What is the Right to Buy scheme?
The Right to Buy scheme is a government initiative enabling public sector tenants in England (and formerly Northern Ireland) to buy their council or housing association home at a discounted rate.
This policy put home ownership within reach of many who otherwise might not afford to buy on the open market.
Origins of Right to Buy
The scheme traces its roots back to the era of the Thatcher government in the 1980s.
That Conservative government saw the initiative as a step to help people make the transition from tenants to property owners (generating wealth for a section of the population that might not traditionally vote Conservative).
It marked a significant shift in UK housing policy, providing a chance for council tenants to get a foot on the property ladder.
The Housing Act 1980 codified the Right to Buy into law. The Act defined qualifying periods, discount levels, and terms of resale. It laid the groundwork for the scheme that exists today.
Who can benefit from the Right to Buy scheme?
Eligibility criteria for Right to Buy
A secure council tenant can apply for the Right to Buy scheme if their property is their only or main home and it is a self-contained property. Tenants must have at least three years of public sector tenancy, which doesn't have to be continuous.
Housing association tenants, however, are only eligible under limited circumstances. For instance, they were living in their home when it was transferred from the council to another landlord such as a housing association.
Public sector landlords, such as local authorities or an NHS trust are responsible for confirming a tenant's qualifying period, determining whether the property is eligible for sale.
Possibilities for joint applications
The Right to Buy scheme isn't solely limited to individual applications. Joint applications are also permissible.
A joint application can be made with up to three family members, who have been living in the property for the past 12 months, even if they aren’t on the tenancy agreement.
What benefits does the Right to Buy scheme offer?
Under the scheme, qualifying tenants are given an opportunity to buy their home, a valuable asset, at a reduced price compared to the market value.
Owning a home can have substantial financial benefits over being a tenant. This includes the potential for property value appreciation, savings on rent, and stability in housing payments if you choose a fixed-rate mortgage.
Maximum discount
The maximum discount is determined by several key factors.
Firstly, the length of the qualifying period plays a significant role. Tenants need to have a qualifying period of at least three years as a public sector tenant or a housing association tenant. This period need not be continuous.
Secondly, the type of property - whether it's a flat or a house - influences the discount. Houses usually get a smaller discount compared to flats.
Finally, the location of the property also affects the discount. Council tenants in London, for instance, can avail a larger discount compared to tenants in other parts of England.
How much money can be saved by buying your council house?
The savings generated from buying a council house can be considerable. The key saving comes from the discount offered under the scheme.
The money that would otherwise go into paying rent can now be invested back into the property or used for other financial goals.
Can low incomes and older people afford it?
With the discount offered under the Right to Buy scheme, even those on low incomes or older people have the chance to become homeowners. However, affording the property is not only about being able to pay the discounted price. Potential homeowners must also consider ongoing costs such as maintenance, insurance, and potentially higher utility bills.
In addition, mortgage affordability checks by lenders will also take into account income and expenditure, not just the discount on the property. Potential homeowners need to be able to afford the mortgage payments now and in the future.
What are the steps to apply for the Right to Buy scheme?
Application process
Preparation is a crucial part of the Right to Buy scheme application process. Potential homeowners should first assess their eligibility and understand the financial implications of buying a home.
Check you meet the eligibility criteria
Before applying for the Right to Buy scheme, potential homeowners should ensure they meet the eligibility criteria.
Complete an application
The next step is to complete the Right to Buy application form, also known as RTB1 notice.
The form requires tenants to provide details about their tenancy and the property. Once completed, this form should be sent to the tenant's landlord.
After submitting the application
After receiving the application, the landlord will send a written notice to the tenant. If the application is approved, the notice will also contain the price the tenant can buy the house for and the terms and conditions of the sale.
Upon receiving the offer, the tenant will need to decide how to fund the purchase. If they decide to go with a mortgage, it's essential to shop around and choose a mortgage that fits their circumstances and needs.
The tenant will also have to consider the service charges they might need to pay. This is particularly important for those living in flats where such charges are common.
How has the Right to Buy scheme evolved over time?
The Right to Buy scheme has served as a hallmark of the Conservative government's housing policy. It was a flagship initiative of Prime Minister Margaret Thatcher, touted as an empowering move to let more people have the security of owning their own home.
Substantial discounts incentivised the purchase of council homes, and, since its inception, around two million properties have been sold under the scheme.
As the scheme developed, various changes took place to expand its reach. The scheme was extended to housing association tenants in 1985.
Over the years, the Right to Buy scheme saw numerous amendments. One of the significant changes was the increase in the maximum Right to Buy discount, which went up to £75,000 in England in 2012, then to £100,000 in London in 2016.
