Unintended or unexpected consequences of the existing Right to Buy
The researchers itemised what they termed “unintended or unexpected” outcomes of the RTB, perhaps the most serious of which is the resale of former council homes into the private rented sector (PRS). Their findings are summarised below.
RTB stock and the private rented sector
Although the evidence base is patchy, there is an established and growing trend of RTB property transferring to the PRS on resale. The fact that ex-council homes were generally valued 10% below equivalent owner-occupied stock made them attractive to private landlords as well as to first time buyers.
A 1995 study found 8% of ex-RTB homes in the PRS; later studies have established that the proportion in the PRS varies by location – with London returning the highest percentage – and by popularity of estate, with the least popular showing the highest percentage.
A 2014 study for the GLA found that at least 36% of ex-RTB homes in the capital were now in the PRS and, while London has a distinct housing market, a 2015 study for Inside Housing magazine estimated that almost 40% of all leasehold homes (most likely to be flats) sold under RTB were now in the PRS.
The effect on Housing Benefit expenditure
Housing benefit expenditure increased in the years following the deregulation of private sector rents in 1989, and has increased again in response to the growth of the PRS. With an average housing benefit claim in the PRS totalling over £20 per week more than in the social sector, transfer of ex-RTB homes into the PRS has obviously contributed to this. The number of new social sector tenancies is in decline as a result of RTB, meaning that people, often in receipt of housing benefit, who would previously have sought a social housing tenancy are increasingly forced into the PRS with its higher rents.
As an indication of the increase in housing benefit expenditure in the PRS, the report notes expenditure of £3 billion in 2003-4 had risen to £9.2 billion by 2011-12. It concludes that there is little indication government expenditure planning had taken account of this reason for growth.
Unexpected repair costs
Some purchasers of leasehold properties did not take service charges or future major repairs into account; studies in 2006 and 2012 found this had caused major financial difficulties for a number of buyers in low value homes where remortgaging was not an option.
Again, others had bought properties which turned out to be defective – not all were covered by the Housing Defects Act 1983 – and found themselves with property which was unsaleable and difficult to raise a loan for repairs.
RTB purchasers with mortgage difficulties
Although most purchasers have not had problems, an examination of DCLG figures on mortgage arrears in 2009 showed that people who bought from a council or housing association were two to three times more likely to fall into arrears than a standard mortgage holder.
RTB and social mix
One of the stated benefits of RTB was that it would promote a wider social mix on council estates. Although in the first five years this was true as the original purchasers stayed in their homes, the picture started to change on resale; how it changed varied depending on the popularity of the estate.
Where RTB was high, the remaining council stock housed a greater concentration of poorer households, meaning the social mix may well have reduced. RTB, says the report, “appears to have confirmed and consolidated, rather than changed, the status, reputation and social role of these neighbourhoods”. The growth in the PRS on less popular estates has compounded this.
The uneven spread of asset ownership
Although most tenants who undertook RTB did acquire an asset, where and when they bought had a significant impact on the size and liquidity of that asset. Where the housing market was rising rapidly, the asset value increased and could be unlocked by remortgaging and/or trading up. London fared best under this measure, with an example given of properties in Newham and Stockport valued at £44,000 in 1997 having risen by 2012 to £180,000 and £115,000 respectively.
When the less well off households who were less likely to undertake RTB are factored in, it can be seen that the spread of asset ownership is very uneven, both geographically and socially.
Problems of housing affordability
The failure to replace stock lost through RTB with equivalent social rented homes has led to a major decline in new lettings. This has resulted in many households who would in previous times have qualified for social housing having to rely on less affordable options, notably the PRS. At the same time, house prices in the UK have risen faster than in any other OECD country and home ownership has fallen from 70% in 2002 to 64% in 2013, leading to ever greater reliance on the PRS.
RTB’s impact on housing stock conditions
The impact on stock conditions has been mixed. Many purchasers immediately undertook cosmetic changes such as new doors and windows, but not all followed up with routine maintenance and major repairs. Sale into the PRS may result in poorer conditions as statistically PRS properties are more likely to fail basic health and safety standards; and landlords may cut back on maintenance to combat a potential decline in rental income.
Policies designed to exempt certain property types or local areas from RTB have had mixed results
Legislation to exempt rural homes from RTB has been largely ineffective; exemption for purpose built disabled and sheltered housing has worked well, but is less effective for adapted properties.
