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Explained - shared ownership Right to Buy for housing association tenants

  1. 08 October 2019
  2. By Andi Michael

What are the new plans for allowing housing association tenants to buy a share in the equity of their property, and how likely are they to go through?

Right to Buy has proven to be a thorny, divisive issue ever since it was introduced by Margaret Thatcher in the 1980s, but the current government has announced plans for a new shared ownership Right to Buy scheme for housing association tenants.

Under proposals announced by Housing Secretary Robert Jenrick, housing association tenants would be given the right to buy a share in the equity of their property – starting at 10% and increasing in 1% chunks.

According to Jenrick, the new right will be automatic for newly-built homes, with a ‘voluntary’ arrangement between associations and the government for existing tenants, echoing the ‘voluntary deal’ for the full Right to Buy extension struck between housing associations and the government in 2015.

A partial Right to Buy?

In a press statement released by the Conservative Party, it said it wanted to work with housing associations on a voluntary basis to determine what offer can be made to those in existing housing association properties.

“For those tenants in new stock, there will be an automatic right to buy a share of their home from as little as 10%, with the ability to increase that share over time, up to full ownership,” the statement added.

In August, the government announced a range of changes to shared ownership, with plans to review a new national model for shared ownership to make it simpler for people to purchase more of their own home, including allowing them to staircase up in 1% increments rather than by 10% at a time.
However, this is seen as a major further step, effectively offering partial ‘Right to Buy’ to 2.6 million households.

While Right to Buy, which allows most council tenants to buy their home at a discount, is still in operation throughout England – the scheme was ended in both Scotland and Wales in recent years – it doesn’t allow a staircase process in the same way as the shared ownership Right to Buy scheme for housing association tenants.

This could potentially make it a more affordable option than attempting to buy a home outright, although the same criticisms which have dogged Right to Buy for decades – in particular the loss of vital council homes which aren’t then replaced – could also be aimed at this latest proposal.

A home-owning culture

Despite the huge rise in the private rented sector in recent years – it’s now the second largest form of housing tenure, the largest in London and is steadily closing the gap on owner-occupiers – Britain is still seen as a nation of home owners.

Jenrick referenced this in his speech announcing the proposals. “I want to ensure that residents living in new housing association homes are given the opportunity of climbing onto the property ladder by giving them the right to shared ownership of their homes,” he said.

“This means that tenants in new stock will have an automatic right to buy a share of their home, as little as 10%, and increase that share over time. I also look forward to working with housing associations on a voluntary basis to open this opportunity to those living in existing properties.”

He added: “As Conservatives, we know that owning a home is not just about the four walls around you, it’s about investing in your family, saving for the future and putting down roots in a community. We are on the side of hard-working people who want the sense of security that comes with homeownership.”
However, the proposals unsurprisingly sparked criticism from some, with warnings from the National Housing Federation about its impact on the housing crisis (at a time of limited supply and high demand, is reducing the supply available for housing association tenants really the wisest move?)

With the Conservatives not yet revealing how it plans to formulate a voluntary agreement with housing associations for existing stock, and not making apparent how the proposed policy will be enforced for new homes, some have questioned its viability.  

A step back from the government?

During the 2015 general election, one of the biggest pledges in David Cameron’s manifesto was for a full extension of Right to Buy for housing association tenants. Under the plans, those renting from a housing association would have benefitted from the same discounts available to council tenants when buying their homes, with housing associations then compensated for the lower value of the sale via public money (generated by the sale of unoccupied council homes). 

However, despite the Conservatives winning a surprise majority in 2015, the government soon became distracted and then consumed by the EU referendum and the subsequent uncertainty and political chaos this caused.

The plans outlined in the 2015 manifesto have, as a result, failed to get off the ground. There is an ongoing pilot in the West Midlands, but no date for the rollout to the rest of the country or concrete proposals on how the plans would be funded.

Jenrick gave no nod to the wider Right to Buy extension plans in his recent announcement, but there is every chance this new scheme is now being viewed and used as a replacement.

Separately, Labour Shadow Chancellor John McDonnell caused outrage among buy-to-let landlords and the lettings industry in early September when he announced plans to sell buy-to-let homes to tenants at a discount, which critics said could see the state compel landlords to sell their asset to their tenants. 
The controversial Right to Buy policy received no mention at the recent Labour Party conference, though – perhaps a consequence of the hostile reaction it garnered from several quarters.

The increased focus on Right to Buy from both main political parties could reflect a shift back to prioritising home ownership.

Current Prime Minister Boris Johnson is known to favour home ownership over renting. At last year’s Conservative Party conference, Johnson made a fringe speech expressing a strident commitment to private home ownership, speaking of a family living in a damp flat with condensation running down the window and black spores on the wall. “The council wouldn’t do anything,” he told the conference delegates. “I thought what a difference it would make to that family if they had been able to take back control – to coin a phrase. To buy that flat.”

Why is Right to Buy controversial?

While supporters say it helps to give people on lower incomes the chance to buy a home that they otherwise wouldn’t have been able to afford, critics point to its effect on supply with many council tenants buying their homes and then selling them within weeks, with the policy variously described as ‘unsustainable’, a ‘disaster for the UK taxpayer’ and ‘a massive transfer of wealth from the many to the few’.
But those in favour said it has helped many people – some 2.6 million in Britain since the policy came into effect – achieve the dream of home ownership, as well as securing families’ financial futures and creating, as Thatcher called it, a ‘property-owning democracy’.

It will only become clearer over time if the plans to extend a partial Right to Buy to housing associations tenants will prove just as divisive.

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