The scheme also faced geographical variations: it was suspended in Wales in 2019 and ended completely in Scotland in 2016. In Northern Ireland, the scheme ended in August 2022 for housing association tenants, but tenants of the Northern Ireland Housing Executive are not affected and still have access to it.
How has the Right to Buy scheme affected council housing stock?
With tenants buying their homes, council owned housing stock dwindled. The scheme significantly reduced the number of council homes available, leading to increased waiting lists for social housing.
Local authorities were not allowed to use the full amount received from sales to build new homes, which further constrained the housing stock.
While the scheme made home ownership affordable for many people, it simultaneously led to a shortage of affordable housing for rent and hasn't increased the number of new build homes.
This has had a knock-on effect on the housing market, driving up rental prices due to the scarcity of available council houses.
What are the possible concerns with the Right to Buy scheme?
Right to buy rules after purchase
The Right to Buy scheme does not stop at the point of purchase. There are rules that tenants-turned-homeowners must follow once they've bought their homes.
Many people think that they will be able to do what they want to their properties, but there may be covenants over use.
Implications for new tenants and existing tenants
When tenants buy their council homes, it leads to a reduction in available rental properties for new tenants.
For existing tenants, particularly those in flats, service charges can rise sharply once their building has been sold, affecting their ability to afford their rent.
Preserved Right to Buy and its limitations
For tenants of housing associations who were originally council tenants, the preserved Right to Buy applies.
However, it's subject to the same rules as the original Right to Buy scheme, including the repayment of the discount if the house is sold within the first five years, potentially posing a financial risk for new homeowners.
Critiques and responses to the scheme
The scheme, while beneficial to many, has not been without its detractors and critics.
Some argue that it has put undue strain on local authorities and housing associations.
With the reduction in council housing, local authorities are left with fewer properties for those most in need, leading to increased waiting lists. On the other hand, housing associations have had to deal with the administrative challenges of managing Right to Buy applications, diverting resources from other areas.
Future of the Right to Buy scheme
The future of the Right to Buy scheme remains uncertain. There are discussions on modifying the scheme or even phasing it out altogether, especially in light of the housing crisis in the UK. However, no definitive decisions have been made, leaving future homeowners, housing associations, and local authorities waiting for clarity.
What should one consider before opting for the Right to Buy scheme?
Pros and cons of buying a council house under the scheme
One of the key facets of the Right to Buy scheme is the substantial buy discount it offers, making it an enticing prospect for council tenants. However, becoming a homeowner also brings additional responsibilities, financial and otherwise, that should be taken into account.
Ownership of a council house, or any property, goes beyond the upfront payment and mortgage rates. Your newfound role as a homeowner entails expenses such as maintenance costs, insurance, and council tax, all of which can add up significantly.
Moreover, your lifestyle will play a significant role in this decision. Being a homeowner gives you more freedom to make modifications to your property, but it also means being tied to a particular location.
It is important to consider your financial stability and future plans before embarking on this home ownership journey. Can you afford the mortgage payments if your circumstances change? Will owning a house in a particular location suit your lifestyle in the long run? These questions underscore the importance of scrutinising your financial capability and future plans before making the leap onto the property ladder.
Alternatives to Right to Buy scheme like shared ownership
While the Right to Buy scheme seems appealing with its discounted rates and opportunity for home ownership, it's worth considering other housing schemes that might be more suited to your circumstances.
For example, the shared ownership scheme allows you to buy a share of a property and pay rent on the remaining share. This could be a fitting alternative if you cannot afford to buy a house outright on the open market.
The shared ownership scheme can be more flexible than the Right to Buy scheme as it offers the opportunity to increase your ownership share over time, depending on your financial situation.
Read more about the advantages and disadvantages of shared ownership.
This approach, known as staircasing, might better suit individuals with variable incomes.
Where can I find further details about the Right to Buy scheme?
Local authorities are a valuable resource for tenants interested in the Right to Buy scheme. They provide accurate, region-specific information, which is essential due to the local variations in how the scheme is applied.
Your local authority can provide details about discount levels, eligibility, and the application process. They can also provide guidance about local housing policies and the potential impact of your decision to buy. It's worth noting that using a solicitor or another professional service can help streamline the process and provide additional peace of mind, but many tenants successfully navigate this process independently.
Useful online resources and governmental portals
Governmental portals offer authoritative information about the Right to Buy scheme. For detailed information, you can visit the official UK government website which provides comprehensive information about the scheme in England.
For tenants in Northern Ireland, the Northern Ireland Housing Executive website provides relevant details about the right to acquire scheme.
The Citizens Advice website is another useful resource with easy-to-understand information about the scheme, eligibility criteria, and the application process. This platform also offers advice on the financial implications of buying a council house and suggestions on how to deal with potential problems you may encounter during the process.