Councils fork out “eye-watering” £22 million a year renting back Right to Buy homes
January 21st, 2019
Councils in London are spending over £22 million each year renting back homes sold under the Right to Buy, according to a new report. Right to Buy: Wrong for London, from Labour’s London Assembly Housing Spokesperson, Tom Copley AM, also identifies that the number of Right to Buy homes now in London’s private rented sector has hit at least 54,000. Mr Copley said that at a time when the need for homes at social rent level far outweighs the numbers being built, it was “reckless” of the Government to continue with the Right to Buy. He said it was failing London and called for its abolition.
Responses to Freedom of Information (FOI) requests submitted by Mr Copley to all London councils, found that the number of Right to Buy homes now in the private rented sector has risen by at least 11,825 in the last five years to approximately 54,000. These figures are considered conservative, as some local councils did not provide data. 42% of homes sold through Right to Buy in London are now being rented out by private landlords at market rates (up from 36% in 2014).
The capital needs 30,972 new low-cost rented homes every year, according to the 2017 London Strategic Housing Market Assessment (SHMA). With demand outstripping supply – just 7,905 low-cost rented homes have been built in the last five years – councils are being forced to rent back properties formerly sold under the Right to Buy to use as temporary accommodation to meet the needs of homeless families. Mr Copley’s report found that at least 2,333 Right to Buy homes are now being rented by local authorities, with Newham alone renting back 808 of these at a cost of £12.9 million per year. The total yearly cost to councils renting back these properties is at least £22,345,760. Westminster Council are renting back 650 former council homes, but couldn’t provide a figure for the annual cost of this. Based on the average cost of renting back council homes across London this could be in excess of £8 million a year.
In 2012 the Government decided to ‘reinvigorate’ Right to Buy, increasing the discount on council homes to £75,000 across England. The following year the discount was increased to £100,000 in London. The Government promised one-for-one replacement, within three years, on any additional homes sold due to the increased discount. By March 2018 the Government were falling behind on this pledge. Nationally, since 2012, 17,072 additional replacements were required, but the number of homes started or acquired was below 16,000.
The Mayor of London has pledged to start 11,000 new council and Right to Buy replacement homes by 2022. He has also introduced a new ‘ring-fence offer’ for London councils to protect their Right to Buy receipts. But in order to meet need, some councils are buying back homes they had previously sold under the Right to Buy. Ealing Council, for example, has bought back 516 former council properties. Whilst more than half of these were for regeneration projects, Ealing found themselves spending £107,071,333 buying these back – more than six times the £16,230,470 they received through the original sales of these homes, which were discounted by a total of £15,648,455 under the Right to Buy.
Labour’s London Assembly Housing Spokesperson, Tom Copley AM, said:
“Something has gone very wrong when tens of thousands of homes built to be let at social rents for the public good are now being rented out at market rates for private profit, sometimes back to the very councils that were forced to sell them.
“The Right to Buy is failing London and should be abolished. Home ownership is still important for many people, but it can’t come at any cost, particularly if it means families struggling to put a roof over their heads or living in poor conditions. It’s not right that cash-strapped councils are having to fork-out eye-watering amounts renting back properties they were forced to sell at a discount.
“Many councils are building new council homes again for the first time in a generation. But we risk treading water or even going backwards if we continue to lose precious existing homes to Right to Buy.
“At a time when the need for homes at social rent level far outweighs the numbers being built, it’s reckless to continue to force the discounted sale of council homes.
“At the very least, we want to see the Government exempting newly built council homes from the Right to Buy and legislating to prevent Right to Buy homes being let on the private market. But with councils fearing their investment in social housing could be wasted, and the Right to Buy adding to London’s housing crisis, abolition is the best way to protect the capital’s social housing stock.”
- The Right to Buy is a policy introduced in 1980 through which council tenants can buy their home at a discount, which increases with the length of time they have lived there. This can be a maximum of 70% off the value of the home, and the discount is capped in London at £108,000. The Right to Buy has been abolished in Scotland and Wales;
- A copy of Tom Copley AM’s report, Right to Buy: Wrong for London, can be found here;
- The data in Mr Copley’s report was gathered from a series of Freedom of Information requests to the 33 London local authorities in August 2018;
- Authorities were asked:
- How many residential properties they hold the freehold of;
- How many they hold the freehold of, but not the leasehold (this gives an indication of how many Right to Buy properties there are in a borough);
- How many of the above have a leaseholder with a different correspondence address to the property (which indicates that the owner is not a resident of the property.)
- Key findings from the FOIs include:
- Councils are renting back 2,333 former council homes, previously sold under Right to Buy;
- The total yearly cost of this for London councils is at least £22,345,760;
- Newham are renting back 808 of these at a cost of £12.9 million per year;
- Westminster were able to estimate they rent back 650 homes they sold through the Right to Buy to use now as temporary accommodation, but were not able to say how much this costs them. Based on the figures provided by other boroughs, the average cost of this is £13,277 per home per year, giving an estimated annual cost to Westminster of £8.63 million;
- The number of Right to Buy properties now in London’s private rented sector (PRS) is 54,000;
- This is has risen by at least 11,825 since 2014;
- This now represents 42% of former council homes in London in the PRS;
- Ealing Council bought back 516 former council properties sold under the Right to Buy. The council received £16,230,470 for the original sales, after they were discounted by £15,648,455 under the Right to Buy. They spent £107,071,333 buying these back.
- All 33 boroughs (including the City of London) were sent the same requests. Mr Copley did not receive full responses from all 33;
- At least 10 boroughs did not give Mr Copley the responses required to estimate the full extent of Right to Buy properties now in the private rented sector, while the numbers provided may be an underestimate, as in some cases the local authority may have sold the freehold as well, and they may not have tracked the future ownership and tenure status of a property after the initial sale;
- According to the 2017 London Strategic Housing Market Assessment (SHMA), the capital needs 30,972 new low-cost rented homes every year to meet demand (47% of all new homes required). If this is taken to mean social rent levels or the Mayor’s new London Affordable Rent definition – in line with the new draft London Plan – the annual requirement for low-cost rented homes is several times greater than the total number of such homes that have been built in the past five years (7,905);
- In 2012 the Government decided to reinvigorate Right to Buy, increasing the discount on council homes to £75,000 across England;
- In 2013, the maximum Right to Buy discount was increased from £16,000 to £100,000 in London, and has risen with inflation each year to £108,000 in 2018-19;
- After reinvigorating the Right to Buy in 2012, the Government promised one-for-one (but not like-for-like) replacement on any additional homes sold as a result of the increased discount;
- By March 2018 the Government had fallen behind on its promise of one-for-one replacement. Nationally, since 2012, 17,072 additional replacements were required, but the number of homes stated or acquired was below 16,000;
- The Mayor of London has pledged to start 11,000 new council and Right to Buy replacement homes by 2022;
- Further information about the Mayor’s new ‘ring-fence offer’ can be found here;
- Tom Copley is a Londonwide Assembly Member