Right to Buy is making the housing crisis worse. Here's how to reform it

The government should ban private landlords from buying former council housing and abolish discounts on the properties.

In October 1980, Margaret Thatcher’s first Housing Act as Prime Minister introduced the Right to Buy. Over 30 years later, this flagship policy, which was ostensibly about helping aspiring home owners, has facilitated the transfer of thousands of council homes into the hands of private landlords.

Yesterday I published a report, From Right to Buy to Buy to Let, which shows that at least 36% of all homes sold under Right to Buy in London are now rented out privately. Surely there could be no better indication of the extent to which the policy has represented poor value for money to both taxpayers and local authorities alike?

In the case of taxpayers, not only did they pay to build the home, they then subsidised the considerable discounts offered to tenants and then – once the homes were sold – missed out on the rental income that would have covered the build costs. To add insult to injury, with 36% of former council homes now in the private rented sector, taxpayers are left to foot the bill for extra housing benefit to cover excessive, unregulated, private rents. This is because many of these homes will be let to benefit claimants, while many would-be council tenants are now forced into the private rented sector. In some London boroughs, the average housing benefit claim by private sector tenants is over £100 a week – £5,200 a year – more than council tenants.

Even more absurdly, local authorities are now frequently forced to rent their former homes back at market rates to discharge their statutory homelessness duties. Right to Buy has led to the pillaging of local authority housing budgets by central government, and handed a huge state subsidy to those council tenants fortunate enough to be able to raise a deposit. Eric Pickles’s recent announcement that discounts will increase from 60% to 70%, meaning homes can be bought for less than a third of their market value, is nothing short of Whitehall-sanctioned robbery of taxpayers and local authorities alike.

Why on earth should taxpayers, paying sky high rents in the private sector with no hope of raising a deposit to buy a home, subsidise better off council tenants to buy their home? Had local authorities been required to replace the homes sold, the situation today would no doubt be rather different. But not only was there no requirement for them to do this, they were actively prevented from doing so because receipts from Right to Buy sales were kept by the Treasury. To a great extent, the causes of London's current housing shortage can be directly traced to this decision.

When the coalition announced they were reanimating the corpse of Right to Buy, they made much of their commitment that every home sold will be replaced. Yet in London it takes 1.6 sales to fund one new property, with no guarantee that the replacement will match the size or rent of the home sold.

My report makes the case for significant reforms to Right to Buy. Most notably, in recognition that Right to Buy should be about genuinely supporting aspiring home owners, it shouldn’t be possible for these homes to ultimately line the pockets of under-regulated private landlords. Covenants should be placed on these homes to ensure they are never let privately and breaking this covenant should be a criminal offence, as it is to illegally sublet a council flat. Discounts, which force local authorities to write off a huge proportion of a property’s market value, should be abolished. In the spirit of localism, councils should have a "right not to sell" if it is not in the community interest to do so, or if it would undermine their ability to respond to local housing need. Finally, if a home is sold, it should be replaced; one-for-one and genuinely like-for-like.

Housing is the greatest challenge facing London and is the most significant threat to the capital’s economic future. Right to Buy, as it is currently constituted, has played a central role in causing and exacerbating London’s housing crisis and inflating welfare spending. Reform is long overdue.

A resident walks towards council run housing in Lambeth on London. Photograph: Getty Images.

Tom Copley is a Labour member of the London Assembly

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How will Theresa May meet her commitment to low-earners?

The Prime Minister will soon need to translate generalities into specifics. 

The curtailed Conservative leadership contest (which would not have finished yet) meant that Theresa May had little chance to define her agenda. But of the statements she has made since becoming prime minister, the most notable remains her commitment to lead a government "driven not by the interests of the privileged few, but by yours." 

When parliament returns on 5 September, and the autumn political season begins, May will need to translate this generality into specifics. The defining opportunity to do so will be the Autumn Statement. Originally intended by George Osborne to be a banal update of economic forecasts, this set-piece more often resembled a second Budget. Following the momentous Brexit vote, it certainly will under Philip Hammond. 

The first priority will be to demonstrate how the government will counter the threat of recession. Osborne's target of a budget surplus by 2020 has wisely been abandoned, granting the new Chancellor the freedom to invest more in infrastructure (though insiders make it clear not to expect a Keynesian splurge).

As well as stimulating growth, Hammond will need to reflect May's commitment to those "just managing" rather than the "privileged few". In her speech upon becoming prime minister, she vowed that "when it comes to taxes, we’ll prioritise not the wealthy, but you". A natural means of doing so would be to reduce VAT, which was increased to a record high of 20 per cent in 2010 and hits low-earners hardest. Others will look for the freeze on benefit increases to be lifted (with inflation forecast to rise to 3 per cent next year). May's team are keenly aware of the regressive effect of loose monetary policy (low interest rates and quantitative easing), which benefits wealthy asset-owners, and vow that those who lose out will be "compensated" elsewhere. 

A notable intervention has come from Andrew Tyrie, the Conservative chair of the Treasury select committee. He has called for the government to revive the publication of distributional analyses following Budgets and Autumn Statements, which was ended by George Osborne last year (having been introduced by the coalition in 2010). 

In a letter to Hammond, Tyrie wrote: "I would be grateful for an assurance that you will reinstate the distributional analysis of the effects of the budget and autumn statement measures on household incomes, recently and mistakenly discontinued by your predecessor." He added: "The new prime minister is committing her government to making Britain a country that works 'not for a privileged few, but for every one of us'. A high level of transparency about the effects of tax and welfare policy on households across the income distribution would seem to be a logical, perhaps essential starting point." 

Whether the government meets this demand will be an early test of how explicit it intends to be in reducing disparities. 

George Eaton is political editor of the New Statesman.