When the UK government introduced the Right to Buy scheme almost 40 years ago, it was designed to provide first-time buyers with a helping hand onto the housing ladder. At the time, the maximum discount available was £16,000 – relatively modest, even when considered from a 1980 perspective.
Today, qualifying council tenants can access discounts of up to £82,800, increasing to £110,500 for qualifying properties in London. After just three years of continuous residency in a council property, most tenants have the legal right to purchase their home at a heavily discounted rate.
As you’d expect, the scheme has proved immensely popular among council tenants across the UK. In fact, it’s estimated that approximately 70,000 council properties have been purchased under the scheme within the last seven years alone. The vast majority of those purchasing their council homes state that they would have never made it onto the housing ladder, without such a scheme in place.
Unfortunately, it’s become clear over the years that demand is vastly outstripping supply. During the seven years that saw 70,000 council homes bought under the RTB scheme, a mere 11,300 new council properties were built. If things continue at the same pace, inventory will soon be wiped out entirely.
Some have called for sweeping reforms, which could affect eligibility by way of length of tenancy, the amount of discount available, different conditions for different properties/locations and so on. However, others believe the answer could lie in a far more radical solution.
Rather than limiting Right to Buy to council tenants, they’d like to see this scheme extended to private tenants.
Shadow Chancellor John McDonnell recently reaffirmed his pledge to “tackle the burgeoning buy-to-let market”. In a recent interview, he went so far as to state that private tenants should be given the right to purchase their properties at a price below its official market value.
“You would want to establish what is a reasonable price, you can establish that and then that becomes the right to buy . . . You [the government] set the criteria. I don’t think it’s complicated,” he said.
But it’s far from the complexity (or otherwise) of the scheme that has some 2.6 million landlords across Britain up in arms. Instead, it’s the fact that independent calculations estimate total financial losses of more than £50 billion for these landlords. Roughly equating to around £18,400 each, though some would, of course, fair much worse than others.
The primary argument in favour of such a scheme lies in the impossibility of keeping up with demand for Right to Buy council properties. It simply isn’t realistic for the government to step up social house building to such a level as to cope with demand.
However, critics continue to argue that to extend the scheme to the private sector is to take aim at legitimate businesses. Many of which could see the time, money and effort they’ve invested in their buy-to-let businesses laid to waste, if the government steps in.
There’s also the issue of such a scheme potentially being capitalised on as a money-making venture in its own right. You rent a property, you qualify for the right to buy it at a discounted rate and you snap it up. A few years later, you sell it for an exponentially higher price than you paid for it. You make a fortune, the original landlord loses a fortune.
Unsurprisingly, it’s a scheme the majority of industry watchers and analysts don’t see materialising anytime soon. Nevertheless, the mere mention of a private Right to Buy scheme is enough to have millions of landlords lamenting the idea of the Labour government. – UK Property Finance
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