“From right to buy to buy to let”

Greater London Assembly Member Tom Copley has produced a useful report on  a neglected aspect of the impact of Thatcher’s “right to buy” policy (“From Right to Buy to Buy to Let”)[1]. There has been some academic research which has pointed to the trend whereby ex-Council homes when sold on by the tenants who bought them, have been snapped up by Buy to Let landlords. Where the tenants who live in these properties are recipients of Housing Benefit (HB), then the HB paid is higher than would have been the case if the property had remained under the ownership of a local Council. This is one reason for the increase in the national HB bill, although we do not know the exact scale of the problem. Of course, even if a private tenant in one of these ex-Council homes is not on HB the rents in such properties will, in any case, be much higher than they would be if the property had not been sold under RTB.

Tom Copley looks at the impact of this phenomenon in London. The evidence he has uncovered suggests that at least 36% of all homes sold by Councils across London are now let by private landlords. Where tenants are on HB this is paid for out of the national tax pot. In some parts of London the average HB claim is £100 a week more than ‘social housing’ (Council or Housing Association). One of the ironies of this policy is that Councils in some cases now have to accommodate tenants in ex-Council properties, at much higher rents than they would charge themselves.

“A disaster for local authorities”

Copley rightly describes RTB as “a disaster for local authorities”. They lost a significant amount of their housing stock for far less than the homes were worth on the market, and they lost rental income. Both New Labour and the coalition have stolen the lion’s share of the receipts. So, for instance, Swindon Council held onto receipts of only £424,000 for the sale of 40 properties last year. (See “Westminster’s robbery of ‘right to buy receipts”)[2]

The Thatcher government’s policy prevented Councils building replacement homes. I might add that the loss of a significant number of homes meant that the cost of maintenance increased as a result of the denuding of economies of scale.

In London since the introduction of RTB, 271,438 council homes have been lost from the local authority housing stock. Copley does criticise the New Labour government insofar as he says:

“Shamefully, very few of these homes have been replaced have been replaced by governments of all political colours.”

Between 1998 and 2011 only 880 Council homes were built in London, compared to the 85,254 that were sold. When combined with stock transfers there were 285,000 fewer Council homes in London in 2011 than in 1991.

Instead of “one for one replacement” taking place, as they said it would, the coalition government’s enhanced “right to buy” policy has produced a loss of stock. Recent government figures show that only one is being replaced for every seven sold. Worse still, the conditions that the government imposes on replacements mean that ‘social rent’ homes are being converted to the risible “affordable rent”; up to 80% of market rent. (See“More evidence of the need for ‘affordable rent’ to be abandoned.”)[3]

The cost of renting in London is extortionate. The median private rent at the beginning of 2013 was £1,196 a month, though in some boroughs it can be over £500 a week more expensive than Council rents. The consequence for the tax payer, of losing Council homes to the private rented sector, and an increasing reliance on that sector to meet housing need, is “higher long-run welfare expenditure.” In London overall the HB for private tenants is £60 a week higher than that for ‘social housing’ tenants, despite the cuts which the coalition government has introduced. It’s higher than that in 15 boroughs, the highest being in Westminster where it is £102 a week higher than ‘social rent’.

The quality of these private rented homes is often poor. The PRS has the highest percentage of homes not meeting the Decent Homes Standard, estimated at 35% by the English Housing Survey for 2011-12. In London it’s worse. Local authorities have reported that 49% (356,465) of all London’s private rented homes had Housing Health and Safety Rating System Category 1 hazards in 2011/12.

A step too far?

Whilst Tom Copley does a good job of exposing the consequences of RTB, the weakness of his report lies in his refusal to draw the obvious conclusion and call for an end to RTB. It seems to be a step too far. Instead he says that “reforms are needed to make RTB socially, financially and politically sustainable in the long-term”. Yet, if it’s been a “disaster” why would you want to sustain it?

In fact the proposals that Copley brings forward would make the likely number of sales so negligible as to pose the question why retain RTB? For instance, he calls for the abolition of the discounts on sales. Given the impoverished condition of most Council tenants, hardly any would be able to buy their home at the market rate. For instance, in Swindon, even with up to 60% discount for houses and 70% for flats, only 40 properties were bought in 2012-13.

Is he writing tongue in cheek when he says that, “in the spirit of localism”, local authorities should have a ‘right not to sell’ if they deem it to be in the interest of the local community where continuing selling them would undermine the Council’s ability to effectively respond to local housing needs? Copley surely know that “Localism” is a fraud; a cloak behind which centralisation of power is taking place, as even the ex-Tory Council leader in Swindon could recognise. Of course, the corollary of such a ‘right’ is that Councils would maintain the right to continue selling desperately needed stock.

Copley proposes a covenant whereby a home sold could not be let through the private rented sector. But that would still leave open the possibility that a Council would have to use such stock, owing to the shortage of their own, and pay a much higher rent.

Finally, he calls for a policy whereby a replacement home is a genuine one for one replacement, including the size. However, he doesn’t suggest how such a replacement would be funded. It would require an end to the borrowing limits that Councils currently have, and/or a national government subsidy.

Today’s current Labour party, despite all the talk of moving on from New Labour, appears unable or unwilling to take the step of abandoning support for RTB. Jack Dromey, before he lost his Shadow Housing post last year, was asked whether Labour would end RTB. Good heavens no, he said, Labour is “the Party of aspiration”. Whilst this was the “official” line I suspect the real reason for the reluctance to abandon their support for RTB is that they are worried about the Tories beating them up over it. The Tory propaganda can easily be countered by the fact that selling scarce Council homes when they are not being replaced is making the housing crisis worse.

Labour was not founded as a “party of (personal) aspiration” but collective aspiration. Whatever its limits, as a party founded by the trades unions it sought collective solutions to social problems. RTB was not a means of encouraging “aspiration” but encouraging self-interest, ignoring the social consequences of an individual getting a home on the cheap.

If Labour were really to break with the politics of New Labour then the abolition of RTB would go hand in hand with a recognition of the fact that there are no market solutions to the housing crisis. We need more Council housing, not less. Even if Labour forms a government after the next General Election, it will not move towards resolving the housing crisis unless it commits to creating the means for a new Council house building programme to tackle the massive shortage of genuinely affordable homes for rent.

Martin Wicks

15th January 2014

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