Tenants deserve the right to buy

By on 10/11/2010 in News

The right to buy scheme has received a lot of bad press but despite its drawbacks there are strong arguments to retain it, argues Councillor John Lines,  Cabinet Member for Housing.

Three decades after the right to buy policy was introduced it is still one of those topics that never fails to provoke strong debate. This is particularly the case of late with the increased need for both social and affordable homes.

With the Budget cuts starting to bite and further cuts outlined in last week's comprehensive spending review, there seems to be a growing need to blame our current predicament on past decisions and policies such as RTB which is targeted frequently by some academics.

Unfortunately, when an opinion is repeated often enough, people begin to believe what they hear or read without questioning the underlying reasoning. So, for some sense of balance and pre-empting the inevitable post-CSR backlash, here is the other side of the story.

The beginning

When Margaret Thatcher introduced this policy in 1980 it was a bold and radical move. Some said it was a cynical tactic to win votes. But the intention of the RTB policy was to help meet the aspirations of traditionally lower paid working tenants to own a stake in their community – and I believe it worked very well indeed.

The RTB policy had a lot of success stories. It has been by far the largest homeownership initiative in the UK. Nationally, nearly 2 million tenants were able to exercise their right to buy and be the proud owners of their own homes. In Birmingham, more than 50,000 tenants have bought their properties since 1980 and this has led to a number of major benefits.

First, people who would never have been able to afford to buy a home any other way have acquired a key interest in their properties and their neighbourhoods and have also been able to ensure that this asset has been inherited by future family generations. The people bought their council houses, not only because they could afford to, but they also wanted to remain in their home and neighbourhood.

Second, it has led to mixed tenure estates that have an undoubted effect on creating long-term sustainable neighbourhoods.

Third, many of the people who initially bought their council properties have also been able to move on in later life to retire to their place of preference, or upmarket if they wish. This has had the added benefit of freeing up affordable properties for newly forming families and first-time buyers.

For some tenants in the 1970s, 1980s and possibly in the 1990s, new winds began to blow through many housing departments in town halls, when housing committee chairs who had behaved as though they owned the council properties and expected tenants to be grateful to them, had to learn some hard lessons.

Homeowners began investing in home improvements, new porches appeared, back garden gates were replaced, windows were double glazed. Street after street began to look like as though the TV, garden and property makeover shows had paid them a welcome visit. It gave millions pride in their properties.

The present

But I must admit that RTB has caused some problems for Birmingham and the council as a landlord.

The current government's attitude to localism would have been helpful over the past three decades; it is clear that if central government had trusted local authorities with most of the capital receipts generated through RTB, and insisted it be invested in new homes, it could have been used as a model to develop new local authority housing.

Many councils used the RTB receipts they received for other things. Over the years of missed opportunities, we have seen local authority waiting lists grow and the demand/supply equation seesaw out of control. Remember, in the past 10 years we have had the lowest social home build since 1921.

In Birmingham's case, the total receipts since 2004/05 that have been, and will be, paid to the Treasury by the end of March 2011 are estimated at £170 million. This is enough to build 1,700 properties entirely debt-free at today's prices. Combined with the ability to borrow and keep 100 per cent of the rental income there is the possibility that these funds could have provided a model to replace most of those homes lost through RTB.

Of course, what has actually happened is that RTB has removed our more desirable stock and we have been left with a large percentage of non-traditional and high-rise properties like most other urban landlords. This presents clear challenges in terms of managing voids, as well as the added costs of maintaining communal areas.

The future

Despite its drawbacks, there are strong arguments to retain the policy – especially as other affordable homeownership options, such as shared ownership, have not experienced great success, (although I am sure they will in the future).

Additional support could be provided by local authorities by offering local mortgages as some housing associations are doing for shared ownership. Sadly, this a policy that local authorities have been unable to follow in recent years due to the lack of resources and the need to deliver their decent homes programme. Local authorities would be well placed to provide this service and would be able to secure competitive rates for any borrowing from the Public Loans Board that could then be passed on to prospective tenants exercising their right to buy.

Being a strong believer in a mixture of tenancies and ownership, my view is that the RTB policy has been a success in that it has given working people a helping hand and should be continued in the future with some of the suggested refinements under the proposed HRA reform. I am disappointed that we will have to wait another 12 months for this change, but compared to a 30-year wait, it's a snip.

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