Boris Johnson confirms relaunch of Right to Buy scheme.
PM has laid out his plans to help reignite home ownership across England - including allowing benefits to cover mortgage payments and the relaunch of the Right to Buy scheme during a speech in Blackpool on Thursday.
Following its introduction in the 1980s, approximately 4.5 million social tenants took up the opportunity to buy their homes from the state under the scheme, before numbers dwindled to a low of 9,319 in 2020/21.
According to the Centre for Policy Studies, the collapse of the scheme is one of the reasons Britain now has the fifth-lowest homeownership rate in Europe, alongside a lack of supply and restrictions on first-time buyer mortgages. Yet ownership remains overwhelmingly popular.
During his speech, Johnson stated that some housing associations had treated their tenants with "scandalous indifference", adding that it was "time for a change."
He confirmed that the scheme will be "responsibly capped" and paid for by existing plans, adding that the government will end unfair leasehold terms and "supercharge leaseholder's ability to buy their own freehold."
A new CPS paper, published today, welcomes the Government’s commitment to restoring the Right to Buy to the two million housing association households currently denied a chance to own. It also sets out the scale of the discrimination within the benefits system against low-income owners as opposed to working renters.
While the CPS welcomes the Government’s commitment to extending home ownership, it argues that it should go further than just extending the existing Right to Buy by revamping it in the form of a new Right to Own. Under the proposal, tenants would obtain a mortgage worth 60% of the value of their home – which would be paid off in payments that rise at the same rates as social rents do each year.
Also mentioned was the "ludicrous situation" where the young can afford high monthly rents but still cannot afford a deposit to buy a home, adding that the government wants to make it easier to get a mortgage and will be working with lenders so that they recognise the credit worthiness of tenants who pay their rent on time. Compared with ten years ago monthly rental payments in the private rental sector have increased by 40%, while average monthly mortgage payments have only increased by 11%.
Tim Bannister, Rightmove’s director of property science, said: “The next generation of first-time buyers currently need to raise a deposit that’s over 50% higher than ten years ago, while average salaries have only increased by 35%. That’s before you factor in if you’ll be able to get a mortgage, as right now if you’re buying on your own you’d need a hefty deposit of more than 30% to be able to borrow enough to buy a typical first-time buyer home. If a review of the mortgage market could help with the challenge of needing such a big deposit then it would be greatly welcomed by those who are able to demonstrate that they can afford monthly payments, but who are currently locked out of home-ownership.
“It’s clear to see why there are many renters keen to get on the ladder, as they’re forking out 40% more each month than ten years ago, while low-interest rates mean average mortgage payments have only increased by 11% over that same time. Although competition among buyers is now starting to ease, we’re still in a market where demand is massively outstripping supply in many areas of the UK. This has already pushed prices to record highs so the challenge for first-time buyers of raising a deposit is not going to get easier. The review will take time and so any solution won’t help in the short-term, so as the cost of living increases more people are likely to look further afield at cheaper areas to get on the ladder.”
Ian Fletcher, Director of Policy at the British Property Federation, comments: “While the extension of Right to Buy to housing associations may support more people into home ownership, the homes bought must be replaced on a like-for-like basis. Without this, the availability of affordable homes will continue to be stretched at a time when we urgently need more stock, not less.
"The initiative also fundamentally misses the core issue, helping people into social housing and reducing the waiting list. Extending Right to Buy runs the risk of exacerbating this challenge by diverting government funding away from new affordable housing supply.
"There is also the not inconsiderable issue about the legal framework for all of this and how property owned by independent organisations is going to be sold with hopefully their agreement.
“The affordable housing sector urgently needs more sources of funding to deliver the 140,000 affordable homes the country needs. New private capital, both equity and debt, has started flowing into the sector attracted by its stability and returns. It is important this announcement does not risk undermining the interest in investing in the sector and further reducing supply.”