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Councils ‘missing out on £300m annually as Right to Buy discounts rise’
Councils could claw back up to £300m a year by reducing Right to Buy discounts without affecting the ability of tenants to buy their own homes, the Chartered Institute of Housing (CIH) has suggested.
As discounts for the Right to Buy have spiralled to almost £1bn annually, the organisation has called on the government to act to make more money available to replace the social rented homes lost through the policy.
The CIH said that discounting homes from the full market value is necessary in order to reflect the fact they are social homes and could not be sold on the open market at full value. This reflects the way social housing is valued for loan security purposes.
However, the current discounts have now risen to such an extent that £300m more than is necessary is being lost, according to the CIH analysis.
Right to Buy discounts were increased to £80,000 – and £108,000 in London – in April 2012. Since then, 69,467 homes have been sold while only 18,958 have been started or acquired to replace them.
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Clawing back the money above and beyond what is necessary to allow people to buy their homes could build an extra 12,000 homes each year, the CIH said.
The extent of the cost of the policy to the public sector was revealed in the CIH’s UK Housing Review 2018 autumn briefing paper, which will be launched today at Sheffield Town Hall.
Terrie Alafat, chief executive of the CIH, said: “Not only are we failing to build enough new homes for social rent, we are losing them at a time when we need them more than ever. Our research shows that we lost more than 150,000 social rented homes between 2012 and 2017 due to the Right to Buy and other factors, and that figure will reach 230,000 by 2020 unless we take action now.”
She said that by suspending the scheme, the government could invest the savings in more social homes and in more sustainable and cost-effective ways to help tenants own their own homes.
“We support the principle of helping tenants move into homeownership but it cannot be at the expense of other people in need,” she said.
“About two-thirds of the discount that a tenant who buys their home now receives is justified because they are sitting tenants paying sub-market rent. But one-third is an excessive discount, which if clawed back would lead to more money coming to councils to build new homes,” she said.
The government is currently consulting on ways to make it easier for councils to replace the homes they sell under Right to Buy.
