Thatcher redux

A political divide may be opening up between the parties on the future of social housing. New Labour is talking about restricting or even suspending council tenants' right-to-buy in areas of housing stress. The Conservatives, reaching back to one of Margaret Thatcher's most controversial policies, are proposing to extend it to housing association properties.

The lines are not yet clearly drawn: Labour's talk of restriction is still vague and the Tory proposal is to be put out for consultation before being fixed as a manifesto commitment. But the implicit, if not explicit, consensus looks to be broken.

The three great housing revolutions of the past 20 years were the right-to-buy, the rise of the housing association and the stock transfer programme. Labour has swallowed and assimilated each of them. It diluted the attraction of right-to-buy without threatening the basic freedom to acquire and placed the transfer programme at the centre of its policy, adding an "arm's length" option to pull in councils that were unwilling or unable to give away their stock.

Housing professionals have responded to the new messages with total predictability. Councils (including some Conservative ones) never liked right-to-buy and they've applauded the prospect of further dilution or suspension. Meanwhile, lobby groups in the housing sector have thrown up their arms in horror at the prospect of a housing association right-to-buy. But the arguments are not as simple as their protagonists sometimes claim.

Since 1980, right-to-buy has turned nearly 2 million social tenants into homeowners who have bought their houses at an average discount of 50%. It has therefore become an article of faith that right-to-buy has diminished the amount of social housing available for rent and has left the social sector to the old and the unemployed. Abuses of the system – the purchase of homes by right-to-buy owners to take advantage of soaring property prices and the letting of right-to-buy homes at market rents by purchasers – have been catalogued.

Nobody would deny that right-to-buy has reduced the available stock (which has shrunk by 25% despite new-build) or that abuses have occurred. But as professor Steve Wilcox of York University has pointed out, 60% of those who bought in the 1980s and 1990s are still in their houses, and on average people remain in the property for 10 years after purchase. So, even allowing for the slower rate of voids becoming available for renting, the sale of a home does not immediately deprive the market of a new let.

Far better value than restricting right-to-buy, he maintains, would come from exempting councils in housing stress areas from the current legal requirement of setting aside 75% of the money it makes from right-to-buy to repay debt.

Since 1980, right-to-buy has turned nearly 2 million social tenants into homeowners and reduced council houses by a quarter

These arguments are important because they will feature in the debate about housing association properties. But there are two additional questions for the Tories to address: the charitable status of housing associations and the impact of right-to-buy on private sector funding, which is based on rent flow.

About 70% of housing associations have charitable status: so why should they be forced to dispose of assets for less than their value?

This problem could be overcome if the government made up the shortfall that the discount creates. Also, the Conservatives argue that their requirement to reinvest all the right-to-buy receipts into new housing, even if not necessarily in the same locality, would underwrite borrowing.

A bigger problem for the Conservatives may be bringing prices within the reach of people in areas of stress: the maximum discount suggested is £30,000, and in some areas this would not be enough to achieve affordability.

But there is another way forward for the Tories. They could look to build on existing entitlements. There may not be a right-to-buy for housing association tenants, but there is both a right to acquire and a voluntary purchasing scheme. The right to acquire gives a modest discount on post-1997 stock, with the Housing Corporation making up the difference. It applies to both charitable and non-charitable landlords. Housing associations can also apply to the corporation for funding to provide modest discounts under the voluntary purchase scheme.

The Rowntree Trust, half of whose stock is in one big estate on the edge of York, has embarked on a programme of tenure diversification to promote mix and balance on estates (refuting the social case against right-to-buy). It is building properties for rent and sale on the edge of the village, selling half of vacant property on the open market and permitting tenants to buy full or part ownership using the voluntary purchase grant. It admits that this has been the least successful part of the programme because the grant only covers about 15% of the sale price at current values.