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.
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