Table of contents
- 1. A history of right to buy skip to link
- 2. How many houses were sold under right to buy and were they replaced? skip to link
- 3. What was the impact of the right to buy on tenure and the affordability of social housing? skip to link
- 4. What is the potential impact of an expansion of right to buy to housing association tenants? skip to link
Local authority tenants have been able to purchase their homes since 1936. This article summarises the legislative changes around the sale of local authority properties since the policy was introduced. It examines how many properties have been sold under this policy and whether they have been replaced. It also discusses the impact the policy has had on the availability of social housing and the potential for future expansion to housing associations.
1. A history of right to buy
The terms for purchase of local authority housing have been altered on multiple occasions since the policy was first introduced. The most well-known changes were enacted by the Housing Act 1980 and the policy has been known since as ‘right to buy’. This section gives a brief overview of the changes to the policy from 1919 to the present day.
1.1 Before ‘right to buy’
Legislation on the construction and sale of local authority housing was introduced from the end of the first world war onwards:
- The Housing, Town Planning, &c. Act 1919 introduced council housing to the UK for the first time.
- The Housing Act 1936 permitted local authorities to sell their social housing stock to tenants with ministerial consent.
- The House Purchase and Housing Act 1959 removed the requirement of ministerial consent for sale. Tenants were still unable to purchase their home without agreement from the local authority.
1.2 Housing Act 1980
In 1980, the then government passed legislation which enabled many local authority tenants to buy their home at a discounted rate. This followed a pledge in the 1979 Conservative Party manifesto to give local authority tenants the ‘right to buy’ their own home. The manifesto said that helping people into home ownership was one of party’s “five tasks”. After winning the subsequent general election, the new Conservative government introduced the Housing Act 1980. This act gave the tenants of over 5mn local authority houses in England and Wales the right to purchase their home. The Tenants’ Rights, Etc. (Scotland) Act 1980 applied the same policy in Scotland. A separate house sales scheme in Northern Ireland involved small differences. There was no obligation under these acts for councils to use receipts from housing sales for construction of new social housing.
The right to buy was conditional on the length of tenancy. It extended to local authority tenants of three or more years. A discount was offered to help tenants, who were often on low incomes. The minimum discount was 33%, increasing by 1% for every further year of tenancy above three years. The maximum discount could not exceed £50,000, equivalent to just over £200,000 in 2022. These discounts had to be paid back if the property was sold within five years. Tenants also had the right to a mortgage from their local authority.
1.3 Further changes before 2010
Changes were made to right to buy during the 1980s and 1990s. These mostly increased eligibility and uptake. Changes made by legislation included:
- The Housing and Building Control Act 1984 extended the scheme to tenants on long leases and reduced the tenure requirement to two years. It also increased the discount to a maximum of 60% after 30 years tenancy.
- The Housing Act 1985 was a consolidating act. Current right to buy legislation is provided for in this act.
- The Housing and Planning Act 1986 increased discounts for flats to 44% after two years, reaching a maximum of 70% after 15 years. The resale penalty was also reduced so discounts only had to be repaid on sales within three years.
- The Housing Act 1988 introduced ‘delay notices’, which gave compensation to tenants whose landlords delayed implementing a sale.
- The Leasehold Reform, Housing and Urban Development Act 1993 removed the right to a local authority mortgage.
- The Housing Act 1996 introduced a right to acquire for housing association tenants. Tenants qualified after two years but with much smaller discounts than under right to buy.
The Commons Library briefing ‘Introducing a voluntary Right to Buy for housing association tenants in England’ (15 June 2022) provides further information.
Devolution led to a divergence in policy between the constituent UK nations. In 1997, powers for housing were devolved to Wales and Scotland. These nations subsequently adopted different policies which removed the right to buy:
- The Housing (Scotland) Act 2014 abolished right to buy in Scotland.
- The Abolition of the Right to Buy and Associated Rights (Wales) Act 2018 abolished right to buy in Wales.
The house sale scheme in Northern Ireland will also end in August 2022 for housing association tenants, as stipulated in the Housing (Amendment) Act (Northern Ireland) 2020. Tenants of the Northern Ireland Housing Executive are not affected and will still be able to access the Housing Executive’s right to buy scheme.
Changes made after 1997 reduced the incentive to purchase. Right to buy discounts in England were reduced in February 1999 to between £22,000 and £38,000 depending on the region. Discounts were reduced again in 2003 to a maximum of £16,000 except in the most expensive areas of London and the southeast where they remained at £38,000. The qualifying period was increased from two to five years in the Housing Act 2004. This act also introduced an obligation for those wishing to sell their home within 10 years of purchase to offer the property at market value to the former landlord or successor organisation.
1.4 Coalition government and increased discounts
The Conservative-Liberal Democrat coalition government made further changes to the scheme to re-incentivise purchase:
- The maximum discount was raised to £75,000 in 2012 then to £100,000 in London in 2013. The maximum percentage discount was increased to 70% in 2014.
