On housing, David Cameron is like the cartoon prospector who crawls down a long hole into a dark room filled with crates of TNT marked “Right to Buy.” Reaching for his tinderbox, he lights a match to see better. “Where am I?” BOOM! As the dust settles, he looks around. Most of the crates are gone, and those that remain are of poor quality. Thinking himself lucky that he already has more than enough of his own TNT, he exits the room, leaving those who come after him to fight over the scraps.
Having discovered that austerity talk does not make for a positive election campaign, David Cameron has decided to sell “the good life” to voters. In Thatcherite terms, this can only mean one thing, the expansion of the right to buy policy. Under current rules, around 800,000 housing association tenants have a “right to acquire” their homes at a reduced discount to that available to those in council properties – up to £77,900 or £103,900 depending on how long you’ve lived in the property. Under the proposed changes, the Conservatives would now offer housing association tenants the same reduction.
Additionally, Cameron announced that councils would be forced to sell properties ranked in the most expensive third of their type in the local area once they become vacant. These houses would then be sold on a “one to one” basis, with estimates suggesting this would involved 15,000 houses a year (0.4 per cent of total stock) and raise £4.5bn. This money would be spent on funding the right to buy policy, paying off local authority debt, replacing the sold council house, and setting up a “Brownfield Regeneration Fund.”
The problems start with the fact that this government has been particularly negligent in fulfilling similar promises on council houses. In the three years since the Conservatives promised to replace all council houses sold off under Right to Buy, 26,000 homes have been sold, and only 2,298 have been built. Cameron also stated yesterday that any house sold would be rebuilt “in the same area.” But is this possible? When the Policy Exchange first mooted the policy, the “same area” meant within 30 miles of the sold stock. That could mean anywhere! Liverpool and Manchester are only 30 miles away from each other.
As the Financial Times have highlighted, the policy is also full of costing issues. Housing Associations have £60bn of debt held against future rents, and the Conservatives have not stated what will happen to these liabilities. Any payable debt would come away from the total sale price of a house, in addition to the money used to fund the right to buy program and the brownfield fund. Councils could end up with much less money to replace their housing stock than they might have anticipated.
The National Housing Federation, which represents Housing Associations, estimates that only, 221,000 people could benefit from the Right to Buy policy – far below the 1.3 million mark suggested by the Conservatives. Other organisations have simply stated that the Right to Buy is not a priority, but building more houses is. Jonathan Portes, director of the National Institute of Economic and Social Research, echoes many voices when he states: “The U.K. faces a serious structural shortage of housing supply, particularly for low-income families.” Right to Buy “removes a source of affordable rented houses for some people but…does nothing to add to the housing supply.”
Right to Buy is a rinky-dink solution that belongs to another era. In the midst of a housing crisis, the last thing that should happen is for local authority housing to be sold off. More than two million council-owned homes have been sold to their tenants since 1980, and in this time, councils have only built 345,000 properties. They received half the proceed but were obliged by governments to use the money to pay down debt rather than invest in building new houses.
As has been seen over nearly three decades, a persistent Right to Buy policy reduces the number of affordable social housing and eventually increases the number of private sector homes. In some boroughs of London, close to 50% of all homes sold under the policy have ended up in the hands of private sector landlords, to who tenants usually pay higher rents. The loss of housing stock has deprived councils of revenue and has forced them to increase council tax to meet the shortfall. Meanwhile, 4.5 million people are on waiting lists.
David Cameron has lit the match. Lets hope that the the social housing market survives this latest explosion.
First published in Clarity: April 15, 31 2015