David Cameron’s Right to Buy relaunch yesterday is economically irrational and won’t solve the nation’s deepening housing crisis, writes Kevin Gulliver.
Kevin Gulliver is the director of Birmingham-based research charity the Human City Institute and chair of the Centre for Community Research but writes in a personal capacity; his interests are social and economic policy, especially relating to housing, health, communities and inequalities
The relaunch of the Right to Buy (RtB) scheme yesterday by David Cameron and housing minister Grant Shapps heralded, according to the government, a new era where “tenants will once again receive genuine assistance to feel the pride of home ownership”.
The rejuvenated RtB, however, like much of government policy, flies in the face of inconvenient facts, while underscoring the government’s obsession with home ownership and its role in fostering ‘conservative values’.
Rather than implementing a more balanced housing policy to meet the UK’s growing housing needs and one that enables everyone, regardless of tenure, to accumulate assets – an asset-owning rather than a property-owning democracy – the government is seeking to shore up levels of home ownership the credit crunch has already exposed as unsustainable.
The new RtB will offer up to £75,000 in discounts to council tenants (although there is no announcement for housing association tenants who now make up the majority of the social housing sector), which is a significant upgrade from Labour’s £16,000 to £38,000 according to region.
The government claims the upgraded discount is needed because the caps Labour introduced in 1999 – largely to combat fraud and to reduce the bleeding out of the social housing stock – were deterring potential Right-to-Buyers. Statistics on the Department for Communities and Local Government (DCLG) website do not support these claims.
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Analysis by the Human City Institute shows the level of unemployment, the state of the wider housing market and the size of the council housing stock have been the key determinants of RtB activity since 1980, rather than the level of discount.
Some 971,000 sales were processed under Margaret Thatcher’s government (an annual average of 97,000), 316,000 under John Major (an average of 45,000) and 487,000 under the two Labour administrations from 1997 onwards (averaging 35,000 yearly). But over the 30 years since the scheme’s introduction sales have drifted up and down.
The highpoint was in its first flush with 167,000 sales in England during 1983 followed by a downwards movement with 72,000 sales recorded in 1986. An upwards trend was re-established in the wake of the ‘Lawson Boom’ so that by the end of the 1980s, 136,000 sales were processed. Then, during the recession of the early 1990s, sales declined to a low point of 32,000 in 1995.
During the long boom from 1996 onwards the largest number of sales since 1991 – 70,000 – was processed in 2003; a full four years after Labour reduced RtB discounts. Sales only actually dipped to a 4,000 trickle following the financial crisis from 2008 onwards.
Excluding the credit crunch years the number of sales between 1998 and 2007 averaged 44,000. This rather contradicts the government’s account of the RtB’s decline and suggests the rejuvenation of the scheme is political in intent.
There are today only 1.8 million council homes, following 2 million sales since 1980, in a residualised sector in terms of its overall stake in the wider housing market and the increasingly inactive economic status of tenants. Against this backdrop, it is proposed to resurrect the RtB in the teeth of a stagnant economy, a stalled housing market, persistent affordability problems in home ownership and private renting, ballooning waiting lists and growing homelessness.
Moreover, replacement of sold council homes using capital receipts is unlikely to be on a one-for-one basis and, since housing is inelastic in supply, there is likely to be a delay in replacement activity even if large numbers of sales are achieved, which is doubtful given the low incomes of those who remain in social housing.
A further downside is that social housing will be replaced by Shapps’s ‘affordable rent’ programme with rents up to 80 per cent of market rates. So not only will taxpayers subsidise the sale of state assets but the replacement housing will cost more in Housing Benefit for eligible tenants.
Against a backdrop of austerity and the desperate need to offer people an affordable renting option, the new RtB is an economically irrational policy built on a misreading of trends in the economy and housing market, and one that is negligent in the face of the nation’s deepening housing crisis.