- The government made a commitment to replace properties sold. The government promised 1:1 replacement and that new properties would be provided within three years of sale. This only applied to additional properties sold over and above the approximately 2,500 properties that were already being sold each year prior to the commitment.
- In the 2013 autumn statement, Chancellor George Osbourne introduced ‘right to buy agents’ to help buyers complete purchases. He also introduced a £100mn fund to improve access to mortgage finance.
- The Deregulation Act 2015 reduced the qualifying tenancy period for discount back to three years.
1.5 Right to buy and housing associations
The Conservative Party’s 2015 general election manifesto included a commitment to extend right to buy to housing association tenants. This was in addition to the existing ‘right to acquire scheme’ for housing association tenants, which had been introduced in 1996. The right to acquire scheme is less generous than the scheme for those in homes owned by local authorities. The extension of right to buy to housing association tenants was initially implemented on a voluntary basis following agreement between the National Housing Federation (NHF) and the government. The agreement maintained the independence of housing associations, allowing them to refuse sale in certain circumstances.
The extended right to buy was initially piloted by five housing associations. In August 2018, a larger-scale regional pilot was launched in the midlands, with those wishing to purchase having to register online before 16 September 2018.
In a speech on 9 June 2022, Prime Minister Boris Johnson announced an extension of ‘right to buy’ to housing association tenants. This included a pledge to build a new social home for every property sold.
2. How many houses were sold under right to buy and were they replaced?
2.1 Housing sales
Sales of local authority housing prior to the Housing Act 1980 were relatively limited. Between 1957 and 1960, 16,000 council houses were sold in England. The 1980 act led to a surge in sales. Over 100,000 properties were sold for each of the first three full financial years following the passing of the act. A review published in the Journal of Housing Economics suggested high initial sales were due to pent-up demand from older tenants. These tenants qualified for high discounts from their long tenancies.
The number of sales declined after the first few years. Government figures show that a peak of 167,123 houses were sold in the 1982/83 financial year. Sales fell to between 70,000 and 100,000 a year for the following four financial years, from 1984 to 1988. Sales again increased to over 130,000 a year between 1988 and 1990. The gradual decline in sales was in part due to dissipation of initial demand. Rising unemployment and high interest rates also caused demand to fall away.
Sales fluctuated from the early nineties onwards until the Housing Act 2004. Sales were between 30,000 and 70,000 a year from 1991 to 2005. This declined from the 2004/2005 financial year onward reaching an average of fewer than 4,000 sales per year in the 2008/09 to 2012/13 financial years. Sales increased from 2012 onwards, but numbers have not returned to levels seen prior to the 2007/08 financial year.
Alan Murie, emeritus professor at the University of Birmingham, suggests receipts from sales following the 1980 act were initially greater than the Treasury expected. The Chartered Institute of Housing’s UK housing review 2021 found the Treasury had made £47bn from right to buy receipts since the policy was introduced.
2.2 Local authority construction
The Housing, Town Planning, &c. Act 1919 led to a huge programme of social housing construction. UK local authorities built over 5mn houses between 1949 and 1980. The local authority housing stock grew until 1980 as construction outstripped sales. UK households renting from local authorities peaked in 1980 at over 5mn. The annual investment in local authority housing peaked at £12bn in the 1974/75 financial year, equivalent to £20bn in 2020/21.
The introduction of the ‘right to buy’ coincided with a decline in social housing construction. No commitment was made to replace properties sold when right to buy was introduced. In the five full calendar years prior to the introduction of the Housing Act 1980, 627,830 local authority houses were constructed across the UK. In the five years following the act, 215,580 were built. This downward trend continued over the following decades, with 130 local authority houses constructed in 2004.
Two acts in the 1980s reduced the capacity for local authorities to build social housing. The Local Government, Planning and Land Act 1980 allowed central government to impose grant penalties on councils that exceeded newly imposed expenditure limits. The Local Government and Housing Act 1989 required local authorities to set aside 75% of sales receipts, which could only be used to pay down debt until the local authority became debt-free. These changes reduced the ability of local councils to borrow money for capital expenditure, including construction of social housing.
In 2012, a policy of 1:1 replacement for properties sold was introduced. Numerous concerns were raised over the proposed replacements. They included the absence of a commitment to replacement properties being ‘like for like’ with the potential for houses to be replaced with flats.
Construction of replacement housing is below the government target. Ministry of Housing, Communities and Local Government figures released in July 2021 show that as of March that year, 36,380 additional affordable homes had been started or acquired since 2012. This compared to a replacement target of 46,108, a shortfall of 9,728 properties.
2.3 Housing association construction
Housing associations are private, not-for-profit organisations that supply affordable housing. In the 1980s, the Conservative government gave greater responsibility to housing associations for providing affordable accommodation. The Housing Act 1974 allowed housing associations to receive public funding for the construction of social homes. The Housing Act 1988 facilitated the transfer of social housing from local authorities to housing associations. This was done upon tenants’ approval by poll and supporters argued it allowed greater investment in housing stock.
