Right to Buy: it’s time to turn back on the lady

The total social housing stock in the UK has roughly halved since, and for every social home built last year, eight more were sold. The effective cost to public funds is estimated at £194bn – a little over 16% of annual state spending.

The stated aim was to create a ‘homeowning democracy’, enriching people’s lives with the security, comfort and fulfilment of owning their own home. Only, it didn’t exactly work out that way. Almost half of all homes sold under the policy are now being let on the private market. RtB didn’t so much create a generation of homeowners as a new generation of landlords.

As a result, the number of households in the PRS has doubled since 1980, with a fifth of Brits now privately renting. Shockingly, the proportion of income spent on rent has more than trebled: in London, 42% of a renter’s income is spent on housing. In other words, every penny that the average London renter earned between 1 January and 2 June last year went to their landlord.

“More than a million council homes were sold off through RtB, with an average discount of 44% of the market value. It was the Big Bang moment that preceded nearly five decades of financialisation and commodification of housing”

Building new homes, affordable or otherwise, will do little to alter this course while the rate of RtB sales continues at its current pace. Studies from a decade ago show that new developments don’t and won’t reduce either capital or rental prices. The recent build-to-rent boom, once hailed as a surefire way to drive down rental demand and prices, has had the opposite effect, causing a spike in average rents in dense build-to-rent construction zones.

Housing isn’t just getting costlier, however. It’s getting smaller. The past 45 years has born a period of housing shrinkflation, with the average living-room having shrunk by a third in that time. Nearly half of all renters living in flat shares don’t even have one.

Council homes by the thousands have been gutted, converted into HMOs and left to rot, with a BBC feature I recently participated in revealing the ubiquity of mould, rats and even death at the hands of landlords’ institutionalised indifference.

The longer-term macro-economic consequences of RtB has been ballooning house prices that have created an almost feudalistic partition between renters and homeowners. The once plentiful social housing stock was bought and carved up, rents were hiked, and the ladder was pulled up.

Free-market mechanisms are failing. It is critical that we acknowledge that.

But it’s not just renters who are footing an ever-increasing bill for their housing costs. RtB has helped to push an extraordinary 130,000 households into temporary accommodation as the traditional avenues to housing those in need were sold off, while the taxpayer hands out a £2.8bn a year to compensate for this mistake.

“The discrepancy between the discounted RtB sale price and the full market rate councils pay to repurchase has left a black hole in taxpayer cash”

Measures to reverse RtB’s destructive course have been attempted. The mayor of London’s Right to Buy-back, and the subsequent and similar Council Homes Acquisition Programme, support London councils to repurchase former council homes, helping to boost council-owned housing stock.

But the discrepancy between the discounted RtB sale price and the full market rate councils pay to repurchase – in addition to the rise in property prices – has left a black hole in taxpayer cash of more than £15m in only a dozen local authorities over the course of just a couple of years.

While landlords threaten to leave the PRS as the Renters Rights’ Act rebalances power toward the renter, what of those highly dispersed properties potentially for sale in locations demonstrably in demand?

Whether or not that threat crystallises, the time is right to support an initiative for the renter’s right of first refusal, wherein they can buy their home at non-vacant possession valuation, subject to an affordability test. The government could support this with grant or Stamp Duty exemption. This would save homes, improve communities, and boost homeownership with no loss of desperately needed social housing.

Ultimately, however, these are policies to remedy, not resolve. The policy solution, as it so often is and yet all too often ignored, is to go back to the beginning, the root cause. Thatcher might not have been for turning, but to create a housing system that works for all, not just the wealthy few, it’s time we turned our back on the lady and ended the Right to Buy scam.

Roz Spencer, head of safer renting, Cambridge House