Margaret Thatcher’s belief in a ‘property-owning democracy’ paved the way for the introduction of Right to Buy in 1980, and the UK has been a nation obsessed with the idea of homeownership ever since.
Boris Johnson, keen to repair his fortunes after a bruising Tory revolt against his leadership this week, unveiled plans yesterday to make it easier for people to buy their own home.
Johnson’s intention to extend Right to Buy and allow housing association tenants to buy their properties at a discounted price would in turn create fresh housing stock for estate and letting agents in the future.
The scheme has been abolished in Scotland and Wales, but it is still available in Northern Ireland.
Johnson’s announcement has provoked a mixed property industry reaction.
Speaking in Blackpool, he said: “We will finish the right to own reforms Margaret Thatcher began in the 1980s.”
But he scrapped a manifesto pledge to build 300,000 homes a year, instead saying there would be “lots more”.
Industry reaction:
Anthony Codling, former City analyst and now chief executive of proptech firm Twindig, said: “Right to Buy has created taken around 2 million homes into private ownership, but is Right to Buy as rosy as the headline figures suggest?
“Right to Buy works if and only if those homes taken out of the social housing pool are replaced, sadly history suggests that they are not and we do not see from the statements and promises made today that they will be replaced tomorrow. We believe there is a better way and that way is through fractional ownership.”
Iain McKenzie, CEO of The Guild of Property Professionals, stated: “We welcome any change from the Government that will help get more people in a position to be able to become homeowners.
“As the Prime Minister has said, prospective first-time buyers have been aiming at a moving target with rising housing prices, interest rate hikes and the cost-of-living crisis taking its toll on their ability to be able to get a foot on the property ladder.
“Many are already paying rent that would equal their mortgage repayments, however, many have been hindered by deposit requirements and meeting mortgage approval criteria.
“Wider access to low-cost, low deposit finance options will help pave the way for more buyers to purchase their first home.”
Ian Fletcher, director of policy at the British Property Federation, commented: “While the extension of right to buy to housing associations may support more people into home ownership, the homes bought must be replaced on a like-for-like basis. Without this, the availability of affordable homes will continue to be stretched at a time when we urgently need more stock, not less.
“The initiative also fundamentally misses the core issue, helping people into social housing and reducing the waiting list. Extending right to buy runs the risk of exacerbating this challenge by diverting government funding away from new affordable housing supply. There is also the not inconsiderable issue about the legal framework for all of this and how property owned by independent organisations is going to be sold with hopefully their agreement.
““The affordable housing sector urgently needs more sources of funding to deliver the 140,000 affordable homes the country needs. New private capital, both equity and debt, has started flowing into the sector attracted by its stability and returns. It is important this announcement does not risk undermining the interest in investment in the sector and further reducing supply.”
The director of Benham and Reeves, Marc von Grundherr, commented: “We’ve seen how previous initiatives allowing social tenants to purchase their properties has backfired, as it causes a significant shortage of stock for those most desperately in need of help, while also driving up property values in the process.
“Of course, this time around it will be different, as they pledge to replace these purchased properties on a one-for-one basis. Unfortunately, if you believe that, you may also believe that the drunken shenanigans that took place at Downing Street during the pandemic really were innocent, work-related events.
“The government’s record of delivering new homes is woeful at best and social housing has long been an area of serious neglect. To allow them to auction off existing housing association stock while also failing miserably to replace it would be a big mistake indeed.”
Jonathan Rolande, from the National Association of Property Buyers, said: “This policy will do nothing to help anybody affected by the housing crisis. At best, one home that is already occupied will be sold with a large subsidy to the current occupier.
“In its place, another will be built meaning that the number of homes for low earners and the more vulnerable in our society will not change.
“The National Association of Property Buyers is concerned that in reality, the number may reduce.
We should expect the appetite to buy up property to likely outstrip the ability to build replacements. This will be exacerbated by the lengthy planning processes, nimbyism and a shortage of materials and labour to build them.”
Comparisons are being made with the sale of council housing decades ago, but this comparison is not directly relevant. Council homes were owned by the state and whilst they had a notional value, the money for discounts did not have to be found.
Marcus Dixon, director of UK residential research, commented: “Since its inception in 1980 Right to Buy has been contentious. For those in the position to take advantage of the scheme, it has enabled more than two million households to get onto the housing ladder. But money raised was in many cases not re-invested, meaning fewer social rented homes, longer waiting lists and greater reliance on landlords within the private rented sector.
“Critics of Right to Buy argue that it has been a key contributor to the reduction of social housing provision. There remains an acute shortage of social rented homes, 1.1 million households on the social housing waiting list and many stuck in unsuitable or temporary accommodation.
“This can be clearly demonstrated by comparing the number of social housing completions with Right to Buy sales. Since 1980 across England there have been 1.19 million new homes completed by Local Authorities and Housing Associations combined.
“Over the same period, the number of Right to Buy sales totalled 2.19 million. This means that in the last 40 years there has been a shortfall of almost 1 million homes (994,000). Although government were quick to reassure critics that homes sold through the new scheme would be replaced one for one, albeit not retrospectively.
“Part of the rationale behind Right to Buy is that tenants are offered discounts on the market value of the property. In a government pilot of voluntary Right to Buy sales between 2018 and 2020 it was estimated that 80% of tenants who bought through the scheme would have been unable to buy without the discount being in place. With the same pilot showing tenants bought with an average discount of 46% off market value.
“It is unlikely that Housing Associations will be able to offer sufficient discounts and replace stock like for like without government support. Even without Right to Buy Housing Associations are under significant financial pressure. Alongside investment to improve their current portfolio they will need to ensure any remediation works are carried out to deal with cladding and fire safety as well as initiate plans to hit zero carbon targets by 2050. Not to mention additional investment in increasing the size of their rental portfolio.”
James Forrester, managing director of Barrows and Forrester, said: “Boris Johnson claims of a significant increase in the number of homes being built, but this simply isn’t true, which will come as little surprise given the fact that he’s lied to the British public time and time again.
“In fact, the level of new homes reaching the market each year has fallen by fourteen per cent and so once again, Boris’s bumblings couldn’t be further from the reality.
“What’s more, promises to utilise Britain’s brownfield land is nothing more than a weary piece of recycled rhetoric, spouted on numerous occasions to create the illusion of tackling the housing crisis, but without actually following through with it.”