Should we end Thatcher's Right to Buy? How scrapping scheme could help solve UK's housing crisis

Greater Manchester mayor Andy Burnham has vowed to build 10,000 social homes after his re-election and has called for the new council housing to be protected by suspending the Right to Buy scheme.

Building affordable council housing is widely regarded as one of the most crucial ways to tackle the housing crisis, which has seen record numbers of people in England living in temporary accommodation and more than 1.2 million on social housing waiting lists.

Around 90,000 social rent homes – the most affordable tenure of housing – are needed every year, according to the National Housing Federation. But England has failed to get anywhere near that in recent decades and earlier this month the Big Issue’s blueprint for change called for leaders to build more social housing.

That’s as Right to Buy has seen social housing passed into private hands – more than two million homes have been sold through Right to Buy since Margaret Thatcher introduced the scheme in 1980.

But Burnham’s plea for the powers to suspend Right to Buy could be the start of a move to end the long-running policy in other parts of the country for good. 

How does the Right to Buy scheme work?

The Right to Buy scheme has opened the door for millions of social housing tenants to buy their homes, allowing them to purchase at a discount.

The discount varies based on how long someone has lived in their property, the value of the property and the type of property with the maximum discount coming in at 70% of value or just over £100,000.

If the property is sold within five years of being bought through Right to Buy then part of the discount is likely to be repaid.

Councils retain receipts from selling social homes to build more social housing. In March 2023 the government announced councils would be able to retain 100% of their receipts for two years but this agreement lapsed at the Spring Budget.

The idea is to build like-for-like, one-for-one replacements of social homes sold through the scheme, but the longstanding failure to do this has resulted in a chronic shortage of social housing.

Former prime minister Boris Johnson announced in June 2022 he would look to extend the Right to Buy to allow housing association tenants to buy their homes through the scheme. That was described as “baffling and unworkable” at the time.

What are the negatives of the Right to Buy scheme?

Andy Burnham described building the new social housing while the Right to Buy scheme is in operation as “trying to run a bath with the plug out”.

With the scheme in place, the 10,000 social homes he has promised to build could end up in the private sector, which means lost rental income for councils to pay off their investment and fund more new housing.

Research from the New Economics Foundation found that one in four homes sold through the Right to Buy scheme since 2015 are now being rented out by private landlords.

This also hurts tenants with the private rented sector often being of lower quality and more expensive than social housing.

The loss of social housing stock also puts local authorities off building more – especially as many local authorities have warned the existing crisis is forcing them to the brink of bankruptcy due to the costs of placing people in temporary accommodation.

A report from Dezeen found several of the award-winning social homes built in Norwich are subject to Right to Buy applications, for example. The Goldsmith Street homes became the first social housing to win the Stirling Prize architectural award after being built in 2019 due to their energy efficient Passivhaus standards.

With housebuilding due to fall in the months ahead due to rising costs and falling house prices, Right to Buy does not encourage building the social housing the country desperately needs.

One local authority told the Housing Forum it needs to sell six homes via Right to Buy to build one new home.

“It’s a big problem for councils that want to build. A lot of our members are really keen to build, they’re wanting to get their council sector building again. We know that’s something that Labour’s keen to see too: local authorities taking more of a role in bringing people together to deliver housing in partnerships,” said Anna Clarke, director of policy and public affairs at the Housing Forum.

“But one of the things that puts them off is that they can spend all this time and effort to build these new houses and they want them as council housing but they are forced to sell them off just as quickly. That’s really demoralising for people.

“Ending the Right to Buy isn’t going to be a quick fix for the problems of temporary accommodation because it’s a really slow-burn issue. We’re paying the price now for the housing that we sold in the 1980s 40 years ago. But if you could help to give councils more confidence and more money to build with, that would have a more immediate impact and that’s something that we’re keen to see.”

Will the Right to Buy scheme be scrapped?

While an outright ban might not be on the cards in the future, smaller reforms could be coming to suspend or limit Right to Buy sales.

Right to Buy’s offer of boosting homeownership is still politically important just as it was when the scheme launched. As a result, the major political parties might be hesitant to call for the scheme to be scrapped while campaigning ahead of the next election.

Labour’s shadow housing minister Matthew Pennycook said last week that the party would reduce “overgenerous” discounts introduced in 2012 and strengthen protections for newly-built social rented homes if it gets into government.

The Housing Forum recently proposed a ‘buyer’s charter’ to reform Right to Buy, agreeing with Andy Burnham the need to suspend the scheme for new-build properties. 

The charter would include slashing maximum discounts to 20% of a home’s value and increasing the number of years someone has to live in a home before applying for Right to Buy from three years to five.

Covenants should also be in place when a home is sold to prevent the property being let out or force the owner to offer the home to be let out by the council if it is not being occupied.

The buyer’s charter should also be devolved to councils to let the local authorities tackle the housing crisis in their area.

“The Housing Forum agrees with his bigger ask of ending Right to Buy all together, it would be a good idea,” said Clarke.

“But we recognise that it’s not on any of the main party’s agendas and I don’t think Labour is going to go down that route. If they were going to go down that route, they’d be saying so.

“They’re clearly not, especially with Angela Rayner and the position she’s in, I think they’d be very unlikely to push for a complete abolition.

“But in a way they don’t need to because if you just put the discounts back down, and you got rid of it on new-builds and added in a few other exclusion criteria, you could do take the number of sales right down so it’s not doing as much damage as it is currently with the loss of stock.”

The New Economics Foundation also called for local authorities to have more powers to suspend Right to Buy where it can be demonstrated that the policy is contributing to affordable housing shortages.

Right to Buy should end for newly built or acquired homes, NEF researchers agreed, while measures should be in place to prevent these homes from being let out in the private rented sector.

The think tank’s report into Right to Buy reforms concluded that the one size fits all approach of Right to Buy was the chief issue with the scheme.

Giving local authorities more power to opt out and keep hold of more social housing stock could be the antidote. It’s also an idea that the Liberal Democrats included in their manifesto ahead of the general election.

“Right to Buy has granted millions of working class families with access to low-cost home ownership, which they had previously been denied. But our research shows how the policy has had a chilling effect on council house building. It is in urgent need of drastic reform, so that, instead of being part of the problem, it can provide some of the solutions to the housing crisis,” said Hollie Wright, assistant researcher at the New Economics Foundation.

“Rather than a one-size-fits-all approach, councils should be empowered to tailor right to buy policies to meet the needs of local communities. Councils should be allowed to suspend right to buy in high-pressure areas, protect new-build social homes from being sold, prevent sold homes from being privately let, and adjust discounts as needed. Treasury rules should also be reformed to enable councils to replace those homes that are sold. 

“Delivering these long-overdue reforms are essential if councils are to get building again, protect existing homes, and ensure we plot a path out of the housing crisis.”

Ending Right to Buy for good in one fell swoop could be too big of a job. Politically, whoever decided to make the call for abolition risks being attacked by political rivals for slamming the door in the face of prospective homeowners.

But, if Burnham’s call for a local suspension is heard, it could embolden other regional mayors and local authorities to ask for the same.

That could start the process of reversing the damage Thatcher’s policy has done to the country’s social housing stock.

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