Right-to-Buy – How will it actually work?

Right-to-Buy – How will it actually work?

New Right-to-Buy Scheme

Right-to-BuyThe government announced in 2015 an extension to the first Right-to-Buy scheme which was originally only available to council tenants who were given the right-to-buy the homes they had previously rented. But when the Housing Bill becomes law housing association tenants will acquire that same right.

Scottish and Welsh governments have already rejected the scheme preferring to preserve their publicly owned housing stock. In Wales the government is planning to abolish Right-to-Buy entirely, and in Scotland it will be phased out by August 2016. This alternative stance taken by different parts of the United Kingdom is highlighting the impact that devolution is having.

Who will be eligible?

Just like council tenants, under the new scheme potential buyers must have been tenants for at least three years. The government is saying that this means that up to 1.3m housing association tenants in England may be eligible. Around 500,000 housing association tenants are already eligible for some discounts so it is thought that the new scheme will extend rights to around another 800,000 tenants.

How much discount will be offered?

The starting point for discounts is 35% on a house and 50% on a flat. The maximum is 70%, but that is currently capped at £77,900 outside London, and £103,900 within the London boroughs. One example would be a purchaser who has been a public sector tenant for ten years. They could buy a £100,000 flat for just £40,000 therefore achieving a 60% discount on its current value.

How will it be funded?

Under the government’s new Housing Bill, Local Authorities will be required to sell off their council houses whenever they become vacant. The government estimates this would raise £4.5bn. The councils will then have to build replacement homes with the money raised, and the surplus will be used to fund Right to Buy. The government will make up any difference.

How much will it cost?

The government hasn’t yet said what the cost to the taxpayer will be, but it has promised to refund the discount to the housing association involved. The National Housing Federation (NHF) which represents all the UK’s housing associations, has calculated that the total cost of the new Right-to-Buy legislation might be as high as £11.2bn if all those housing association tenants who could afford to buy did so.

How many people have bought their homes since the start?

Since Mrs Thatcher’s government brought in Right-to-Buy in October 1980 around 2.5m council tenants across the UK have bought their homes.

How many tenants will be able to afford to buy their homes?

It is thought that around 15-35% of housing tenants eligible for the new scheme will be able to afford to pay a mortgage, according to the NHF. That means around 221,000 households might be able to take up the offer although this number may prove to be on the high side if mortgage rates begin to rise over the next couple of years.

Post courtesy of BBC.