Wrong to buy?

The law obliged local authorities to offer their tenants the chance to buy their homes at a generous discount (see "Rights to buy", right). Before this, most tenants were resigned to a lifetime of renting unless their economic circumstances changed. The new policy grabbed both headlines and votes, with the Tories portrayed as the party that sought to empower the individual and voters in the aspirational 1980s embracing the seemingly utopian vision of home ownership for all.

Unforeseen problems
But the dream has turned sour. So many people have bought their council homes (see "Homes lost", right) that right to buy has become a victim of its own success. A measure once championed as a way of empowering communities has effectively privatised large parts of the social housing sector and is exacerbating the dearth of affordable homes.

In the South-east, for example, nearly 189,000 homes have been lost during the past 22 years, with the law forcing local authorities to offer discounts on properties of up to £38,000 in London, meaning an average one-bedroom council flat worth £80,000 would sell for just £42,0000.

So experts are starting to ask whether a change of policy is necessary. Baroness Uddin says: "Throughout the life of the previous government, social housing was sacrificed and given away using public money to promote right to buy without paying heed to the consequences for social housing need."

"We're on an ever-decreasing spiral and we need to protect the pool of stock," warns Tim Holden, development director at the South East England Development Agency. Holden says that if tenants are going to be encouraged to buy their own homes, there must also be some wider benefit; for instance, councils could plough the money from the sale back into the community.

Anne Power, professor of social policy at the London School of Economics, says: "Once you have given the right to buy as a universal right to council tenants you have got a bit of a problem, especially in high-demand areas. I think we have got ourselves caught with the idea that you can demolish areas and rebuild them without accounting for the demolition costs, the right-to-buy costs and the long-term costs of keeping that community together."

Open to abuse
Adding to this problem are a number of illogical loopholes in the system which leave it open to abuse.

For instance, there is nothing to stop people buying properties under right to buy not for themselves to live in, but so that they can rent them out on the open market. No-one can blame hard-up tenants for wanting to make money in this way, but doing this adds to the number of properties leaving the social housing sector at a time when the need for permanent accommodation for homeless households is at an all-time high.

The Association of Local Government has set up a working group consisting of itself and a number of London councils to explore the extent of the problem and make recommendations. The findings will be presented to the government this summer.

Tenants can apply to buy their homes under right to buy even if their estate is set for demolition under a regeneration scheme. This means if the council approves the sale, and the building is later demolished, councils have to pay the former tenant the full market value of their home – something most can ill afford. The Ocean Estate in Stepney, east London, is a case in point: since its demolition was announced in February this year, the local authority has received about six applications for purchase every month.

So what can be done to prevent right to buy driving the country deeper into a housing crisis? Scrapping the policy altogether would be political suicide. For large sections of the population, it is their only shot at home ownership and the only chance they will ever have to get some solid equity under their belts. What democratic government would dare snatch that away?

NHF policy officer Aaron Cahill says: "I don't think there is a remote possibility of the government abolishing or substantially altering the right to buy. This government is as keen as the last one to be seen as the party of home ownership."

Local solutions for local people
The problem is a regional one: in northern England, right to buy supports the community; it encourages people to invest in their local area, to be part of the community and to help maintain their environment, while in the South the high demand for housing cannot be met if council homes are sold off without ever being replaced. So could suspending the right to buy in just the hotspots provide a temporary solution?

Tim Holden thinks so: "If there was some sort of mechanism that could be developed to look at that, it would be welcome. The general feeling in the South is that, although right to buy gives choice, it doesn't provide choice for affordable housing."

In real life, though, this is unlikely to be popular as it would penalise those who live in pressured areas for something that isn't their fault and would reinforce the North-South divide that politicians are so keen to heal.

But Scotland seems to have found a middle ground (see above right). This is an admirable short-term policy that could work elsewhere.

Another answer would be to change the way local authorities are allowed to use the money made from the sale of housing. At the moment, only 25% of the money received from the sale of council houses can be spent on capital projects such as new housing. Aaron Cahill says: "Local authorities should be given greater discretion to use capital receipts generated from the right to buy to build homes and/or improve their own stock."

The government must take note of the growing concerns of housing providers and accept that a change in policy is needed if the problems caused by right to buy are to be stemmed. The loopholes must be closed as a matter of urgency, perhaps by suspending right to buy in regeneration areas.

But as far as the government is concerned, right to buy is a much a part of the New Labour philosophy as it was of the Thatcher era. Tony McNulty, minister for housing, planning and regeneration, says: "Many people have the aspiration to own their own home – and the right to buy is a part of that."