WIREDGOV

Tenants have received discounts of nearly £5 billion to help purchase their council home under the Right to Buy (RTB) scheme since the size of the discount was increased in April 2012, new analysis by the Local Government Association revealed yesterday.

While Right to Buy has helped many families get on the housing ladder, the LGA said the scheme faces an uncertain future unless councils are given the flexibility to set discounts locally and retain 100 per cent of sales receipts to fund the replacement of homes sold off under the scheme.

The national RTB discount, set by government, currently averages 42 per cent of market value, meaning council properties can be bought for almost half price. Since the Government increased the size of the RTB discount in April 2012, the average discount on a property has increased by 137 per cent to more than £63,000.

As a result, the LGA estimates that tenants have benefited from £4.9 billion in Right to Buy discounts in order to buy their own home.

The LGA says the size of the nationally-set discount has led to a surge in the number of homes sold under the RTB scheme – with 79,119 homes sold between 2012/13 and 2018/19. With councils only able to use a third of each retained RTB receipt to build a replacement home, they have only been able to replace around a quarter (21,720) of these homes sold in the same period.

This loss of social rented housing risks pushing more families into the private rented sector, driving up housing benefit spending and rents and exacerbating our homelessness crisis.

To ensure RTB works for future generations, the LGA is calling on the Government in the forthcoming Budget to allow councils to set discounts locally and keep 100 per cent of sales receipts to replace homes.

Cllr David Renard, the LGA’s housing spokesman, said:

“We were pleased the Government listened to our call to scrap the housing borrowing cap to give councils more freedom to build council homes. But it makes no sense if these homes are then potentially sold at a heavily discounted price. Protecting council investment in new stock is crucial if we are going to build the homes the country needs.

“Right to Buy continues to enable many families to achieve the dream of getting on the housing ladder and owning their own home. Without reform of the scheme, future generations will not enjoy the same opportunity.

“It is wrong for the same level of discount to be applied all over the country. Local housing markets differ enormously and this national discount is impacting on different areas of the country in different ways.

“Given the Government’s commitment to level up powers and investment in local areas across all parts of the country, we would want to see the flexibility for councils to be able to set discounts for their local area.

“The size of discount is also driving a surge in homes being sold under RTB, which councils are unable to keep up with and replace with new homes for those who desperately need them.

“This is aggravating the housing crisis by further reducing the social housing available to councils to support vulnerable people and their families and reduce homelessness.

“It is vital that councils can set their own RTB discounts depending on the circumstances of their local area and housing markets. Councils must also be able to keep 100 per cent of sales receipts, be permitted to use all of it to replace homes sold, as well as have the ability to combine receipts with government grant.”

Notes to editors

1. The Right to Buy (RTB) scheme allows eligible council (and housing association tenants with preserved RTB) in England to buy their home at a discount. It was introduced by the Housing Act 1980 in England.

2. Tenants must have been a public sector tenant for at least 3 years in order to qualify for the Right to Buy. If tenants live in a house, they can get a discount of 35 per cent after 3 years tenancy. Tenants can also get 35 per cent after 4 and 5 years tenancy. For each extra year after that, tenants get another 1 per cent for each year of tenancy up to a maximum of 70 per cent. If tenants live in a flat, they can get a discount of 50 per cent after 3 years as a tenant. They also get 50 per cent after 4 and 5 years tenancy. For each extra year after that, tenants get another 2 per cent for each year of tenancy, up to a maximum of 70 per cent. However, whatever percentage tenants are eligible for, the discount cannot be greater than £82,800, unless a tenant’s home is in London where the maximum discount is £110,500. Tenants can exercise the Right to Buy jointly with members of their family that have lived with them for the past 12 months, or with someone who is a joint tenant.

3. Between 2012/13 and 2018/19 councils have sold 79,119 homes under RTB and started building 21,720 in that time. Assuming all starts are completed this would equate to a loss of around 57,000 social rented homes in six years.

4. A total of £4,886,851,550 has been distributed in Right to Buy discounts between April 2012 and March 2019. The size of RTB discounts has been calculated by multiplying average discount for any year by the number of sales.

5. Full data set broken down by year