Right to buy scheme
Encyclopedia
The Right to buy scheme is a policy in the United Kingdom
which gives tenants of council housing the right to buy the home they are living in. Currently, there is also a right to acquire for the tenants of housing association
s. Between 1980 and 1998, it is estimated that approximately 2 million homes in the UK were sold in this manner.
-controlled Greater London Council
of the late 1960s was persuaded by Horace Cutler
, its Chairman of Housing, to create a general sales scheme. Cutler disagreed with the concept of local authorities as providers of housing and supported a free market approach. GLC housing sales were not allowed during the Labour administration of the mid-1970s but picked up again once Cutler became Leader in 1977. They proved extremely popular, and Cutler was close to Margaret Thatcher
(a London MP) who made the right to buy council housing a Conservative Party policy nationally.
After Margaret Thatcher became Prime Minister, the legislation to implement the Right to Buy was passed in the Housing Act 1980
. The sale price of a council house was based on its market valuation but also included a discount to reflect the rents paid by tenants and also to encourage take-up. The legislation gave council tenants the right to buy their council house at a discounted value, depending on how long they had been living in the house, with the proviso that if they sold their house before a minimum period had expired they would have to pay back a proportion of the discount. The sales were an attractive deal for tenants and hundreds of thousands of homes were sold. The policy is regarded as one of the major points of Thatcherism
.
Proceeds of the sales were paid to the local authorities, but they were restricted to spending the money to reduce their debt until it was cleared, rather than being able to spend it on building more homes. The effect was to reduce the council housing stock, especially in areas where property prices were high such as London and the south-east of England.
By 1987, more than 1,000,000 council houses in Britain had been sold to their tenants.
The Labour Party
was initially against the sales and pledged to oppose them in the 1983
and 1987 general elections
, but had dropped this policy by the 1992 election
because it was perceived as losing votes.
When Labour finally returned to power in 1997, it reduced the discount available to tenants in local authorities which have severe pressure on their housing stock; this includes almost the whole of London.
Some more recent ideas from the Localis think tank suggests that right to buy should be extended into equity slivers, which could be part earned through being a good tenant. This was part of a review of principles for social housing reform.
All RSLs are now legally obligated to offer Right to Buy advice including advice on high fee-charging Mortgage Brokers. The time in which Right to Buy conveyancing should take place has been reduced from 12 months to 3 months. The Financial Services Authority
now governs and regulates most types of mortgage-selling.
The Financial Services Authority
's governance of Right to Buy purchases was partly to solve the widespread problem of Right to Buy mis selling from brokers and solicitors alike. Each had their own agenda and many were actively charging excessive fees which were then taken out of their client's discount. Fortunately, the above actions that have been taken coupled with the end of the boom period seem to have brought this problem under control.
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
which gives tenants of council housing the right to buy the home they are living in. Currently, there is also a right to acquire for the tenants of housing association
Housing association
Housing associations in the United Kingdom are independent not-for-profit bodies that provide low-cost "social housing" for people in housing need. Any trading surplus is used to maintain existing homes and to help finance new ones...
s. Between 1980 and 1998, it is estimated that approximately 2 million homes in the UK were sold in this manner.
History
Individual local authorities have always had the ability to sell council houses to their tenants, but until the early 1970s such sales were extremely rare. However, the ConservativeConservative Party (UK)
The Conservative Party, formally the Conservative and Unionist Party, is a centre-right political party in the United Kingdom that adheres to the philosophies of conservatism and British unionism. It is the largest political party in the UK, and is currently the largest single party in the House...
-controlled Greater London Council
Greater London Council
The Greater London Council was the top-tier local government administrative body for Greater London from 1965 to 1986. It replaced the earlier London County Council which had covered a much smaller area...
of the late 1960s was persuaded by Horace Cutler
Horace Cutler
Sir Horace Walter Cutler OBE was a British politician and Leader of the Greater London Council from 1977 to 1981. He was noted for his showmanship and flair for publicity, although sceptical of the merits of the authority he was in charge of.-Origin:Cutler was born in Stoke Newington, London into...
, its Chairman of Housing, to create a general sales scheme. Cutler disagreed with the concept of local authorities as providers of housing and supported a free market approach. GLC housing sales were not allowed during the Labour administration of the mid-1970s but picked up again once Cutler became Leader in 1977. They proved extremely popular, and Cutler was close to Margaret Thatcher
Margaret Thatcher
Margaret Hilda Thatcher, Baroness Thatcher, was Prime Minister of the United Kingdom from 1979 to 1990...
(a London MP) who made the right to buy council housing a Conservative Party policy nationally.
After Margaret Thatcher became Prime Minister, the legislation to implement the Right to Buy was passed in the Housing Act 1980
Housing Act 1980
The Housing Act 1980 was an Act of Parliament passed by the Parliament of the United Kingdom that gave five million council house tenants in England and Wales the Right to Buy their house from their local authority. The Act came into force on the 3 October 1980 and is seen as a defining policy of...