Construction of housing association properties began to increase in the late 1980s. A peak of 35,910 housing association properties were built in the UK in 1993, compared to 13,150 in 1987. However, this did not offset the reduction in local authority construction. An average of 4,880 local authority houses were constructed per year in the UK in the 1990s compared to 39,209 in the 1980s and 129,310 in the 1970s. Private sector construction remained relatively flat over this period.
A combination of the reduction in the rate of construction of social housing and sale of local authority housing led to a reduction in the availably of social housing in England. Government figures show a reduction from 5.5mn in 1980 to 4.1mn in 2021.
3. What was the impact of the right to buy on tenure and the affordability of social housing?
3.1 Home ownership versus rental
Social housing construction during the 20th century led to a transition from private to social rents. In 1918, 23% of homes were owner occupied and only 1% were social rents. The remaining households were private sector rents. By 1981, 31% of homes were social rents, compared to 11% for private rents.
Home ownership increased in the years following the introduction of ‘right of buy’. In England, 69% of homes in 2001 were owned by the occupier, compared with 58% in 1981. However, this has since declined to 63% of households in the two years from 2016 to 2018. The greatest decline in home ownership has been among the young. People between the ages of 16–44 are less likely to own a home than they were in 1981. By 2011/12, only 10% of 16–24-year-olds owned their own home, compared to 36% in 1981.
The size of the private rented sector has increased since 1980. Office for National Statistics (ONS) data shows that between 2007 and 2017 the number of UK households in the private rented sector increased by 63%. The ONS also reported that in 2017, 15.8% of people aged between 45 and 54 were renting privately, compared to 5.6% in 1997. The ONS comments that over time this may lead to a higher proportion of older people living in private rented accommodation. Research by insurer Royal London has found that retirees living in private rented accommodation may need nearly double the savings of those owning their own home to avoid a reduction in living standards.
Research from the Brookings Institution, a US-based public policy organisation, has suggested that right to buy and a reduction in construction of social housing has caused a revival in the private rental sector. The Guardian newspaper has argued that high private sector rents and increased house prices have made saving for a mortgage deposit more difficult and therefore have reduced home ownership.
The number of former council homes that are owner occupied has reduced over time. Data from 111 councils in England in 2017 revealed that over 40% of former council homes were now in the private rented sector.
3.2 Availability and affordability of social housing
Government data shows an initial decrease in the size of local authority housing waiting lists in England following the introduction of ‘right to buy’. The number of households on local authority housing waiting lists declined from 1.29 million in 1987 to 1.02 million in 1998. Waiting lists subsequently increased, peaking at 1.85 million households in 2012. The Localism Act 2011 gave local authorities greater freedom to decide who should qualify to go on the waiting list for social housing in their area. Since 2012, the number of households on waiting lists has decreased to 1.18 million in 2021. There have been several legal challenges to local authority housing allocation schemes since the 2011 act came into force. These have focused on whether councils have given homeless families reasonable preference, the lawfulness of policies favouring workers, and whether allocation policies have discriminated against disabled people. The number of new social housing lets has also declined, down 23% in 2019/20 compared to a 2013/14 peak.
There is significant regional disparity in the availability of social housing, with the largest waiting lists for social housing in London. This disparity matches with sales under ‘right to buy’, with the largest number of sales in London. In 2020/2021, 295,953 households in London were on social housing waiting lists, compared to 53,087 in the north-east of England. Many London councils face a significant shortfall; in 2020/21 Lambeth Council had a waiting list of over 30,000 and only 379 dwellings were let to new tenants. Freedom of Information requests have revealed that local authorities in London have rented former social housing from the private sector for use as temporary accommodation for homeless families.
Significant investment may be required to increase the availability of social housing. The National Housing Federation found that £14.6bn would be required each year over the next 10 years to meet social housing requirements in England. It argued that any expansion in right to buy may increase this requirement.
4. What is the potential impact of an expansion of right to buy to housing association tenants?
Two pilots between 2016 and 2018 trialled an expansion of right to buy to housing association tenants. A review of the first pilot found that there was significant “pent-up demand” for purchase. This was largely among “middle aged” tenants. A Department for Levelling Up, Housing and Communities data release in February 2022 stated that 1,839 housing association properties had been sold under the larger, second pilot. Construction of 437 replacement homes had started by 30 September 2021. The government had spent £118.8mn on grants and housing associations had received £192.2mn in sales receipts to be spent on replacement homes.
The second pilot identified lack of land availability and insufficient sales receipts as barriers to replacing properties sold. Responding to a written question on 27 April 2022, Minister of State for Housing Stuart Andrew said that the government “remains committed to right to buy”. He added that the government is reviewing the findings of the midlands pilot and would “announce further details on the voluntary right to buy in due course”.
The government recently announced that right to buy would be extended to housing association tenants. The prime minister, Boris Johnson, said the measures would “help millions more people realise what is currently an unattainable dream of home ownership”. Labour Leader Keir Starmer said that whilst he wants “as many people to own their own homes as want to”, the government’s announcement was the “wrong approach”.