Lime Legal

... but what about the losers?

Published 14 January 2024

With some 2.5 million homes wiped off the stock of social housing by right to buy, the policy’s knock-on effects cannot be ignored. By Nicola Hughes

There is no denying that right to buy was and to some extent still is enormously popular. The right has been exercised by more than 2.5 million households and feted by politicians as a great stepping stone into asset accumulation and social advancement. We cannot deny its huge impact on UK housing and politics.

These are among the key points in Peter King’s housing policy book, in which he attempts to judge the policy on its own merit and plays down its impact on other tenures. But it cannot be separated from the effect of 2.5 million homes disappearing from stock of the social housing.

The conflicting duties for local authorities to allow irretrievable sales of their stock (usually their best properties) yet house people in need have never been properly reconciled. Arch critic John Prescott, when he was deputy prime minister and responsible for housing, put it more bluntly. ‘I inherited a total mess,’ he said.

It’s not the principles of right to buy that bother many critics, it’s the imbalance between supply and demand it creates – the most basic economics. That demand is as urgent as ever, with families on waiting lists for years, stuck in so-called temporary accommodation. If all receipts were ringfenced for spending on housing, a lot of problems might have been avoided. Of course, the right to buy is not the only reason for the shortage of social housing, but it has certainly exacerbated it.

King anticipates this criticism, and brushes it off. But with 1.8 million households on social housing waiting lists, the practical knock-on effects cannot be ignored. He argues that the homes sold would not have been immediately available to re-let anyway, but they could have become available after time. John Hills major review of social housing makes this point succinctly: ‘turnover of existing dwellings as tenants move elsewhere or die… creates most of the potential for new tenants to enter the sector’. But when many of those ex-social tenants now in their seventies who bought their homes die, that stock will remain private. Had the right to buy not existed, that stock would create much needed new social lets, notwithstanding statutory succession rights.

The other theory underpinning his arguments is more ideological, relating to social and political beliefs – fundamental views of human nature. Humans are, he argues, essentially rational, selfish beings, and as such are drawn towards policies such as right to buy which play on privacy and the desire to do the best for you and yours that, he claims, underpins free markets.

In contrast, homelessness duty, social housing and housing benefit are all ‘problematic’, having created ‘economic dependency’. But there is no alternative as to how those living in poverty – as a result of illness, vulnerability, inability to work, or simply low pay – are expected to survive.

Huge subsidy

Of course, many people want to own their own home, but this does not mitigate the need for state support for housing, for the poor, the elderly, the vulnerable. To have shelter is a fundamental human right; everyone should be able to live in a secure and decent home, and indeed many other EU countries have enshrined such a right in their constitution. Subsidised housing is necessary for those who cannot house themselves.

But to own a home is not an automatic right and home ownership isn’t right for everybody. The big discounts that social housing tenants received when exercising the right to buy amounted to a huge subsidy. Many of the benefits claimed for home-ownership – a sense of pride and belonging, responsibility, permanency and privacy – can be met through socially rented housing in any case.

And we must not pretend that the right to buy has worked out for every tenant who exercised it. The recent Financial Services Authority mortgage market review identified it as a risky area, pointing to 2013 government research on right-to-buy companies that cold-called potential customers with high pressure sales techniques, sold unsuitable or unaffordable mortgages and designed scams to gain short-term profit from subletting properties or buying them as soon as the regulations would allow.

Evidence also suggests that a disproportionately high number of households in mortgage arrears or facing repossession bought their homes under the right to buy, an effect seen both prior to and during the recession. There is a high public cost involved in helping the evicted household find new accommodation.
Another frequent criticism that does not convince King is that it has been one of the driving forces behind residualisation of social housing. However, it has encouraged more affluent tenants, with better and bigger homes in nicer areas, to own – leaving the rest behind and damaging the reputation and desirability of social housing.

For King, statutory homelessness duty, priority need categories and housing benefit have been just as important in the homogenisation of social tenants. But this fails to recognise the social importance of these safety nets. It also goes against the evidence of researchers such as Jones and Murie, and of the many tenants who saw their communities change when wealthier neighbours bought up, some eventually selling to other owners, or becoming private landlords.

Lasting damage

Nor does his argument on the huge subsidies that encouraged tenants to buy hold up. To argue that the difference between average private rents and average council rents amounts to a subsidy of more than £3,000 a year, and that with housing benefit this subsidy amounts to almost £5,700 a year, is highly speculative.
Hills puts the average economic subsidy to social tenants at a much more modest £28,000 over 15 years – less than £1,900 a year. King fails to account for the indirect costs taxpayers have incurred – effectively underwriting discounts and the high costs of accommodating households in temporary private housing while there is no space in the social sector.

Another flaw in King’s argument is the comparison he makes between the ‘success’ of the right to buy and the ‘failure’ of the councils’ housebuilding programme. How can what he cheerfully admits was behind ‘the creation of six million new homes, which by 1980 totalled almost a third of the housing stock’ be dismissed as a failure?

Who, in fact, built the 2.5 million homes that were transferred into the public sector by the right to buy? How many homes have been built as a result of it?

So – right to buy the most successful housing policy of them all? In terms of its longevity and take up – yes, perhaps. But judging by the consequences and wider social benefit, it’s hard to see it as a success. It was poorly thought through and executed. Subsequent restrictions and reforms have helped – but more action is needed to ensure that the right to buy does not continue to diminish our valuable social housing to the detriment of those who need a home.