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Will Michael Gove’s Right to Buy reforms mean more affordable housing?

The Levelling Up Secretary has promised local authorities will keep all the money from the sale of council homes for the next two years.

By Jonny Ball

In 1951, the Conservative election manifesto promised to build 300,000 houses a year. “Housing,” the document read, was “the first of the social services”. Clement Attlee’s Labour administration had triumphed after the war on a promise of building a New Jerusalem in Britain, and presided over a steep spike in local authority building. Yet the Conservative government that took power in 1951 outdid Labour; the party’s 1955 manifesto boasted it had exceeded targets by 1955, completing 350,000 houses a year.

Three decades later, many of those houses would be sold off under Margaret Thatcher’s Right to Buy policy – one of the largest privatisations in British history. The construction of municipally owned social homes ground to a standstill in the 1990s, and today cash-strapped local authorities struggle to house the people on their waiting lists.

But this week the Levelling Up and Housing Secretary, Michael Gove, announced a major reform to Right to Buy that is being cautiously welcomed by local authorities.

What is Right to Buy?

The policy allows council tenants to purchase their properties at a significant discount – up to 70 per cent, or £87,200 across England and £116,200 in London boroughs (whichever is lower). It was introduced under the Housing Act of 1980 and celebrated by Conservative ministers as a “transfer of… capital wealth from the state to the people”. Local councils must give a proportion of the receipts from Right to Buy sales to the Treasury. Only 40 per cent of the cost of new housing can be funded from Right to Buy money. The Treasury has received £47bn from the sale of social housing since the scheme began.

[See also: The policy that could help Labour solve the housing crisis]

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What effects has Right to Buy had?

The social housing stock of the UK has been dramatically depleted since Right to Buy was introduced, and the policy’s effect is widely considered to be a major contributor in the shortage of affordable housing. There are now roughly four million fewer units of council housing than there were in 1979. The contraction of council housing as a viable option for people who cannot afford a deposit for a mortgage has led to the explosion of the private rental sector. When Right to Buy was introduced, the average house cost less than five times average earnings. The average house price today is around nine times current average earnings.

More than one million households are on social housing waiting lists in 2023 – the National Housing Federation (NHF), a trade body for social housing associations, claims that the figure is closer to 1.6 million. Estimates from last year suggest that 40 per cent of former council houses sold under Right to Buy are being rented out at higher prices by private landlords. These tenants often receive housing benefits, which are then used to pay their rent. Government expenditure on housing benefit has increased five-fold in real terms since the introduction of Right to Buy. The policy has been scrapped in Scotland and Wales, and in 2020 one of its architects, Michael Heseltine, told Spotlight that receipts from council house sales should always have been reinvested in new social housing stock.

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What changes are the government introducing?

Gove has previously recognised that the supply of social housing has not kept up with demand. On Monday (3 April) it was announced in a letter sent to council chief executives that local authorities will be able to keep 100 per cent of their receipts from social housing sales for the next two years.

“Local authorities should not wait to begin using their retained receipts and can immediately begin incorporating this additional funding into their build plans,” the letter said. Councils will also be able to deliver up to 50 per cent of replacement homes through the acquisition of existing housing, rather than building new ones.

[See also: Michael Gove’s Renters Reform Bill is “unenforceable”]

What effect will these tweaks to Right to Buy have?

The Local Government Association, a cross-party group that campaigns on behalf of its 350-plus local authority members, has been lobbying in favour of 100 per cent Right to Buy receipt retention for several years. It has welcomed the move and called for it to be made permanent. Previously, “councils have struggled to replace homes on a one-for-one basis”, the association said in a statement. “Ensuring that councils have the right funding to replace any homes sold through Right to Buy is crucial, and this announcement should go far in supporting this.”

Kate Henderson, the head of the NHF, said the reform was “good news for councils” that “will help them fund the delivery of much-needed new social homes”. The policy shift has been reported as a £366m bonus for councils to use for new social housing.

Despite being broadly welcomed, the Department for Levelling Up, Housing and Communities’ plans are unlikely to make a significant dent in the country’s affordable housing crisis. Shelter, a housing charity, estimates that the UK needs to deliver 3.1 million more social homes over the next two decades at a cost of around £10bn per year.

[See also: What’s wrong with the English planning system?]