Former minister Stephen Byers said council tenants should be able to use their right to buy discount to buy a home on the open market, but there are doubts about whether the plan would be popular
This weekend Stephen Byers suggested that council housing tenants could hold the key to ending the housing slump. He proposed a new policy of enabling tenants to use transferable right to buy discounts to buy homes on the open market. This proposal was touted as being a win-win scenario, not only helping tenants realise their home ownership aspirations but also freeing up much needed social housing stock and creating a new lease of life in demand for market housing.
Ideas that promote and support individual choice and that can provide a route into sustainable home ownership should be given due consideration and certainly shouldn’t be dismissed out of hand. Unfortunately, while the basic principles might have merit, the practicalities of his proposal raise a number of questions.
In the first instance, I don’t think it is unreasonable to question the likely appetite for this. Yes, there are 2.2 million households in council housing and from tenant surveys we know there are a significant number who’d like to own. I do however wonder how many of these would be queuing up to buy just now. Council tenants do not live in some kind of bubble where they aren’t aware of the news or are immune from wider jitters around consumer confidence. I’m not sure current market uncertainties would foster the kind of environment where potential first time buyers might wish to give up secure rented tenancies and move into a volatile open market where prices seem to be heading largely south.
Then there is the issue of finance. One of the key issues in falling housing transactions remains the difficulties buyers are having in securing mortgages. Even factoring in the levels of discount suggested it remains unclear how many tenants would find themselves with the 10% or greater deposits needed to secure a loan. In the first instance there are the costs of actually buying. Stamp duty, legal fees, increasingly costly mortgage arrangement fees, moving vans – all of which quickly erode the deposit. Then there is the matter of being able to pay for said mortgage. Given the way council housing is allocated, a significant number of tenants are low paid or vulnerable, with the majority receiving housing benefit to pay most, if not all of their rents. Even in normal circumstances, let alone given their enhanced risk profiling, I’m not sure that many banks will be queuing up to lend on these terms. More importantly, I’m not sure it’s what we’d hope to offer people in the way of an entry into sustainable home ownership.
Council tenants do not live in some kind of bubble where they aren’t aware of the news or are immune from wider jitters around consumer confidence
But let’s assume for argument’s sake that these issues have been overcome and that finance is in place. What kinds of properties might be available and affordable on the open market? Council housing has seen massive investment through the decent homes programme and thanks to a capped rents regime a good quality larger home is affordable for many families in parts of the country where renting, let alone purchase would be out of the question. So, armed with your discount and your loan, would you be able to afford a similar family home on the open market? I suspect the answer would be unlikely. Although house prices have fallen, the most significant falls have been with flats not family homes. Unless our council tenant is downsizing or moving between significantly differently priced areas they might find their choices limited further.
I could go on and talk about ongoing repairs and maintenance costs and service charges or the cost to the public purse at a time of fiscal restraint, or about issues of equity and fairness in relation to other social housing tenants or indeed people struggling with rents in the private sector, but I don’t want to come across as totally dismissing the idea.
There may well be some people out there for whom a portable right to buy might prove attractive and appropriate. Certainly the principle of opening up choice for tenants is a good one. Unfortunately, I suspect the numbers who could pursue this will be few and far between, and while this might work for them, it certainly would not provide a panacea for our current housing market ills. Reform of right to buy is welcome, but it should be a coherent part of the forthcoming housing reform green paper not treated as part of some short term fix for market volatility.
It is clear from the mistakes we have made over the past decade that we do need to come up with new thinking to promote more sustainable home ownership. Unfortunately for all its good intentions, I’m not sure that this particular idea takes us much further down this route.
Richard Capie is director of policy and practice at the Chartered Institute of Housing