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Right-to-Buy – How will the extension of Right-to-Buy actually work?
The extension to the governments Right-to-Buy scheme looks to be one of the first big controversies of the new Conservative government.
Up until recently it was only council tenants who had the right to buy the homes they had been renting. But when the Housing Bill becomes law – as outlined in the Queen’s speech – housing association tenants will also have that same right.
Who is eligible?
Potential buyers must have been tenants for at least three years, which is the same as it is for council tenants. According to the government, that means up to 1.3m housing association tenants may be eligible in England and around 500,000 housing association renters are already eligible for some discounts. The new scheme will extend the rights to a further 800,000 tenants, and the discounts available will increase. The government in Wales is planning to abolish Right to Buy entirely, and in Scotland it will be phased out by August 2016. In Northern Ireland a separate scheme exists.
How much of a discount will be offered?
For those eligible, discounts start at 35% on a house and 50% on a flat. The maximum is 70%, which is currently capped at £103,900 in London and £77,900 anywhere else in the UK. For example, someone who has been a public sector tenant for ten years could buy a £100,000 flat for just £40,000 – using the 60% discount they are entitled to.
How will it be funded?
Local Authorities will be required to sell off their most valuable council properties, whenever they become vacant. This would raise an estimated £4.5bn according to the government. The councils will then build replacement homes with the money raised, and the surplus will be used to fund Right to Buy. The government will then make up any difference
How much will it cost?
The government hasn’t yet announced what this will cost the taxpayer, but it has promised to refund the discount to the housing association involved. The National Housing Federation (NHF) which represents the UK’s housing associations has calculated that in total, Right to Buy for housing association tenants might cost up to £11.2bn, if all tenants who were in a position to buy did so. The Institute for Fiscal Studies (IFS) worry it will potentially cost “billions of pounds” over the next parliament, and it “would worsen the UK’s underlying public finance position”.
Will it mean fewer homes for social rents?
The government claims that by selling off housing association homes, and by requiring a replacement to be built, the scheme will, essentially, double the number of homes available. Also, it will increase the proportion of home-owners in England, which, in recent years, has fallen. However, the NHF states that since 2012, only 46% of homes sold have been replaced by new ones, despite local authorities being required to do so. One of the main problems with this is that councils cannot find enough land to build on.
How many people have bought their homes since the start?
Around 2.5m council tenants across the UK have been able to buy their homes since Right to Buy was introduced under the Conservative government in October 1980. The numbers buying peaked at 167,000 in England in 1982/83, but fell dramatically to 3,179 by 2009/10. After the discounts were increased, sales went back up and the government hopes the number will now continue to rise.
How many tenants will be able to afford to buy their homes?
Around 15 to 35% of tenants eligible for the new scheme will be able to afford a mortgage, according to the NHF. That means around 221,000 households might be eager to take up the offer – but if mortgage rates begin to rise as expected over the next could of years, this number could be much less.
Post courtesy of BBC.