Two-thirds of councils will be unable to replace all homes sold by 2023.

The Right to Buy scheme could collapse within five years unless there are significant changes to the way it is funded.

The scheme enables council and housing association tenants to buy their homes at an average discount of 50% of the property’s market value.

But two-thirds of councils will not have the means to replace the homes sold off under Right to Buy on a one-to-one basis within five years’ unless there is a significant restructuring of the scheme.

A report commissioned by the Local Government Association warns that by 2023, councils will only be able to replace around 2,000 of the 12,000 properties sold under Right to Buy every year.

Its spokesman, Martin Tett, 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.

“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.”

Why is this happening?

Under the current system councils are only allowed to keep a third of the money raised from each property sold under Right to Buy to build a replacement home.

Instead, a significant portion of all receipts have to be handed over to the Treasury.

At the same time, local authorities are not allowed to borrow cash to fund the building of new affordable homes.

The LGA report said more than 60,000 homes had been sold under Right to Buy in the past six years, but councils had been left with only enough funding to build 14,000 new homes to replace them.

Two-bedroom end of terrace house sits in the Tower Gardens estateAbove: This two-bedroom end of terrace house sits in the Tower Gardens estate, which was the first Council Housing Estate built in England, and is now a conservation area.

Who does it affect?

The situation is likely to lead to a shortage of affordable housing for people to rent.

The LGA report estimates there is a shortfall of 46,000 properties between those sold in the last six years and the funding councils have to build new affordable homes.

The situation is also likely to significantly limit the number of people able to make use of the Right to Buy scheme, impacting the ability of low-income families to get on to the property ladder.

What’s the background?

The LGA is warning that without a fundamental change to the way the scheme is funded, Right to Buy could become a thing of the past.

It is calling for a comprehensive package of reforms, including allowing councils to borrow money to build new homes and enabling local authorities to keep all of the money raised from sales through Right to Buy.

It would also like councils to be allowed to set their own Right to Buy discounts locally to reflect the needs of their communities.

Tett says: “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.”

Top 3 takeaways

  • The Right to Buy scheme could collapse within five years unless there are significant changes to the way it is funded

  • Two-thirds of councils will not have the means of replacing the homes sold off under Right to Buy on a one-to-one basis within five years’ time

  • The LGA is calling for councils to be allowed to keep all of the money from Right to Buy sales and be able to borrow funds to build new homes

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