Think tank welcomes Right to Buy revival but urges government to go further

Boris Johnson is expected to confirm plans to extend the Right to Buy to housing association tenants later today.

The prime minister will use a major speech in Lancashire to announce new measures to potentially help millions onto the property ladder.

It is reported that renters will be offered the opportunity to acquire their social properties at discounts of up to 70%, although is expected to be limited to a series of pilots for now.

There are concerns among some analysts that the Right to Buy extension could erode supply of affordable homes. But the policy has been welcomed by the Centre for Policy Studies.

A new Centre for Policy Studies paper, published today, describes Right to Buy as one of the biggest policy successes of the 20th century. It highlights the fact that almost 10% of households, representing roughly 4.5 million people, used it to move into ownership. It also sets out the scale of the discrimination within the benefits system against low-income owners as opposed to working renters.

The paper, by former Number 10 housing advisor Alex Morton, argues that Right to Buy led to a reduction in waiting lists for social housing. It also argues that the policy delivers long-term savings for the Treasury of around £140,000 per house sold, largely due to the reduced cost of housing benefit when someone becomes an owner.

It also claims that the benefit system is fundamentally biased towards keeping people as tenants rather than owners, with CPS calculations finding that just 2.3p is spent on incentivising ownership among low and middle earners for every pound that subsidises renting. It calls for this imbalance to be redressed by making the benefit system as tenure neutral as possible.

While the Centre for Policy Studies welcomes the government’s commitment to extending home ownership, it argues that it should go further than just extending the existing Right to Buy by revamping it in the form of a new Right to Own.

Under the proposal, tenants would obtain a mortgage worth 60% of the value of their home – which would be paid off in payments that rise at the same rates as social rents do each year. Like any other buyer, once this ends the property is owned outright however, effectively at a 40% discount, mirroring the Right to Buy discount but at a lower rate. In an emergency such as a loss of employment, the tenant would be able to access the equity they had built up, providing a cushion for them.

In other words, the Centre for Policy Studies believes today’s proposal would provide tenants greater security, with every rental payment increasing the tenant’s share of ownership – but still leaving them better protected in the event of financial shocks or unexpected costs.

The paper shows how the revenue from these sales, plus the sale of high-value council homes as they become vacant, could be used to fund the construction of a new wave of affordable social housing – expanding home ownership and the housing stock at the same time.

Morton, head of Policy at the Centre for Policy Studies, said: “The Right to Buy was one of the most transformative policies of the 20th century, moving millions of people into home ownership. Many of the arguments made against the policy since do not stack up. The Government would be right to extend the policy to housing associations to take the opportunity to place greater ownership at the heart of its levelling up agenda, and deliver on the commitments made in the 2015 and 2019 Conservative manifestos.

“Longer term, the government can not only revive the Right to Buy but fully reinvent it for the 21st century by implementing a Right to Own. This would put rocket boosters under home ownership rates whilst protecting tenants and the state coffers.”

Robert Colvile, director of the Centre for Policy Studies, added: “The government’s commitment to home ownership, and to the Right to Buy, is hugely welcome. Our report argues that restoring the Right to Buy to housing association tenants, as widely reported, will be hugely welcome – and demolishes many of the left-wing myths surrounding the Right to Buy.

“However, we also urge the government to go further in boosting ownership among tenants of all tenures, for example by turning the existing Right to Buy into a new Right to Own, and incentivising private sector landlords to sell to their tenants, as proposed in previous CPS work.”

SOURCE: Property Industry Eye | JUNE 9, 2022 | MARC DA SILVA