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How Margaret Thatcher’s flagship scheme descended into dysfunction

Thatcher Right To Buy
The rental market has undergone a seismic shift since Thatcher's 'Right to Buy' scheme was first introduced in the 1980s - David Levenson/Getty Images Europe

Margaret Thatcher’s flagship 1980s housing policy “Right to Buy” has been “abused” and requires urgent reform, a damning report has warned.

The discount scheme has allowed council tenants to buy their homes for as little as £15,000 since it came into force in 1980.

Discounts are capped at 70pc, or £100,000 in London – having last increased in 2014 under former prime minister and current Foreign Secretary David Cameron.

However, a report by The Housing Forum, a body of local authorities, housing associations and housebuilders, has urged the Government to drastically cut the maximum discount.

It said Right to Buy has taken away council accommodation, while some buyers are purchasing homes and then placing them straight onto the private rental market.

In the last financial year, 10,896 homes were sold through Right to Buy and only 3,447 were replaced – resulting in a net loss of 7,449.

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In more recent years, the scheme has been extended voluntarily to housing associations that let out social homes. Since 1991, the scheme has resulted in a net loss of 24,000 social homes.

Scheme ‘putting off’ councils from building

The Housing Forum report reveals that local authorities – the majority now cash-strapped with huge housing wait lists – are swallowing losses to the tune of £63,000 on individual property sales.

Anna Clarke, policy director at the members body, said: “Forcing councils to sell off their housing at prices much lower than it costs to rebuild it leaves them fighting an uphill battle.

“Many councils are keen to build new council homes – but they’re put off doing so by the risk of having to sell their new homes off as fast as they can build.”

Sales of council homes have increased over the past 10 years, and are expected to reach 100,000 between 2021 and 2030 – total replacements, however, are unlikely to be much above 43,000.

Meanwhile, the number of households in temporary accommodation has doubled in the last decade to over 100,000, due to the lack of permanent homes to place constituents in.

Homes bought at a discount and then rented out

The Housing Forum’s report also found “apparent abuse in the system and unfairness” after looking at how the Right to Buy scheme was being used by tenants, who were found to have “often” bought properties with gifts or loans from other family members.

In other cases, families had managed to buy their homes after falling into rental arrears and claiming benefits shortly beforehand. Some homes were sold, the report said, only to be let out on the private market shortly after.

In one case highlighted in the report, a 93-year-old had applied to buy her home. Her daughter had power of attorney over her financial affairs, giving rise to concerns over whether the purchase was truly in the tenant’s interests.

The property was a bungalow, a type of home in short supply nationally and designed to accommodate tenants with disabilities.

Naturally, councils have become wary of the Right to Buy scheme. As a result, many are now reluctant to build more housing only to lose tens of thousands of pounds on it in the future.

One council, the report said, has calculated that it would need to sell six homes via the Right to Buy scheme in order to create enough funding to build just one new one.

Another said: “It breeds caution. It makes us all more cautious about growing our stock.”

‘It’s time to overhaul Right to Buy’

Darren Rodwell, the Local Government Association’s (LGA) housing spokesperson, said whilst the Right to Buy scheme can and has delivered home ownership for many, the current form “does not work for local authorities”, and has led to many of those most in need of housing support “simply unable to access secure, safe social housing”.

He added: “We are facing a significant housing shortage in this country which has pushed council budgets to the brink.

“It is time for the Government to overhaul a system which has seen our social housing stock significantly diminish.”

To make councils major housebuilders again, the LGA has long been calling for a number of proposals to reform the Right to Buy scheme. One big change would be to increase the time tenants need to live in the property before they can buy it from three to 15 years.

Discounts should be capped at 20pc

Another proposal put forward by the LGA is for the Government to give individual councils the ability to set their own discounts.

In its report, The Housing Forum said discounts should be significantly paired back across the board – from the current 70pc, to a cap of 20pc.

Across the country, wildly different discounts are already being applied. Data collected by the LGA and estate agency Savills last year showed that the average discount in the north of England was 48pc in 2021-22, over 10pc more (36pc) than in the south – despite major differences in house prices.

This masked an even greater variation at the authority level, where the maximum discount applied that financial year was 54pc by an East Midlands council – and the lowest was 18pc, applied by a London council.

But the volume of sales in London is still high. The average sale price in London after the discount was £214,613 last year – which would usually require a £21,000 deposit and a combined income of £54,000.

Over the past decade, Barking and Dagenham have sold 1,988 homes, and Newham has sold 1,801 –  which means both of these boroughs have sold more than 10pc of their stock.

Homelessness continues to rise

Levels of homelessness have now increased above pre-pandemic levels – and they are especially bad in the Home Counties.

Around 4,467 more people were assessed as homeless in the final quarter of 2022-23 in county areas, compared with the same quarter a year earlier.

The County Council Network has said this represents a 18pc increase, compared with a 15.7pc increase in metropolitan boroughs.

Homeless charities are also therefore calling on the Government to urgently review and reform Thatcher’s flagship policy.

Jasmine Basran, head of policy at homelessness charity Crisis, said: “For us, the key issue to address here is housing supply. We need to be supplying 90,000 social homes a year. We need to enable councils as much as possible to do that.

“We think the Right to Buy scheme should be reformed to help councils respond better to homelessness issues in their areas.”

A Department for Levelling Up and Housing spokesman said: “We remain committed to Right to Buy which has helped over two million social housing tenants to become homeowners. Local authorities oversee this process and can use money from sales and preferential borrowing rates to build new homes.

“Through our long-term plan for housing we are building the homes the country needs, including additional social housing, and we have delivered over 696,100 new affordable homes, of which over 172,600 are for social rent, since 2010.”

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