Housing associations and the Right to Buy Contents

2The statutory Right to Buy

6.The Right to Buy has existed for council tenants since 1980, and we wanted to understand its impact so that we could assess the effects of the extended RTB for housing association tenants. We therefore commissioned Professor Ian Cole and his colleagues at the Centre for Regional Economic and Social Research at Sheffield Hallam University to undertake a review of the literature and data available on the statutory RTB. Their findings are available on our website and are summarised below.

7.Between 1980/81 and 2013/14, 1.8 million properties were purchased in England through the RTB, generating capital receipts of around £45 billion up to 2010/11. The number of homes owned by councils fell considerably during this time, from 5.1 million in 1980 to 1.7 million in 2014. This was due to the RTB but also the transfer of stock from the local authority to the housing association sector through a process called Large Scale Voluntary Transfer (LSVT).

8.The rate of RTB sales varied between the different parts of the UK. In the first five years, the proportion of properties sold in the North of England lagged behind sales in the more prosperous South-East and South-West, but these differences then levelled off. In the early years of RTB, sales were higher in smaller, rural district councils and new towns and lower in larger, urban authorities. This gap closed a little when the higher discounts were introduced in the mid to late 1980s. RTB sales were highest in areas where owner occupation was already at high levels and where the initial stock of council housing was relatively small.

9.The type of households which exercise the RTB has changed over the 35 years that the policy has been operating at national level. In the first phase, a relatively high proportion of RTB purchasers were older, reflecting pent up demand and the larger discounts for longer term tenants. During the 1990s the most common household type was a two parent family with children at school. The incomes of RTB purchasers were generally below average and most purchasers were drawn from lower middle class or skilled working class backgrounds. Only a minority of RTB purchasers had incomes in the lowest quartile of the income distribution. Around one in eight households exercised the RTB with external funding support. This kind of financial assistance from families or other sources allowed some households with lower incomes (such as pensioners) to purchase their property. In some cases companies offered special deals to sitting tenants, especially those receiving Housing Benefit, to purchase outside the formal mortgage market.

10.The research also found that a considerable amount of the sold RTB stock has now been ‘recycled’ into the private rented sector. A study in 1995 found that former council houses were being priced some 10 per cent lower than owner-occupied properties of an equivalent size, age and type. While this often made them accessible to first-time buyers it also made them attractive to private landlords. A survey undertaken in 2003 found that 21 per cent of properties in Lambeth and 31 per cent in Camden bought under the RTB three years earlier were no longer owner-occupied. This figure was much lower outside inner London: 7 per cent in Birmingham, 6 per cent in Havering and 3 per cent in Leeds. The rate could also vary widely among estates in the same city, with less popular estates seeing a higher transfer to the private rented sector. A study of changing tenure in Birmingham between 1981 and 2001 found that the private rented sector had increased on the Ladywood estate by 43 per cent solely as the result of transfers from RTB property, compared to just 16 per cent on another estate, Falcon Wood. Evidence suggested that from 2011 onwards, the number of RTB homes that are now in the private rented sector has increased.

11.The research also found that average weekly Housing Benefit awards in the private rented sector are over £20 per week higher than in the social rented sector. This equates to over £1,000 per annum for each claim. The research also identified a study in Renfrewshire which found that 43 per cent of Housing Benefit claimants in the private rented sector were living in properties purchased under RTB. The authors calculated that in Renfrewshire alone, the higher cost of accommodation within private renting led to an additional cost of £3.2 million per annum compared to the equivalent within social renting.

12.RTB has contributed to a substantial shift in housing stock between different sectors, which—in the absence of countervailing new build programmes—has caused supply problems. In the short term there were no evident losers, as the same household continued to live in the same property. In the longer term, however, there is a shrinkage in the local supply of social housing and so in choice for social tenants.

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Prepared 8 February 2016