. The sale price of a council house was based on its market valuation but also included a discount to reflect the rents paid by tenants and also to encourage take-up. The legislation gave council tenants the right to buy their council house at a discounted value, depending on how long they had been living in the house, with the proviso that if they sold their house before a minimum period had expired they would have to pay back a proportion of the discount. The sales were an attractive deal for tenants and hundreds of thousands of homes were sold. The policy is regarded as one of the major points of Thatcherism
Thatcherism
Thatcherism describes the conviction politics, economic and social policy, and political style of the British Conservative politician Margaret Thatcher, who was leader of her party from 1975 to 1990...
.
Proceeds of the sales were paid to the local authorities, but they were restricted to spending the money to reduce their debt until it was cleared, rather than being able to spend it on building more homes. The effect was to reduce the council housing stock, especially in areas where property prices were high such as London and the south-east of England.
By 1987, more than 1,000,000 council houses in Britain had been sold to their tenants.
The Labour Party
Labour Party (UK)
The Labour Party is a centre-left democratic socialist party in the United Kingdom. It surpassed the Liberal Party in general elections during the early 1920s, forming minority governments under Ramsay MacDonald in 1924 and 1929-1931. The party was in a wartime coalition from 1940 to 1945, after...
was initially against the sales and pledged to oppose them in the 1983
United Kingdom general election, 1983
The 1983 United Kingdom general election was held on 9 June 1983. It gave the Conservative Party under Margaret Thatcher the most decisive election victory since that of Labour in 1945...
and 1987 general elections
United Kingdom general election, 1987
The United Kingdom general election of 1987 was held on 11 June 1987, to elect 650 members to the British House of Commons. The election was the third consecutive election victory for the Conservative Party under the leadership of Margaret Thatcher, who became the first Prime Minister since the 2nd...
, but had dropped this policy by the 1992 election
United Kingdom general election, 1992
The United Kingdom general election of 1992 was held on 9 April 1992, and was the fourth consecutive victory for the Conservative Party. This election result was one of the biggest surprises in 20th Century politics, as polling leading up to the day of the election showed Labour under leader Neil...
because it was perceived as losing votes.
When Labour finally returned to power in 1997, it reduced the discount available to tenants in local authorities which have severe pressure on their housing stock; this includes almost the whole of London.
Some more recent ideas from the Localis think tank suggests that right to buy should be extended into equity slivers, which could be part earned through being a good tenant. This was part of a review of principles for social housing reform.
Right to buy rules after 2005
The Right to Buy rules were changed in 2005. Five years' tenancy is now required for new tenants to qualify, and properties purchased after October 2004 can no longer immediately be placed on the open market should the owner decide to sell. Such owners must now approach their previous landlord (Registered Social Landlords RSLs) and offer them "first right of refusal". If the RSL is unable to offer a realistic purchase price, then that landlord still has the right to offer the property to an alternative RSL.All RSLs are now legally obligated to offer Right to Buy advice including advice on high fee-charging Mortgage Brokers. The time in which Right to Buy conveyancing should take place has been reduced from 12 months to 3 months. The Financial Services Authority
Financial Services Authority
The Financial Services Authority is a quasi-judicial body responsible for the regulation of the financial services industry in the United Kingdom. Its board is appointed by the Treasury and the organisation is structured as a company limited by guarantee and owned by the UK government. Its main...
now governs and regulates most types of mortgage-selling.
The Financial Services Authority
Financial Services Authority
The Financial Services Authority is a quasi-judicial body responsible for the regulation of the financial services industry in the United Kingdom. Its board is appointed by the Treasury and the organisation is structured as a company limited by guarantee and owned by the UK government. Its main...
's governance of Right to Buy purchases was partly to solve the widespread problem of Right to Buy mis selling from brokers and solicitors alike. Each had their own agenda and many were actively charging excessive fees which were then taken out of their client's discount. Fortunately, the above actions that have been taken coupled with the end of the boom period seem to have brought this problem under control.
Criticisms
The right-to-buy scheme has been criticised for the following reasons:- In areas where demand for housing exceeds supply, the stock of social housing was depleted faster than it was replaced;
- Speculating investors were able to buy up council properties through deferred transaction agreements, hastening the rise in property costs;
- Commercially and socially valuable council assets being sold at below their market value or replacement cost;
- The remaining stock of council housing was concentrated in undesirable areas with little employment opportunity, further isolating and stigmatising the tenants.
Further reading
- Jones, Colin & Murie, Alan. The Right to Buy: Analysis & Evaluation of a Housing Policy (Blackwell Publishing Ltd., 2006).
External links
- Financial Services Authority
- Right to Buy Changes (CTAB Mortgage Desk)
- The Right to Buy (Dept. for Communities and Local Government - formerly ODPM).
- House Price Crash
- The Conservatives Start Selling Council Houses (haroldhill.org)