Extending ‘right to buy’ would worsen housing crisis

By Savi Hensman
April 16, 2015

There has been widespread criticism of a Conservative Party manifesto pledge to extend the ‘right to buy’ to housing association tenants. This would worsen the housing crisis and be costly to the public.

At present council tenants can buy their homes at heavily discounted rates. If the Conservatives (who dominate the ruling Coalition) win the election, they plan to extend this to people renting from housing associations.

Each property would be sold at up to £102,700 below market value in London and £77,000 for the rest of England. Obviously this will be hugely expensive as well as reducing the stock of social housing, at a time of desperate need.

In addition, councils would be forced to sell off around 15,000 of their more expensive properties becoming vacant each year, though supposedly, replacement homes would be built.

While some money would be reinvested in new housing, it is likely that there would be far less than before. Since the ‘right to buy’ was introduced in 1980 by Margaret Thatcher, who was the Conservative Prime Minister, 1.88 million council homes have been sold and just 345,000 new properties built.

Earlier in 2015, there were rumours of a possible cut-price sell-off of urgently-needed housing. David Orr, chief executive of the National Housing Federation (which represents housing associations) wrote, “Of all the daft ideas I’ve heard in a career in housing, this is the daftest.”

When the manifesto promise was announced the Confederation of British Industry, an employers’ organisation, said, “Extending the right-to-buy scheme does not solve the problem” of the housing shortage.

Placeshapers, which brings together over 100 housing associations which own and manage 750,000 homes, pointed out that “Extending home ownership, at taxpayers’ expense, to those who are already well housed in the housing association sector would make an already disastrous situation a whole lot worse.”

It stated: “Leaving aside the legality of any government trying to interfere in what independent charities do with their assets and the adverse financial impact such a move would have” on housing association business plans, “this cynical ploy would remove desperately needed socially rented homes from those who will never be in a position to buy. Where are they supposed to live?”

The chair, Tony Stacey, threatened legal action if the plan went ahead.

“The Conservatives say each home sold under the extended right to buy would be replaced on a one-for-one basis – but we know this is not happening under the current scheme”, said Gavin Smart, the deputy chief executive of the Chartered Institute of Housing. “Right to buy has already had a huge impact on the supply of genuinely affordable homes, which is being cut at a time when more and more people are in need.”

“Some associations could face insolvency if forced to sell. The homes are required as security against loans. If lenders call for more security and associations can’t stump up, then the government (which investors expect to prevent any association from failing) will have to intervene – which could be very expensive. Ratings agencies Standard & Poors and Fitch have both now warned the policy could impact long-term credit-worthiness of associations”, wrote Nick Duxbury, the executive editor of Inside Housing.

It is not even clear that the benefits would outweigh the disadvantages for the tenants at whom the policy is aimed. Many could not afford to buy, even at a discount, and some would anyway have ethical concerns.

For those who did go ahead, the risk of ending up homeless would be high. In April 2012, the government revived the policy for council tenants. According to Channel 4 News, Shelter warned that ‘right to buy’ mortgage holders were three times more likely than other homeowners to be repossessed because they tended to have less money.

Many people are now in insecure jobs, sometimes with zero-hour contracts, and the benefit system is under sustained attack. A sudden drop in hours, loss of a job or having to take time off because of sickness or caring responsibilities could make it extremely difficult to afford mortgage payments.

What is more, according to Shelter’s advice pages, “Repair and maintenance costs of flats can be expensive. You may have to contribute towards the cost of repairs and improvements to the communal areas of your block of flats and sometimes on your estate. Sometimes buyers of council houses also have to contribute to the costs of communal areas... You may have to budget for additional loans or mortgages to fund these types of repairs. Bills can be many thousands of pounds.”

A sizeable number of housing association tenants who took out mortgages to buy their homes could find that, far from being homeowners, they had lost the housing security they previously had. Meanwhile the stock of genuinely affordable housing, especially in areas where rents had soared, would continue to shrink.

However, as has happened with much former council housing, private landlords could find themselves in control of a valuable asset, for which they could charge huge rents.

More secure and better-paid jobs, and policies that did not push up housing prices, would make it easier for people on low or middle incomes to buy homes. But the priority at present is surely to provide more people with somewhere to live, preferably close to where they work or to the support networks of which they are a part. Private ownership and profit are not the only things that matter.

* More on the issues in the 2015 General Election from Ekklesia: http://www.ekklesia.co.uk/generalelection2015

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© Savitri Hensman is a widely published Christian commentator on politics, welfare, religion and more. An Ekklesia associate, she works in the equalities and care sector.

Although the views expressed in this article do not necessarily represent the views of Ekklesia, the article may reflect Ekklesia's values. If you use Ekklesia's news briefings please consider making a donation to sponsor Ekklesia's work here.