Right to buy scheme

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The Right to buy scheme is a policy in the United Kingdom which gives tenants of council housing the right to buy the home they are living in. Currently there is also a right to acquire for the tenants of housing associations.

Individual local authorities have always had the ability to sell council houses to their tenants, but until the early 1970s such sales were extremely rare. However, the Conservative-controlled Greater London Council of the late 1960s was persuaded by Horace Cutler, its Chair of Housing, to create a general sales scheme. Cutler disagreed with the concept of local authorities as providers of housing and supported a free market approach. GLC housing sales were not allowed during the Labour administration of the mid-1970s but picked up again once Cutler became Leader in 1977. They proved extremely popular, and Cutler was close to Margaret Thatcher (a London MP) who made the right to buy council housing a Conservative Party policy nationally.

After Mrs Thatcher became Prime Minister, the legislation to implement the Right to Buy was passed in the Housing Act 1980. The sale price of a council house was based on its market valuation but also included a discount to reflect the rents paid by tenants and also to encourage take-up. The legislation gave council tenants the right to buy their council house at a discounted value, depending on how long they had been living in the house, with the proviso that if they sold their house before a minimum period had expired they would have to pay back a proportion of the discount. The sales were an attractive deal for tenants and hundreds of thousands of homes were sold. The policy is regarded as one of the major points of Thatcherism.

Proceeds of the sales were paid to the local authorities, but they were restricted to spending the money to reduce their debt until it was cleared, rather than being able to spend it on building more homes. The effect was to reduce the council housing stock, especially in areas where property prices were high such as London and the south-east of England.

The Labour Party was initially against the sales and pledged to oppose them in the 1983 election but dropped this policy because it was perceived as losing votes. Since 1997 the Labour government has reduced the discount available to tenants in local authorities which have severe pressure on their housing stock; this includes almost the whole of London.

The Right to Buy rules were changed in 2005. Five years' tenancy is now required for new tenants to qualify, and properties purchased after October 2004 can no longer immediately be placed on the open market should the owner decide to sell. Such owners must now approach their previous landlord (Registered Social Landlords RSLs) and offer them 'first right of refusal.' If the RSL is unable to offer a realistic purchase price, then that landlord still has the right to offer the property to an alternative RSL.

All RSL's are now legally obligated to offer Right to Buy advice including advice on high fee-charging Mortgage Brokers. The time in which Right to Buy conveyancing should take place has been reduced from 12 months to 3 months. The Financial Services Authority now governs and regulates most types of mortgage-selling.

The right-to-buy scheme has been criticized because, in areas where demand for housing exceeds supply, the stock of social housing was depleted faster than it was replaced; because speculating investors were able to buy up council properties through deferred transaction agreements, hastening the rise in property costs; and because the remaining stock of council housing was concentrated in undesirable areas with little employment opportunity, further isolating and stigmatizing the tenants.

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