Councils cannot afford to replace homes sold under Right to Buy in England and Wales

The Right to Buy (RTB) scheme in England and Wales has become unsustainable and risks becoming a thing of the past unless councils are given the powers to set discounts locally and replace every home sold.

According to new research from the Local Government Association (LGA), which represents 370 councils, generous discounts for local authority tenants mean that the number of homes sold have quadrupled.

This is since the Government increased the size of the discounts available in April 2012. As a result the average discount has increased by 13% to more than £60,000 in 2016/2017 and selling properties at almost half price.

Councils are warning that they have been unable to replace the huge number of home sold as while they are allowed to keep a third of the sale price to put towards building new social housing, they are also prevented from borrowing to make up the shortfall in costs.

The LGA said it means that councils have only been able to replace around a fifth of homes sold since 2011/2012.

The figures show that in 2011/2012, the average discount for a council tenant purchasing under RTB was £26,690, around 25% of average property value, rising to £61,810 or 43% in 2016/2017.

Over the same period, councils have reported a 409% rise in RTB sales, from 2,638 in 2011/2012 to 13,416 in 2016/2017. This has amounted to a total of nearly 58,000 council homes sold under RTB in six years.
The LGA is calling on the Government to ensure RTB works for future generations by allowing councils to set discounts locally and keep 100% of sale receipts to replace homes.

Council leaders are also urging the Government to accept the calls of both the LGA and the cross party Treasury Select Committee, and completely scrap the cap on the amount councils can borrow to invest in new and existing homes.

‘Councils support people’s aspiration to own their own home and Right to Buy is one way of doing this. However, selling council homes at a discount of nearly half price had led to a social housing fire sale that threatens the future of the scheme. The rate of homes sold under RTB combined with the restrictions on councils is making replacing homes sold virtually impossible,’ said Judith Blake, LGA housing spokesperson.

‘This loss of social rented housing risks pushing more families into the private rented sector, driving up housing benefit spending and rents and exacerbating our homelessness crisis. This is particularly concerning as many of the homes sold through the scheme ended up being rented out privately at more expensive rates,’ she explained.

‘For RTB to work, councils must be able to replace every home sold. Councils must be allowed to set RTB discounts locally, retain RTB sale receipts in full to replace sold homes, and be given the freedom to borrow to build new affordable homes and play a lead role in tackling the country’s housing shortage,’ she added.