Right to buy: A timely kick-start for housing or a gimmick to be avoided? - House & Home - Property - The Independent

Right to buy: A timely kick-start for housing or a gimmick to be avoided?

The Government is offering generous incentives to tenants, but critics say this could cause more problems than it solves, reports Chiara Cavaglieri

With house construction in the UK at a standstill the Government is pulling out all the stops to get things moving again by bringing in yet another initiative. To give the industry more food for thought after the recent introduction of the NewBuy scheme, designed to help people buy a new home with only a 5 per cent deposit, there is now a revived version of the old right-to-buy scheme, but again there are some serious question marks looming.

Introduced by Margaret Thatcher in the 1980s, the original right-to-buy scheme offered generous discounts of up to 60 per cent to encourage some 2.5 million tenants to buy their own council homes, some of whom have benefited handsomely from rising property prices. However, after successive governments tinkered with it – under John Prescott the discounts were capped at £38,000 – tenants have been steadily losing interest, with the number of sales falling from an annual peak of 84,000 10 years ago to fewer than 3,700 sales last year.

David Cameron is hoping to get the old scheme going again by introducing a new discount cap of £75,000 on right-to-buy property sales; considerably more generous than the £50,000 expected, but critics say even this "rebooted" version could cause more problems than it solves.

"The purpose is opaque at best. Selling off the nation's affordable housing stock at a time when there are two million families on waiting lists must be mad but still the powers-that-be press on," says Henry Pryor, a housing expert and commentator.

Under the refreshed scheme, tenants with five years' residency will be able to buy their home with up to 35 per cent knocked off and an extra 1 per cent discount for each additional year, up to a maximum of £75,000. Tenants in flats will be able to save 50 per cent after five years, after which they save an extra 2 per cent annually. This will be an appealing prospect for aspiring homeowners and at face value, it is difficult to criticise a move that encourages those people who can afford it to leave social housing.

The first hurdle, however, will be preventing social housing from coming under even more pressure in the time lag between existing properties being sold and new homes being built. Even when those new homes are ready, rents are so high that the replacements could add to the problem. Campbell Robb, the chief executive of the housing charity Shelter, says that if the homes sold aren't replaced like for like, and landlords charge up to 80 per cent of market rents, the bulk of this "affordable" housing will still be far beyond the reach of many people.

"At a time when we already have a critical shortage of affordable housing in this country, this amounts to little more than asset-stripping and will ultimately mean fewer genuinely affordable homes for families struggling on low incomes," he says.

Despite the aim that proceeds from every social housing home sold will be used to build a new one, many will remember last time when the Conservatives were criticised for failing to reinvest the money and some people fear we could see the same today.

"It's good to see the prime minister continuing to push housing issues," says Grainia Long, the chief executive of the Chartered Institute of Housing. "However, we have raised concerns over the Government's claim that it can provide one new affordable rent home for each council house sold."

So, could this simply be an attempt to snatch some favourable headlines? Many of the council homes people would want to buy are already owned privately and the ones that are up for grabs tend to be in less desirable areas that tenants are unlikely to want to buy and lenders hate to lend on.

There is no avoiding the fact many ex-local authority homes have a stigma which is going to stifle resale values. Those in blocks or developments, which still have a large percentage of council properties, are often more difficult to sell on and lenders will be even more cautious with these properties. Many potential right-to-buy tenants may decide now is not the time to become a homeowner.

"The pros ought to outweigh the cons, but mortgage lenders won't lend as freely as they did 30 years ago. They will pick and choose the structure of property they feel safest lending against, and the income of a borrower will nowadays have to be significantly superior to what it was," says Ben Thompson, the managing director of Legal & General mortgages.

Daniella Lipszyc, a financial claims lawyer from Ultimate Law, also questions whether council tenants will really benefit from the proposals. She says we must remember that in the past right-to-buy has left a number of owners vulnerable after being mis-sold mortgages following inappropriate advice from brokers, lenders and solicitors who were more concerned with commissions than due diligence. "The scheme had problems with valuations to start with – no one had a true idea of the property's value because it was the first time it had been bought and they had nothing else to gauge it against," she says.

When the market took a nosedive, some who exercised their right to buy found they would have been far better off as tenants. Right-to-buy mortgage holders are three times more likely to be repossessed, says Shelter, so rigorous affordability checks are crucial if we are going to prevent tenants from diving in without truly being able to afford to buy their home. Those buying flats will probably have to factor in a "service charge" towards the upkeep of the whole building, which could mean an annual bill of several thousands of pounds.

Ms Lipszyc has her doubts that the scheme will work because even for tenants confident they can afford to buy, the mortgage market is a different prospect now.

"An improved discount is all very well, but they can't force lenders to lend. This is actually a better time to buy because the market is so poor and tenants are less likely to end up in negative equity as they did five or six years ago. The irony is that they won't be able to find any lenders willing to lend them the money."

Expert view: Henry Pryor, housing market commentator

"Like FirstBuy and the NewBuy scheme it is far from clear why this initiative should bring benefits either to tenants or to the local authority selling the property and while some people will make money having bought their rented property, many will look back as the previous generation who bought in the Eighties and wonder if it really was worth the effort."

Discover more property articles at Homes and Property
Life and Style
tech
Arts and Entertainment
Robin Thicke's video for 'Blurred Lines' has been criticised for condoning rape
music
News
Paper trail: the wedding photograph found in the rubble after 9/11 – it took Elizabeth Keefe 13 years to find the people in it
newsWho are the people in this photo? It took Elizabeth Stringer Keefe 13 years to find out
Voices
Yes supporters gather outside the Usher Hall, which is hosting a Night for Scotland in Edinburgh
voicesBen Judah: Is there a third option for England and Scotland that keeps everyone happy?
PROMOTED VIDEO
Life and Style
Bono and Apple CEO Tim Cook announced U2's surprise new album at the iPhone 6 launch
tech(but you can't escape: Bono is always on your iPhone)
Sport
Tim Wiese
sport
Life and Style
Kim Kardashian drawn backlash over her sexy swimsuit selfie, called 'disgusting' and 'nasty'
fashionCritics say magazine only pays attention to fashion trends among rich, white women
Arts and Entertainment
TVShows like Agents of S.H.I.E.L.D are little more than marketing tools
Arts and Entertainment
Hit the roof: hot-tub cinema east London
architectureFrom pools to football pitches, rooftop living is looking up
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Programme Test Manager

£400 Per Day: Clearwater People Solutions Ltd: Our client are currently seekin...

IT Network Manager - Shepherd's Bush, London

£28000 - £30000 per annum: Ashdown Group: IT Network Manager - Shepherd's Bush...

Secondary supply teachers needed in Peterborough

£21000 - £35000 per annum: Randstad Education Cambridge: Secondary supply teac...

Modern Foreign Languages Teacher

£100 - £110 per day: Randstad Education Group: Full time German Supply Teacher...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week