Will extending the Right to Buy help deal with the UK’s housing crisis?

David Kingman looks at one of the key proposals on housing from the Conservative election manifestoHouse Pound

The Conservative Party has pledged to extend the popular “Right to Buy” scheme to cover Housing Association tenants if they remain in power following this week’s general election, as part of the solution to the UK’s housing crisis. How would this affect young people who want to get on the housing ladder?

“A good life for all”?

Extending the Right to Buy to cover people who rent their homes from Housing Associations was one of the key policy announcements unveiled during the launch of the Conservative election manifesto on 14 April, where the party claimed that helping more people to get on the housing ladder was part of a creating “a good life for all” in modern Britain.

Currently, 1.3 million people in England rent their homes from housing associations, non-profit bodies which provide housing at discounted rates, often on behalf of local authorities. The Right to Buy scheme – under which long-term social housing tenants are offered the opportunity to buy their current property at a discounted cost – has never covered people who rent from housing associations, even though the decline of local authority-owned social housing which the Right to Buy has created has meant that the share of Britain’s social housing that housing associations provide has grown over recent years.

Extending the Right to Buy scheme would boost levels of home-ownership, but at a significant cost to taxpayers because – while the tenants would be able to buy their homes at a discount – the housing associations would need to be reimbursed for their full market value. An analysis of the scheme undertaken by the Institute for Fiscal Studies estimated that the total cost to taxpayers could be as high as £11.6 billion (spread over several years), depending on how many of the eligible tenants choose to take up the government’s offer and which parts of the country they live in.

The Conservatives intend to fund extending the Right to Buy through a separate but related measure they announced alongside it, under which local authorities would be required to sell off valuable properties in their housing stock. This scheme would require councils to put on the market any properties which fall into the top third of the price range in their region when compared to all homes that have the same number of bedrooms. The Conservatives’ analysis suggests this could raise as much as £4.5 billion per year, although this assumes that each property would generate revenue worth around £300,000 each.

The Conservatives have actually earmarked the money this would generate to do three things: fund the sell-off of Housing Association properties under the Right to Buy, build new social housing to replace them, and create a new “Brownfield Regeneration Fund”, which would be capitalised with £1 billion over five years to help unlock new housing delivery. However, the IFS analysis concluded that “significant uncertainties” remain about how feasible these plans would be in practice.

Significant uncertainties

Overshadowing the practicalities of this scheme is the question of fairness. One way of looking at the Right to Buy is that it provides social housing tenants with home ownership at a discount paid for by general taxpayers, many of whom may be struggling to find adequate housing themselves.

Many of the former social housing tenants who have taken up the Right to Buy previously have gone on to resell their properties at a much higher price than they paid for them – with buyers often renting them out again to tenants who receive Housing Benefit, so in some instances the government has effectively sold properties at a discount and then rented them back for a higher cost.

In terms of the practicalities, the original Right to Buy has led to a sharp fall in the social housing stock, as local authorities were often unable to obtain the necessary funds to build new social housing that could replace the units that had been sold. The Conservatives are pledging to replace all of the housing association homes that are sold under the new scheme, but the IFS argues that the government’s record of failing to replace social housing when they promise to suggests this is unlikely to be fulfilled.

Local authorities would also have to deal with the problem that in the most expensive areas – particularly in Inner London – it is extremely difficult to build new affordable housing because of high land costs. This could well result in the new Right to Buy leading to worse segregation between wealthier and poorer areas of the city, which would hardly be positive for social justice.

Overall, there seems to be a grave risk that extending the Right to Buy to cover Housing Association tenants would simply result in one-off gains for a particular group of people, while making the overall housing crisis worse as the supply of affordable housing would almost certainly be permanently reduced.