The Right to Buy scheme, which allows council tenants to buy their home, is at risk of being unsustainable, a new study warns.
Councils will be unable to replace homes under the scheme within five years unless it is drastically reformed, according to Local Government Association (LGA) analysis.
The current system, one of Margaret Thatcher’s flagship policies, allows council tenants to buy their properties at a big discount.
But councils can only keep a third of the receipts from each sale to build a replacement home, with the rest going to the council and government for other purposes.
And councils are also prevented from borrowing to make up the shortfall.
Analysis by Savills for the LGA has found that two thirds of councils will have “no chance” of replacing homes sold off under Right to Buy on a one-for-one basis in five years’ time.
It found that by 2023, of the approximately 12,000 homes sold off annually under the scheme, councils would only be able to replace about 2,000 each year.
:: Right to Buy: What is it and how does it work?
Image: Margaret Thatcher hands over the deeds to a Right to Buy council home in 1980
Borrowing restrictions coupled with a significant portion of all receipts being handed over to the Treasury instead of local communities are preventing the ability of local authorities to re-invest in housing, the LGA said.
The association said over the last six years more than 60,000 homes have been sold off under the scheme.
It said that because of the discount offered to buyers, the prices, on average, are half the market rate, so councils have only had enough funds from the sales to build or buy just 14,000 new homes to replace them.
This has left a shortfall of 46,000 homes – enough to house the populations of Basingstoke, Worcester or Lincoln, the LGA said.
Local authorities want the scheme reformed and are calling for councils to be allowed: to borrow to build new homes; to keep 100% of all sales receipts: and to set Right to Buy discounts locally to reflect community needs.
Image: Councils are only allowed to take a third of each council home sale for rebuilding
Martin Tett, LGA Housing spokesman, said: “We know that the Right to Buy changes lives – it helps people who otherwise wouldn’t be able to get on the ladder experience the security and independence of home-ownership. It is essential that it continues to do so.
“However, we are now in a situation where, without fundamental reform of the way the scheme is funded, this vital stepping stone into home-ownership is under threat.
“Councils urgently need funding to support the replacement of homes sold off under the scheme, or there’s a real chance they could be all but eliminated.
“Without a pipeline of new homes, future generations cannot benefit from the scheme.”Enabling all councils to borrow to build and to keep 100% of their Right to Buy receipts will be critical to delivering a renaissance in house building by councils.
“However, if we’re to truly make Right to Buy sustainable, we must also move towards greater flexibility on discounts locally so we can reflect local community need.”Councils are closest to their communities and it’s essential this money is reinvested in homes in those areas so our residents can access secure, affordable housing.
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“This money is badly needed to deliver homes for our residents – instead of resting in an account in Whitehall, it should be sent back to where it belongs.”
In 2012, David Cameron increased discounts offered by the Right to Buy scheme following a reduction in discounts imposed by Tony Blair’s Labour government in 1997.