How does right to buy work and why is Boris Johnson planning to extend it?


Even though it is more than 40 years old, the changes wrought by Margaret Thatcher’s right-to-buy policy can still be felt in Britain today. It established the story the Conservative party continues to tell about itself, of being crusaders for opportunity for all; it transformed the way people thought about what it meant to own or rent their homes; and it shifted almost 2m social housing dwellings into private hands. It became the emblematic policy idea of a prime minister who was pretty unpopular at the time, only to rule for another decade. No wonder Boris Johnson wants a piece of it.

No wonder, either, that he is not the first Conservative leader to propose extending right to buy to housing associations. But there are very good reasons it has not happened before.

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What is the government expected to propose today?

In his speech to backbenchers ahead of the no-confidence vote, Boris Johnson promised that if he won, he and the housing secretary, Michael Gove, would “be setting out plans to kindle that dream of home ownership in the hearts of millions who currently believe it is beyond their means.”

The proposed mechanism is to extend the right to buy to people living in properties owned by housing associations – not-for-profit bodies that rent low-cost homes to about 2.5 million people.

Crucially, housing associations are not state-owned. At the moment, people living in council properties can get a discount of up to 70% of the market value of their home, up to a maximum of £87,000, or £116,200 in London. There is a scheme in place for housing associations but it limits the discount to a maximum of £16,000.

What did Margaret Thatcher’s model look like?

In his 2015 book Promised You a Miracle: UK80-82, the Guardian columnist Andy Beckett writes that the 1980 Housing Act “envisaged a revolution in how a large minority of Britons lived”. It seemed possible, in part, because there was an abundance of social housing: 5.5m homes were provided by local authorities and housing associations in England, or 31% of the total stock.

Now anybody who had lived in council housing for more than three years would be entitled to own it. Tenants were given a 33% discount on market value at the three-year point, rising to 50% after 20, up to a ceiling of £50,000. And they were guaranteed 100% mortgages by the local authority. Against average property prices in 1980 of £23,500, it was an extraordinarily good deal for those able to take advantage of it.

How did it play out in practice?

Right to buy was a hugely powerful – even life-changing – policy for exactly the aspirational working-class voters who Thatcher was trying to woo. By the end of 1982, more than 240,000 homes had been sold to their tenants in England alone. But within a few years a significant gap was visible between tenants who were buying and those who were not.

A government study published in 1986 found buyers were “disproportionately drawn from the middle-aged and the better-off”. Their incomes were more than double those of people who remained tenants. Meanwhile, rents for the worse-off council tenants who remained rocketed – going up 55% relative to earnings in a decade.

What does the landscape look like today?

In the 42 years since the scheme was introduced, 1,992,799 sales to tenants have been completed, the government says. Fewer than 5% of the homes sold off have been replaced, according to the charity Shelter, and the available stock has dropped from that 5.5m figure to 4.2m by 2020.

Meanwhile, a large proportion of right-to-buy homes are now in the hands of private landlords: in 2017, Inside Housing magazine reported that 40% of them were being rented out, and their tenants were paying more than twice the rent charged by local authorities. Average property prices in Britain have gone from that 1980 figure of £23,500 to £278,436 as of March.

In other words, the 1980s right-to-buy generation received a huge financial windfall from the government, which accrued as the property market rocketed – and their successors are paying exorbitant private rents, up 15% in two years, because there is no council housing to put them in. Scotland and Wales abandoned the policy several years ago.

Where does the idea of extending the scheme to housing associations come from?

It has been around from the beginning. In 1982, the Guardian reported on proposals to make much the same change Johnson is proposing today – news which led the director of the National Federation of Housing Associations (now the National Housing Federation) to complain: “Charities have a duty that lasts in perpetuity … it is vital to keep these homes for the old, the disadvantaged and the young in the future.”

The change never happened – but a version of the idea popped up in David Cameron’s 2015 manifesto, only to be junked after an unsuccessful pilot in the West Midlands, which found that nothing like enough of the properties being sold off were being replaced with new stock – a red line for housing associations that were participating. (We might think of Nick Clegg’s claim that either Cameron or George Osborne once told him: “I don’t understand why you keep going on about the need for more social housing – it just creates Labour voters.”)

Could Johnson succeed where others failed?

Experts are sceptical. Gavin Smart, the chief executive of the Chartered Institute of Housing, says the scheme is “not the answer” and would “be at the expense of the poorest households”, arguing that the estimated £70,000 subsidy a household would be better spent on addressing the housing stock crisis. Theresa May’s former housing adviser Toby Lloyd points out that offering affordable housing tenants sale discounts could create tension with private renters.

Others point to the fact that … not many people living in housing associations seem to want this right very much. A report on the West Midlands pilot found just 1.2% of households would be expected to buy under the scheme. Experts also note the fundamental problem – which is that the housing associations that own the homes have historically never welcomed the idea, and it would be extremely expensive to win them over.

In other words, the best hope for opponents of the policy is that it will never happen in the first place. And indeed, one report this morning suggests internal estimates have priced a national version of the scheme at about £3bn a year, far in excess of an intended budget of £500m. That probably means any changes will be limited to more pilot programmes. Another Boris Johnson magic trick: a rabbit pulled out of a hat, which immediately disappears.

Source: The Guardian