CPS welcomes the Government’s commitment to extending home ownership, it argues that it should go further than just extending the existing Right to Buy by revamping it in the form of a new Right to Own. Under the proposal, tenants would obtain a mortgage worth 60% of the value of their home – which would be paid off in payments that rise at the same rates as social rents do each year.

Like any other buyer, once this ends the property is owned outright, however, effectively at a 40% discount, mirroring the Right to Buy discount but at a lower rate. In an emergency such as a loss of employment, the tenant would be able to access the equity they had built up, providing a cushion for them.

In other words, today’s proposal would provide tenants greater security, with every rental payment increasing the tenant’s share of ownership – but still leaving them better protected in the event of financial shocks or unexpected costs.

The paper shows how the revenue from these sales, plus the sale of high-value council homes as they become vacant, could be used to fund the construction of a new wave of affordable social housing – expanding home ownership and the housing stock at the same time.

Alex Morton, Head of Policy at the CPS, said: “The Right to Buy was one of the most transformative policies of the 20th century, moving millions of people into home ownership. Many of the arguments made against the policy since do not stack up. The Government would be right to extend the policy to housing associations to take the opportunity to place greater ownership at the heart of its levelling up agenda and deliver on the commitments made in the 2015 and 2019 Conservative manifestos.

"Longer term, the Government can not only revive the Right to Buy but fully reinvent it for the 21st century by implementing a Right to Own. This would put rocket boosters under home ownership rates whilst protecting tenants and the state coffers.”

Robert Colvile, Director of the CPS, said: “The Government’s commitment to home ownership, and to the Right to Buy, is hugely welcome. Our report argues that restoring the Right to Buy to housing association tenants, as widely reported, will be hugely welcome – and demolishes many of the left-wing myths surrounding the Right to Buy.

“However, we also urge the Government to go further in boosting ownership among tenants of all tenures, for example by turning the existing Right to Buy into a new Right to Own, and incentivising private sector landlords to sell to their tenants, as proposed in previous CPS work.”

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