Right-to-buy (RTB)

Background

Proposals to introduce right-to-buy (RTB) featured as a key promise in the 1979 conservative election manifesto. It was inaugurated in England and Wales by the Housing Act 1980 and in Scotland in the Tenants Rights etc (Scotland) Act 1980. In Northern Ireland, RTB was introduced by the Northern Ireland Housing Executive (NIHE) on a voluntary basis but on similar lines to the rest of the UK.

The concept of allowing council tenants to purchase their properties at a substantial discount proved enduringly popular and since 1980 around 2.45 million properties have been purchased throughout the UK, from a council stock that stood at over five million. 

Historically, RTB sales ran at an average of around 40,000 a year in England, which amounts to  just over one per cent of the outstanding council stock. This was approximately four per cent of all residential property sales. In the decade prior to the Housing Act 2004 (see below) however, sales had been higher, totaling 69,577 in England for 2003/04. Since the 2004 Act, they have dropped back significantly, reflecting less generous provisions, high service charges for some RTB leaseholders, and the fact that much of the better stock has been sold. In 2006/07 RTB sales in England totaled just 16,896. In value terms, RTB sales are of limited significance in the context of the housing market as a whole since prices are discounted against what are relatively low value properties, though since 1999 English discounts have been capped at between £22,000 and £38,000 depending on the area where the sale takes place. In January 2003, discounts in parts of London and the South East were further reduced to a maximum of £16,000 in order to ease pressures on affordable housing. Existing restrictions on the resale of RTB properties in rural areas were also tightened. Discounts in Scotland were heavily reduced under the Housing (Scotland) Act 2001 at the same time as RTB was extended (with certain qualifications) to housing association tenants though this latter provision is is being phased in over 10 years. The Scottish Government recently consulted in its green paper Firm Foundations on ending RTB for new social housing properties but no action has yet been taken. RTB discounts in Northern Ireland were reduced in 2002.

Recent changes
 
The provisions on RTB contained within the Housing Act 2004 came into effect on 18 January 2004. These made a number of changes to the conditions relating to RTB with analogous changes also made to the right to acquire. Briefly those changes were:

• Extends the qualifying period for the right-to-buy from two years to five years residence;
  
• Increases the period within which a sale of a RTB property will incur repayment of discount from three years from purchaser to five years;
  
• Minor changes to the exception to the RTB of properties suitable for elderly persons;
  
• Exempts properties scheduled for demolition from the RTB;
  
• Requires RTB owners selling their properties within 10 years of purchase to offer their properties to a local social landlord on a "first refusal" basis;
  
• Shortens the time allowed within which tenants must complete the purchase of their property; and
  
• Ends the little used rent to mortgage scheme. 

Current status

The 2003 reduction in discounts and the changes brought in by the Housing Act 2004 have been motivated by two factors: one is the lack of affordable housing in certain areas, notably London. The other factor is the alleged presence of abuse of the RTB provisions notably in regeneration areas, with tenants and property traders profiting from discounted sales and pursuing the possibility of accessing further government funds through compulsory repurchase for demolition, and other expedients. In fact, there is evidence that RTB has not contributed as much towards the crisis in affordable housing supply as has been thought, due to the tendency of RTB owners to remain in their homes for long periods after their purchase, as they probably would have done as tenants. It is also believed that a high proportion of the stock that might have been best placed to contribute to the supply of affordable housing for rent, particularly in the south, has already been sold.