It has been suggested the government is considering relaunching Thatcher’s infamous Right To Buy scheme.
The Right To Buy scheme helped nearly 2 million people in England buy their housing association properties and become home owners. In 1980, the flagship policy ‘Right To Buy’ Scheme was introduced and allowed tenants to buy their home at a discounted rate.
More than 4 decades later, Boris Johnson and the government are considering relaunching to help the millions currently renting.
The Right To Buy scheme comes after the pandemic has caused a property boom pushing house prices at an all-time high pushing many first-time buyers out of the market and into rented accommodation. With a higher price, comes a higher deposit.
The scheme would only be available to those currently renting housing association properties. Approximately 2.5 million households.
Housing associations work in a similar way to council houses in that they offer subsidised rent to individuals or families on low incomes.
How did it work?
The scheme was introduced under the Housing Act in 1980. Under the Right to Buy scheme, households could buy their council homes for a discount of between 33 per cent and 50 per cent of the market price — or 70 per cent for flats.
This discount was raised to 60 per cent in 1984 and then 70 per cent in 1986. You had to have been in council housing for a minimum of three years to qualify.
It is worth noting, not all reactions were positive when the radical new policy was announced. It was blamed for seeding a housing crisis. The scheme reduced the country’s stock of social housing, and the safety net that it offers. There was also a belief that there was an inequality in the discounts offered – a stark contrast in the value of great properties in great areas, versus those in poorer areas.
How could it work now?
The Government has not yet announced the discount tenants can expect under the new scheme. The idea was first mooted by David Cameron’s Government in 2015; it was suggested housing association tenants could receive up to the same 70 per cent discount as council tenants.
A pilot of the system in the Midlands in 2018 saw tenants typically receive a 46 per cent discount for properties valued at an average of £137,271.
These discounts were subsidised by the Department for Levelling Up, Housing and Communities. Housing-association tenants can purchase their home – but the maximum discount is £16,000 and you can only buy a property built or acquired by a housing association since 1997.
It is speculated that there will likely be clauses in the Right to Buy Scheme to stop people buying property from the council, only to immediately rent it out. This will be to stop the scheme being abused. No doubt there will be a number of other conditions to bring the scheme up to date.
A government spokesman says:
‘We want everyone to be given the chance to own a home of their own, and we keep all options to increase home ownership under review.’
Renting Vs Buying
Rents have risen at a record rate over the past year, jumping by 14 per cent in London and by more than 19 per cent in other hotspots such as Manchester.
Overall average rents are now 15 per cent higher than they were two years ago, according to figures from the Office for National Statistics.
According to Halifax, the average first-time buyer paid a £53,935 deposit last year.
Experts warn home loans are likely to get even more expensive in the months ahead, with the Bank of England expected to raise interest rates again imminently — possibly from 0.75 per cent up to 1 per cent.