Right to buy put homes in the hands of landlords. Rehashing it will do the same | Bob Kerslake
Among the slew of “red meat” policies that are now being put forward to shore up Boris Johnson’s position, there is one that ought to cause real concern for those want to see fair and balanced housing in this country. The government is proposing to resurrect right to buy for tenants in housing association properties, allowing tenants to potentially use their housing benefit in order to buy their social properties at discounts of up to 70% of market price.
This rehashing of one of Margaret Thatcher’s flagship policies originally formed part of the hugely contested and controversial Housing and Planning Act, introduced by the Conservatives in their 2015 general election manifesto. It was sidelined in 2016 by Theresa May and her chief of staff, Gavin Barwell, in favour of a more balanced approach that valued different types of housing: home ownership, private rental and “affordable” housing.
The paucity of detail in the current announcement suggests it is still at the drawing-board stage. It should stay there. There are a number of problems with the policy.
Most obviously, these are not the government’s properties to sell. Housing associations are independent, mainly charitable organisations that were established with the main purpose of providing genuinely affordable homes for those on low incomes. Peabody, which I chair, was founded in 1862 by George Peabody, who sought to “ameliorate the conditions of the poor and needy” in London. It should not be for the government to oblige Peabody to sell its housing stock. And if it does, the cost of the substantial discounts must be fully reimbursed.
It is hard to think of a more inequitable and poor-value policy for a government committed to “levelling up”. Under the current right-to-buy scheme, which allows council-housed tenants to buy their homes from local authorities, the discounts are substantial. The tenant of a council-owned flat in London who has been renting from their local authority for three years could be eligible for a discount of up to £116,000. But the price of a typical flat in London can exceed £500,000. So even the current policy is available only to those with quite significant means.
Fully aware of the poor value of the scheme, the Treasury has been extremely reluctant to provide additional funds for it. The version of this policy pitched in the 2015 Conservative manifesto proposed to force local authorities to sell off their high value, typically larger and most-needed properties to pay for the discounts that housing associations would be required to offer tenants.
At the time it was first proposed, this policy was deeply divisive. It pitted councils against housing associations, and made little financial sense. It was quietly dropped. So where is the money going to come from this time? If the Treasury is not providing any new money to fund the discounts that housing associations will be obliged to offer new right-to-buy tenants, this funding will presumably come at the expense of other much-needed housing schemes.
In 2012 the coalition government introduced the one-for-one replacement policy. This was supposed to ensure that any council homes sold under right to buy were replaced, and was largely intended to assuage Liberal Democrats’ concerns that reinvigorating right to buy would lead to an irretrievable loss of social housing. In the lead-up to the 2015 general election, the Conservatives campaigned to extend right to buy to housing association tenants, with that same commitment to one-for-one replacement. But the policy has not worked. Despite government commitments, only a small proportion of the homes sold off under the existing right to buy scheme have been replaced.
Given the desperate need for more genuinely affordable rental housing, the government’s priority should be on reversing the long-term net loss of social housing, not adding to it. Housing associations, including Peabody, have already had to scale back their plans to build new homes as a result of rising construction costs. Instead of funding discounts for existing housing association tenants, the government should be putting money towards building new affordable homes available at genuinely affordable rents.
The clear evidence from the sale of council houses since Thatcher’s introduction of right to buy is that a high proportion of these properties do not stay owner occupied. Instead, many end up as buy-to-let investment vehicles whose absentee landlords charge rents that far outstrip those charged by local authorities. As a result, the amount of housing benefit paid to private landlords has soared over the last decade, and is now estimated to be more than £9bn. Analysis by Professor Alan Murie for the 2022 UK Housing Review produced by the Chartered Institute of Housing found that 40% of council-owned properties sold off under right to buy ended up as homes in the private rented sector.
The government is right to highlight the challenge posed by falling rates of home ownership. But there are far more effective ways to address this issue. We need to build more homes of all types and tenures. The planning proposals in the levelling up and regeneration bill published last month are a big improvement on what was in the government’s white paper from 2021, but there is a lot more that could be done to get Britain building. The government has dropped the target to build 300,000 new homes annually. Why not work collaboratively with the housing sector to see how we can make this a reality?
When the 2015 policy was announced, the then mayor of London, one Boris Johnson, said that extending right to buy to housing associations would be the “height of insanity” if it did not lead to the creation of more affordable homes in the capital. We can say confidently that it won’t. Johnson was right the first time: the policy won’t work. It should be quietly dropped again.
Bob Kerslake is chair of the Peabody group board, former president of the Local Government Association, former head of the civil service and former permanent secretary at the Department for Communities and Local Government