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Selling off council houses under the right to buy is wrong – discuss

Buy to letDid you see this article from the Observer about landlords ‘cashing in’ on the right to buy over the weekend?

It is based on a report, From Right to Buy to Buy to Let, compiled by Tom Copley, a Labour London assembly member, from responses to freedom of information requests.

This shows that:

  • at least 36% of all homes sold by councils across London under the buy to let law are now let by private landlords
  • substantial numbers of these are being let to tenants who are now supported by housing benefit, while
  • many would-be council tenants have now been forced into the private rented sector because of the dwindling supply of council homes

The result of this is that we, the taxpayers, have paid and are paying, several times over.

  • We paid for the original properties to be built
  • We therefore effectively subsidised the council house tenants who bought them at an undervalue,
  • We (or rather the public sector) no longer gets the benefit of rent from the properties which our taxes helped to build, and
  • Now we are paying, through housing benefit, higher rents to private landlords.

The report says that families on benefit claim claim as much as £100 a week – £5,200 a year – more in housing benefit than council tenants in the same area.  Goodness knows how much money has been lost to the taxpayer through this exercise.

Let me come right out into the open here. I don’t agree with selling off publicly owned residential property to the private sector. I never have done.

I don’t blame council tenants for buying the properties when they were offered to them – I would probably have done the same in their place.

I don’t blame buy to let landlords for buying them from the original owners and renting them out at a market rent. Thats business, and they are at least making accommodation available for people.

But please explain to me why it is fair and right that someone lucky enough to have subsidised council housing in the first place, should then be given the opportunity to buy this property at an undervalue. Often a massive undervalue.  When everyone else has to pay full price.

And why it is right that property built with OUR MONEY should be sold off at an undervalue and taken forever out of the public sector. With no funding being made available to councils to build new houses to replace those sold.

Leaving councils with a statutory duty to house the homeless in priority need, but nowhere to put them.

The report is written with particular reference to London (Tom Copley being a London Assembly member) and London has perhaps has suffered the most and has the biggest housing problems.  As the report says

If there is insufficient housing for those on low-incomes – the key workers that keep the city ticking – it will undermine London’s long-term economic competitiveness.

These are the recommendations made in the report:

  • The government should introduce mandatory covenants on all Right to Buy properties that stipulate that the home cannot be let through the private rented sector
  • The system of discounts should be abolished
  • A new system should be introduced whereby local authorities retain an equity stake in any home sold
  • Local authorities should have a ‘right not to sell’ council housing if this can be justified
  • Newly built council housing should be exempted from the Right to Buy if the borough wishes them to be
  • Local authorities should have a right of first refusal to buy the former council property before the owner seeks to sell it on the open market
  • All new homes built through Right to Buy receipts should mirror the rent, size and tenure specifications of the home lost by the council through this policy
  • Local authorities should only be allowed to sell the leasehold of a property and not the freehold.

This all sounds fairly sensible to me.  What do you think?

You can read the report online here.

(See also the comments area below and >> click here to read our terms of use and comments policy)

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8 Responses to Selling off council houses under the right to buy is wrong – discuss

  1. Hard to argue with the financial logic in the report.

    Of course, Right to Buy was introduced by Maggie and gave ordinary working people the opportunity of home ownership for the first time.

    It helped create a culture of people working hard and investing for the future, for the benefit of their families, at a time when the UK was an economic basket case.

    The principle was right. Of course at the time no-one could look 30 years into the future and see the issues raised in Tom Copley’s report.

  2. There is nothing to discuss. The Right to Buy policy/legislation shoudl never have been introduced. The private sector was never going to be able to supply the number of new homes needed to keep up with the demand of social tenants, let alone make up for the homes that were sold.

    In Scotland they have already introduced a bill to reverse the legislation (although it also contains some other policies I don’t really agree with).

  3. The ‘report’ conveniently fails to take into account repairs, maintenance, management charges, insurance etc of the older social housing stock.

  4. Also when making the ‘benefit tenants claiming up to £100 a week more’ comparisons with council tenants, it overlooks that council rents are heavily subsidised.

    And it doesn’t take into account pricing of properties under secure tenancies.

    Or the inefficiency of councils when it comes to spending OPM.

    There is much wrong with RTB but this one sided report ignoring major aspects is a bit of a nonsense.

  5. RTB is not the cause of the housing shortage in the SE of England that is due to governments allowing the population to increase rapidly without building the houses needed to accommodate the extra people.

  6. I think the problem was that rents in the public sector where (and still are) far too low. So there is no incentive for someone renting in the public sector to move on when they are able to do so.

    A case could be made for public sector rents being set higher than the private sector, as tenants in the public sector gets more rights.

    If the rent levels were not so low, the discounts would not have had to be so big and if the money was then spend on building new public sector housing we could had ended up with mixed estates and still had enough homes.

  7. Ignoring the legal requirement that Councils have to house people, I presume Councils sold their Council houses for more than they paid for them and generated a capital gain. If a landlord did this, they would have to pay CGT on these funds but Councils don’t. Councils (or their ALMOs) then could access super-cheap funding via Housing Corporation (as was then) if they wanted to build new more efficient or smaller homes. My heart is not bleeding for these Councils as Private Rented Sector (PRS) landlords would jump for joy to have access to near-free money and tax-free capital gains!!

    Unfortunately, Councils are not run on a commercial basis and don’t understand basic treasury, capital and asset management. They squandered these amazing tax-free gains and cheap funding. Parking London, why are Councils not buying back the housing stock from distressed sellers? They could easily set up a commercial vehicle for doing this and make greater returns than PRS. Far better to do this than constantly moan about Right to Buy!!!

  8. The basic idea of tenants owning their council homes was originally from labour and councils always had the right to sell homes to tenants, it just happened very rarely. The idea was then adopted by Cutler via his General Sales Scheme which later evolved into the Right To Buy policy when he headed the Housing Committee of the GLC. It didn’t come from Thatcher, although she promoted it.

    Julia, the idea wasn’t that councils should use the windfall to buy shiney new social housing. Quite the opposite. It was a much more
    ideological policy to specifically move away from the idea that housingshould be provided by the state and towards a free market.

    Back then a lot of social housing stock was empty and sub-standard so it did’t seem like such a bad idea. The problem is that I believe social housing is fundamentally one of the rare things that government can provide better than free markets than.



About the post author:

Tessa Shepperson

Tessa is a lawyer and specialises in creating products and services which help landlords and letting agents learn and understand landlord & tenant law. For example, she runs the Landlord Law website (now in its 14th year) and is a director of Easy Law Training Ltd and Your Law Store. Tessa also sits on the Property Redress Scheme Council. When not working she enjoys reading, cooking and messing around on the computer. You can also find her on Google

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