31 July 2024

Reforming Right to Buy

Reforming Right to Buy image
Image: LDprod / Shutterstock.com.

Hollie Wright, assistant researcher, New Economics Foundation (NEF), calls on the new government to rethink Right to Buy.

Everyone acknowledges the severity of the housing crisis gripping the UK. It's not merely a collection of statistics, but a reality affecting families across the country. At the heart of this crisis lies a policy that has been both lauded and criticised for over four decades: Right to Buy.

While the policy has helped many individuals onto the property ladder, its wider societal impacts cannot be ignored. The challenge for the new Labour government will be to balance the aspiration for home ownership with the pressing need for accessible, affordable social housing.

Throughout the General Election campaign, the Labour remained relatively quiet on Right to Buy. The Chancellor's early emphasis on the importance of social housing is encouraging, but to effectively protect and grow social housing stock, local authorities must be empowered to suspend Right to Buy in areas where it's demonstrably depleting homes. Prioritisation of local control aligns with the Prime Minister's recent summit with England's metro mayors. His claim that 'those with skin in the game are the ones who know best what they need' could pave the way for a more nuanced, locally-tailored approach to housing policy. The impact of Right to Buy on our communities has been profound. Since 1980, over two million homes have moved from public to private ownership. While this might appear a victory for homeownership, the reality is more complex. NEF's research reveals an average loss of 24,000 social homes annually since 1991 – a figure that represents thousands of families potentially struggling to find affordable homes each year. Moreover, our findings show that 40% of homes sold under Right to Buy are now in the private rental sector, with some areas like Brighton seeing figures as high as 86%. This transition often places these properties out of reach for those social housing was intended to serve.

The financial implications for local authorities are equally concerning. With Right to Buy discounts now up to 70%, councils frequently sell at a loss – a significant challenge in times of constrained budgets and escalating local authority bankruptcies. We know that Labour has previously expressed interest in abolishing the higher level of Right to Buy discounts imposed in 2012, which would be a welcome shift.

We're witnessing a growing divide between national policy and local needs. Both Sadiq Khan in London and Andy Burnham in Greater Manchester have called for greater control over Right to Buy in their areas, echoing concerns long raised by local governments. Starmer's apparent commitment to devolution may present an opportunity to address these long-standing issues. While these steps towards devolution are vital, it's crucial to recognise that they are not a standalone solution. To maximise impact, devolution must be paired with the wider reforms proposed in our report. These measures will mitigate the worst impacts of Right to Buy and help preserve social housing stock for local communities.

At NEF, we propose the government should not only devolve decision-making on suspension and distribution of Right to Buy to local authorities and metro mayors, but also reform the receipts system to allow full retention and flexibility in spending for local authorities, increase the length of time you need to have lived in a social property to qualify for Right to Buy, and reduce discounts to more sustainable levels.

The devolution of Right to Buy powers could be particularly effective. It would allow areas facing severe housing pressures to modify or pause the scheme as needed. By combining devolved decision-making with reforms to the receipts system, qualification period, discount levels, and resale conditions, we can create a more balanced and sustainable approach to social housing.

In the longer term, a comprehensive approach must consider not only local control but also the broader implications of the policy on a national scale. This might involve reassessing the fundamental premises of Right to Buy, exploring alternative models of affordable home ownership, and developing strategies to significantly increase the supply of social housing through building.

By empowering local authorities and implementing these changes, we can begin to address the housing crisis more effectively, balancing the aspirations of homeownership with the critical need for accessible social housing.

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