Almost 40 per cent of former council homes sold on the cheap under the Government’s Right to Buy scheme are now being let out on the hugely expensive private rental market, enriching a new generation of landlords.
The first national study of its kind, carried out by Inside Housing magazine, comes as the government prepares to extend full Right to Buy discounts – of more than £100,000 per property in London and £70,000 elsewhere – to a further 1.3 million housing association tenants.
Figures released by 91 councils in England under the Freedom of Information act show 37.6 per cent of flats sold to tenants under the controversial policy are being sublet at up to seven times the cost of average social rents.
Campaigners have denounced Right to Buy as “a perverse subsidy” that harms the poorest in society. Labour leadership candidate Andy Burnham called the policy, introduced by Margaret Thatcher’s government in 1980, a “disaster”.
The councils revealed they have sold 127,763 leasehold properties – typically flats and maisonettes – with 47,994 leaseholders now living at another address, a strong indication that the home is being sublet.
More than half the ex-council flats in six local authority areas are now being let privately with the highest - 70 per cent - in Milton Keynes. Stevenage, Corby and Blackpool all sold more than 60 per cent of their stock to people who are subletting their property.
Mr Burnham told The Independent: “These figures show the dramatic impact of Right to Buy on social housing stock. Social house building has effectively stopped in most of England. It is a disaster for our country, leaves families without a secure home and drives up the housing benefit bill.
“I’ve put house building at the centre of my leadership campaign. For too many people across the country today, the light of hope for home ownership has gone out. The Government will make this situation even worse with its plans to sell off housing association properties through Right to Buy, without any credible plans to replace them.”
Mr Burnham said under his leadership Labour would propose a legally binding guarantee that if any council house or housing association property is sold under Right to Buy then at least one new similar property of a similar standard and rent must be built “within walking distance”.
Typical ex-council properties currently available for private renting include a four double-bedroom apartment in Archway, north London, for almost £3,200 a month; a two-bedroom flat in Bermondsey, south east London, for £1,700 a month; and a three-bed maisonette in the same area for £2,400 a month.
The cheapest rent charged by registered social landlords in London is on average £450 a month in Lewisham, south east London, up to £559 a month in Newham, east London, according to figures compiled by the Greater London Authority.
Estates are being transformed with homeowners and council tenants being replaced by professional sharers and students – and the trend is not confined to London.
Nick Atkin, chief executive of Halton Housing Trust, which owns 6,400 homes in Cheshire following a transfer from the council, said many of them remain subject to the Right to Buy.
He said: “One in four sales is made to someone who is in receipt of housing benefit, so they are often not the person buying the home. It can be friends and family, but it is also companies who offer to purchase the home on their behalf.”
Right to Buy, introduced by Margaret Thatcher in 1980 and revamped by David Cameron, gives secure tenants of councils and some housing associations the legal right to buy the home they are living in. Since discounts were raised in 2012 almost 30,000 homes have been sold under the scheme but the supply of affordable homes - defined as the sum of social rent, affordable rent, intermediate rent and affordable home ownership - has shrunk dramatically over the same period.
Following a steady rise in the supply of affordable housing from 37,470 a year in 2004 to 60,480 in 2010, a sharp decline resulted in the availability of just 42,710 affordable homes last year.
Pat Callaghan, cabinet member for housing in Camden – where 36 per cent of the 8,922 leasehold properties are sublet, said: “Over the years I have seen many of our estates become virtual honey pots for estate agents and [private] landlords.”
Betsy Dillner, Director of Generation Rent, said: “Right to Buy is a perverse subsidy that worsens the overall situation of the poorest in society. Many of these properties are home to tenants who would qualify for social housing but pay vastly higher market rents that have to be covered by housing benefit, costing us all.
“If the government really wants to promote the dream of home ownership, they know very well that investing in the expansion of social housing would prevent prices running away from millions of aspiring home owners. Instead we see them again pursuing dangerous policies for the benefit of a few.”
Housing Minister Brandon Lewis, one of more than 150 MPs earning at least £10,000 a year each in rental income, said: “More council housing has been built since 2010 than in the previous 13 years. However, it is important that councils make the best use of their assets and manage their housing stock as efficiently as possible. So it is right that as high value council homes become empty they should be sold to fund new affordable housebuilding in the same area.
“Our proposals will do that and more, extending Right to Buy level discounts to over a million housing association tenants, with the homes sold replaced with new affordable homes.”
What does five more years of the Tories mean for Britain?
What does five more years of the Tories mean for Britain?
1/8 Welfare payments will be slashed
One of the most controversial parts of the Conservative manifesto was to cut benefits for the working age poor by £12 bn over the next three years. But during the campaign they only said where £2 bn of these savings would come from. That leaves £10 bn still to find. Some experts think the only way they can close that gap is by means testing child benefit – with millions of families losing out
2/8 There will be tax cuts for those in work and those who die
The Tories will increase the threshold at which the 40p rate of tax becomes payable to £50,000 by 2020. They haven’t said so but it is also likely that at some point in the next five years they will abolish that 45p rate of tax altogether for the highest earners. They also want to increase the effective inheritance tax threshold for married couples and civil partners to £1m
3/8 There will be an in/out EU referendum in 2017
The next two years are going to be dominated by the prospect of a referendum on Britain’s membership of the EU. First off David Cameron has the daunting task of negotiating a deal with other EU leaders an acceptable deal that he can sell to his party so he can go into the referendum campaigning for a ‘yes’ vote. This may be unachievable and it is possible that the Tories may end up arguing to leave. Opinion polls show Britain is divided on EU membership, one poll this year showed 51% said they would opt to leave compared to 49% who would vote to stay in
4/8 There will be more privatisation of the NHS
Having won the election the Tories now have a mandate to go further and faster reforming the NHS. In order to make cost savings there is likely to be greater private involvement in running services, while some smaller hospitals may lose services they currently provide like A&E and maternity units
5/8 There will be many more free schools – and traditional state schools will become a thing of the past
The Tories plans to create 500 new free schools and make 3,000 state schools become academies. They will also carry on reforming the Department of Education and remove more powers from local authorities over how schools are run
6/8 On shore wind farms will be a thing of the past and fracking will be the future
Government spending on renewable energy is under real threat now the Lib Dems are no longer in power with the Tories. Subsidies are likely to be slashed for off-shore wind farm and other green energy supplies. Meanwhile there will be generous tax break for fracking as ministers try and incentivise the industry to drill for onshore oil and gas
7/8 There maybe more free childcare – but not necessarily
In the campaign the Tories pledged to double the amount of free early education for three- and four-year-olds from 15 hours a week to 30. The extra hours would only be offered to working families where parents are employed for at least eight hours a week. However they have not said where the money will come from to fund the pledge
8/8 Workers' rights could be reduced
The Tories want to slash business regulation, merge regulator and cut costs. The Lib Dems stopped them from reducing the employment rights of workers in power – but these are now under threat