Issues & Ideas | 14th April 2015

Undecided? The Tories’ ‘Right to Buy’ policy might be enough to make you vote Labour

Extending ‘Right to Buy’ is a terrible policy that even Thatcher didn’t dare do, argues Tom Copley.

Photo: Getty


‘Right to Buy’ was undoubtedly the most iconic policy of the Thatcher government. It was also the largest scale privatisation in the history of this country. Ostensibly about encouraging home ownership, the policy was deliberately constructed to prevent local authorities replacing homes that were sold. Thus, our precious social housing stock has been shrinking ever since.

‘Right to Buy’ is possibly unrivalled in offering such poor value for money to both taxpayers and local authorities. Taxpayers  not only funded the initial building of the council home, they then subsidised the substantial discounts offered to tenants and then – once the homes were sold – missed out on the rental income that would have covered the build costs.

Yet now David Cameron is proposing to extend ‘Right to Buy’ to Housing Association tenants. It’s a sign of how desperate and unoriginal the Tories are that they are having to dredge up and dust off an old Thatcherite policy, one which will be no less damaging this time around.

This is an old Thatcherite policy, one which will be no less damaging this time around.

‘Right to Buy’ was deliberately not extended to Housing Association tenants by the Thatcher government. As a House of Commons briefing note explains:

“The rationale for exempting assured tenants from the ‘Right to Buy’ is based on the need for associations to provide security for private lenders. If these tenants were able to buy their homes, the value of an association’s asset base would gradually be eroded and their rental stream reduced; it was recognised that, in turn, this would make lenders cautious about backing them.”

In an attempt to allay fears about the impact on Housing Association balance sheets, the taxpayer rather than the association will pay for the discount to tenants under the Tories’ proposed scheme. Did you hear that, private tenants?

Your taxes will be used to subside a relatively small number of tenants who are already in secure, affordable accommodation to obtain a very valuable asset. Meanwhile you’ll have to carry on paying sky-high market rents for a highly insecure one-year tenancy. Does that sound fair?

Ah, but Housing Associations receive taxpayer subsidy, don’t they? Well, yes, but most of them now raise the majority of their finance privately. The annual government grant to Housing Associations in England and Wales is £1.1bn. Yet private landlords enjoy an annual state subsidy of around £5bn in the form of mortgage interest tax relief. Despite this, Britain’s 11 million private tenants will receive no handout for homeownership from the state.

Your taxes will be used to subside a relatively small number of already secure tenants.

Indeed, private landlords stand to be big beneficiaries of extending ‘Right to Buy’. A report I published in 2014 found that 36 per cent of homes sold under ‘Right to Buy’ in London are now in the hands of private landlords. In many cases councils are forced into the absurd situation where they have to rent back properties that they were made to sell at a discount at market rents to house homeless families.

There is nothing stopping the very same situation occurring with ex-Housing Association properties, with the associated impact it would have on the housing benefit bill. In London, the average housing benefit claim is £61 per week higher in the private rented sector than the social rented sector.

Tory claims that homes sold will be replaced one for one should be taken with a very large pinch of salt. They made precisely this claim when they reanimated the corpse of ‘Right to Buy’ in 2010, offering discounts now in excess of £100,000. Yet since ‘Right to Buy’ for council homes was revived, just 2,298 replacement homes have been started nationally compared with 26,000 sold. A series of information requests I made to local authorities in London found that they expect to build just two new council properties for every three that are sold.

Housing Associations have already warned that the discounts offered to tenants make like for like replacement impossible. Speaking about preserved ‘Right to Buy’, which is granted to tenants living in former council homes that have been stock transferred to Housing Associations, Jim Ripley of Phoenix Community Housing said: “We don’t receive anywhere near enough from right to buy sales to replace each social rented home we lose.”

The Tories made precisely this claim when they reanimated the corpse of ‘Right to Buy’ in 2010.

There is no requirement that replacement homes match the size or tenure of the home that is sold. Thus, a four bedroom family home let at social rents could be replaced by a one bed “Affordable Rent” flat let at 80 per cent market rents.

The Tories claim they will pay for extending Right to Buy by making councils sell properties in expensive areas. This would force councils to socially cleanse boroughs of their richer areas. In central London this will have a dramatic and hugely damaging impact. We celebrate the fact that London is not like Paris, where all the rich people live in the middle and the poor people live around the edge. Our social mix is one of the things that makes us a great city.

Social housing is built for the public good not just of the current generation but future generations too. To force a council or a Housing Association to sell a property at a discount helps a relatively small number of people gain a very valuable asset at the expense of future generations. In a cynical attempt to win a few extra votes, the Tories are willing to exacerbate our housing crisis still further.

What’s needed to solve our housing crisis is not yet further fuel for housing demand but a mass housebuilding programme. Labour is committed to building 200,000 homes a year by 2020, investing £5bn in a Future Homes Fund and reforming council house financing.

Unlike the Tories, Labour is proposing to reform private renting to help tenants by making three year tenancies standard, capping annual rent increases and banning lettings agency fees for tenants. I’d like to see us go further, of course, but Labour’s manifesto starts us on the journey towards ending our housing crisis.

Tom Copley is a London Assembly member for Labour.