Here’s why the Tories’ new right to buy policy would cost us £11.6bn

Prime minister David Cameron – the man with the plan. Not a good plan. But a plan, nonetheless. Image: Getty.

The Conservatives have announced their flagship housing policy: extending Right to Buy to include housing association homes, funded by selling off local authority homes when they become vacant. Ambitiously, they say these receipts will also fund brownfield regeneration and replacing stock.


But, first things first – let’s look at how many people this will affect and how much it would cost.

People would only be able to buy their home under this scheme if they can afford it and meet certain eligibility critera. Firstly, they need to have lived in their property for at least three years – 1.4m households fit this criterion1.

Secondly, we should only count those who don’t currently have “Preserved Right to Buy” (that is, those who retained their right to buy, after their home was transferred from the council to a housing association), because they can already buy with a large discount.

We estimate there to be around 550,000 households that are already eligible for this2, leaving 850,000 households eligible for the new proposal.

But crucially, they need to be able to afford to buy the home after the discount. Under Conservative plans, the discount would start at 35 per cent, and increase by one percentage point for every year they have been a tenant in that home (up to a maximum of 70 per cent, or a cash cap of over £103,000 in London and just under £80,000 elsewhere). Based on the average length of occupancy3 (between nine to 12 years depending on the region), the household income required to afford a 95 per cent mortgage after the discount varies between £14,000 and £31,0004.

Even with this discount, not every household could afford such a mortgage – the proportion of tenants varies by region, from 15 per cent to 35 per cent5. This means that, across the country, there are 221,000 households that are eligible for the new proposal and able to afford the mortgage6. If all of these households decide to take up the scheme, it would cost £11.6bn7. Indeed, the longer the scheme operates for, the bigger the per centage discount, and the more households that could become eligible.

This is a significant amount of money that needs to be funded from sales of council property.

Many questions arise from all this:

  • Will the sale of council properties raise enough to pay for this scheme, brownfield regeneration and replacing council stock in the same area?
  • Will council house sales happen at the same rate as people who take up this new Right to Buy?
  • What will be the impact of losing social homes in high value areas (particularly rural areas) and can they be replaced?
  • How will lenders of housing associations react, if they know homes can be sold off after three years?
  • Will the larger, higher value and better housing stock be sold first?

With so much at stake, there are too many unanswered questions about how the policy would work in practice – and about the impact on affordable housing supply across the country.

Joe Sarling is senior analyst at the National Housing Federation.

 

Footnotes:

1 English Housing Survey

2 NHF amended estimates from DCLG Impact Assessment

3 English Housing Survey

4 DCLG using average local authority Right to Buy sale price

5 English Housing Survey

6 NHF analysis

7 NHF analysis

 

 
 
 
 

As EU funding is lost, “levelling up” needs investment, not just rhetoric

Oh, well. Image: Getty.

Regional inequality was the foundation of Boris Johnson’s election victory and has since become one of the main focuses of his government. However, the enthusiasm of ministers championing the “levelling up” agenda rings hollow when compared with their inertia in preparing a UK replacement for European structural funding. 

Local government, already bearing the brunt of severe funding cuts, relies on European funding to support projects that boost growth in struggling local economies and help people build skills and find secure work. Now that the UK has withdrawn its EU membership, councils’ concerns over how EU funds will be replaced from 2021 are becoming more pronounced.

Johnson’s government has committed to create a domestic structural funding programme, the UK Shared Prosperity Fund (UKSPF), to replace the European Structural and Investment Fund (ESIF). However, other than pledging that UKSPF will “reduce inequalities between communities”, it has offered few details on how funds will be allocated. A public consultation on UKSPF promised by May’s government in 2018 has yet to materialise.

The government’s continued silence on UKSPF is generating a growing sense of unease among councils, especially after the failure of successive governments to prioritise investment in regional development. Indeed, inequalities within the UK have been allowed to grow so much that the UK’s poorest region by EU standards (West Wales & the Valleys) has a GDP of 68 per cent of the average EU GDP, while the UK’s richest region (Inner London) has a GDP of 614 per cent of the EU average – an intra-national disparity that is unique in Europe. If the UK had remained a member of the EU, its number of ‘less developed’ regions in need of most structural funding support would have increased from two to five in 2021-27: South Yorkshire, Tees Valley & Durham and Lincolnshire joining Cornwall & Isles of Scilly and West Wales & the Valley. Ministers have not given guarantees that any region, whether ‘less developed’ or otherwise, will obtain the same amount of funding under UKSPF to which they would have been entitled under ESIF.


The government is reportedly contemplating changing the Treasury’s fiscal rules so public spending favours programmes that reduce regional inequalities as well as provide value for money, but this alone will not rebalance the economy. A shared prosperity fund like UKSPF has the potential to be the master key that unlocks inclusive growth throughout the country, particularly if it involves less bureaucracy than ESIF and aligns funding more effectively with the priorities of local people. 

In NLGN’s Community Commissioning report, we recommended that this funding should be devolved to communities directly to decide local priorities for the investment. By enabling community ownership of design and administration, the UK government would create an innovative domestic structural funding scheme that promotes inclusion in its process as well as its outcomes.

NLGN’s latest report, Cultivating Local Inclusive Growth: In Practice, highlights the range of policy levers and resources that councils can use to promote inclusive growth in their area. It demonstrates that, through collaboration with communities and cross-sector partners, councils are already doing sterling work to enhance economic and social inclusion. Their efforts could be further enhanced with a fund that learns lessons from ESIF’s successes and flaws: a UKSPF that is easier to access, designed and delivered by local communities, properly funded, and specifically targeted at promoting social and economic inclusion in regions that need it most. “Getting Brexit done” was meant to free up the government’s time to focus once more on pressing domestic priorities. “Getting inclusive growth done” should be at the top of any new to-do list.

Charlotte Morgan is senior researcher at the New Local Government Network.