The damaging legacy of right to buy

In tough electoral times, politicians look for policies that galvanise the hearts and minds of a despondent electorate. Boris Johnson proved no different when in last month he announced his intention to extend Thatcher’s flagship right to buy policy to housing association tenants.

Right to buy embedded the notion of a ​‘property owning democracy’ into the British political psyche and brought Thatcher into power in 1979 through a mass of working-class votes. At the moment, it allows council tenants to purchase their homes at a large discount: up to £116,200 cheaper in London and £87,200 elsewhere. Much of the money from this purchase is sent to the Treasury, with the council allowed to retain a portion, as long as they spend the portion on additional affordable homes in a manner approved by central government. Johnson wants to extend this policy to housing associations, who today hold the majority of affordable housing stock. Since its inception, approximately 2m sales of social housing have taken place under right to buy. To Johnson, this is a victory of greater homeownership, but this ignores the grave costs of the policy.

First, the sales of council homes have not been accompanied by investment to replace the social homes lost to right to buy. Rather, investment in new social housing has been consistently slashed since the 1980s, with government investment instead going to paying the housing benefit bill. In addition, right to buy actually disincentivises the building of new social homes. Why would councils pay to build homes, only to sell them at a discount, lose income from future rental payments and not receive the full sale receipt?

“Why would councils pay to build homes, only to sell them at a discount, lose income from future rental payments and not receive the full sale receipt?”

When homes are sold at a discount under right to buy, this represents a loss to public finances – an estimated £75bn over the lifetime of the policy since 1980. Extending the policy to housing associations will only extend this disincentive to more providers of social housing, slowing social housebuilding when it needs to be sped up. It is estimated that the government may have to compensate housing associations by £14.6bn in a decade if the policy is extended.

With right to buy sales far outweighing supply, there been an average annual net loss of 24,000 social homes since 1991. The government has sought to have a one-to-one replacement policy in recent years. Yet, how can a policy of one-to-one be effectively applied when right to buy discounts result in financial loss? The replacement policy has had little success. Furthermore, lost social homes don’t need to be replaced with new social homes – any home will do, according to the government. Genuinely affordable social homes may be replaced by unaffordable shared ownership properties that are easier to make viable on development schemes.

Second, the policy hasn’t straightforwardly led to higher levels of homeownership or owner-occupancy of former social homes. Research from Inside Housing showed over 40% of right to buy homes are now rented privately. Affordable social housing has turned to unaffordable private rented housing. It is no wonder that during the existence of right to buy we’ve seen ​‘generation rent’ emerge in 2011/​12, when the proportion of households in the private rented sector outstripped those in the social sector. While some social housing has been allowed to fall into disrepair, private rented properties lack even the regulation of social housing, meaning that residents live in worse quality housing with insecure tenancies, while paying higher rents.

Worse still, many of the tenants of these ​‘right-to-buy-to-let’ properties rely on housing benefit. 25% of private renters received housing benefit in 2020/​21. Right to buy has reduced the supply of social homes, meaning more people rely on housing benefit because they cannot be housed in a council house. This means a larger housing benefit bill which ends up in the bank accounts of private landlords, not councils and housing associations who would recycle it into public investment.

“It is no wonder that during the existence of right to buy we’ve seen ​‘generation rent’ emerge”

Third, right to buy has added to the declining perception of social housing, furthering stigma. Inherent in the policy is the idea that homeownership is a superior tenure, and that social housing should act as a stepping stone to the aspirational homeownership. With social housing in such short supply, it has become a tenure for the very poorest, as only the wealthiest social tenants can make use of right to buy. With this promotion of homeownership, the government has a vested interest in ensuring rising house prices to support their voting base, at the expense of providing housing for those in need. All of this results in prejudice against social housing and makes gathering political support for social housing difficult.

Admittedly, the government have tried to use extending right to buy as a ​‘vote winner’ before and not followed though: David Cameron piloted a similar policy back in 2018. Nevertheless, Johnson’s announcement indicates the current government’s dangerous attitude towards social housing, at a time when need for itis at its greatest. The focus remains on winning elections, instead of building a housing system that makes sure all of us can live in good quality, affordable homes.

The prevailing attitude towards social housing won’t change without pressure. At NEF, we are launching Homes for Us, a campaign for affordable and desirable social homes for the 21st century. You can help us prepare by contributing to our Social Housing Listening Campaign, which is gathering perceptions and perspectives on social housing.

Image: iStock