News: Right to Buy housing association mortgages

Prime Minister Boris Johnson wants to take a leaf out of his predecessor Margaret Thatcher’s book by reviving the Right to Buy – this time for housing association tenants.

Johnson is “very excited” by the prospect of a Right to Buy helping to solve the problems of “generation rent”, claimed a story in Housing Today on the 3rd of May . The sale of former housing association homes to first-time buyers would represent a golden opportunity for them to get that vital first step on the housing ladder, argued a story in the Daily Mail newspaper on the 2nd of May .

The Right to Buy – which granted council tenants the opportunity to buy their own home – was a flagship policy of the Thatcher government in the 1980s. The essential principles enjoyed a temporary revival under Prime Minister David Cameron in 2015 when he explored the viability of a “Voluntary Right to Buy” scheme for housing association tenants. Although the idea was trialled in the Midlands the scheme was never pursued further – largely because of a shortage of both land and funding to replace those housing association homes sold on to new owners.

If the government were to revive a Right to Buy scheme for housing association tenants, this could give some 2.5 million households the opportunity of owning their own home. As a story in the Express newspaper on the 10th of May explained, however, the idea has not met with universal approval.

An alternative approach also currently under consideration by the government involves the use of funds otherwise granted to recipients of Universal Credit through housing benefits. Those benefits could instead be used to help recipients secure a mortgage to buy their own home – especially if discounts of up to 70% could be secured through any Right to Buy social housing.

Background: How does Right to Buy work?

The Right to Buy has been around for more than 40 years. One of the promises in the Conservative Party’s general election manifesto of 1979 was to give council house tenants “the legal Right to Buy their homes”. As the Money Saving Expert explains in a posting updated on the 15th of February 2022, this right was duly incorporated into the Housing Act of 1980.

Any council tenant gained the Right to Buy their home at a substantial discount (a maximum of 70% of its market value or £84,600 in England and £112,800 in London) provided that:

  • it was their only home – in which they currently lived;
  • the dwelling was self-contained – so, none of the facilities such as a kitchen, bathroom, or toilet, were shared with other households;
  • the tenancy was “secured” through a formal contract or tenancy agreement between the tenant and the landlord (typically, the local council);
  • the applicant had been a public sector tenant for a total of three years (not necessarily three consecutive years); and
  • the tenant was legally free of debt – there were no County Court Judgments (CCJs) against them, for example.

Successful applicants would need to apply for a mortgage in their own right – help in finding mortgages for Right to Buy social housing was not provided by local councils. Former tenants applied for a mortgage in the normal way.

If the Right to Buy Scheme is extended along the lines currently under consideration by the government, it remains to be seen what details might be thrashed out for Right to Buy housing association mortgages.

The National Archives reveal that , since the introduction of the Housing Act 1980, more than 6 million former council houses have been sold to tenants under the Right to Buy Scheme in England – and a further 400,000 such homes in Scotland.

The initial Right to Buy Scheme is alive still in England and in Northern Ireland, but it has since been abolished in Wales and Scotland.

What was Voluntary Right to Buy?

The Home Group explains that a pilot Voluntary Right to Buy Scheme – granting housing association tenants the Right to Buy – was run in the Midlands in 2018 but the scheme was put on hold before its national formal launch by September of that year.

The scheme was never launched in Scotland where housing laws were by this time different.

Our view on Right to Buy housing association mortgages

We take the view that any new Right to Buy will inevitably reduce the volume of social housing availability – even lower than its current levels. This could add to the lack of affordable housing for the homeless and those in need of social housing.
But on the other hand, it will help those stuck in generation rent. Those struggling to save for a deposit will have the opportunity to buy their homes at a discounted price and this could mean a life-changing event that they could take advantage of that otherwise would not have been possible.
We believe the money raised through the sale of more social housing should be used to replace affordable housing on a like for like basis at least. In that way, the housing shortage for those in need will not be made worse. Our focus is on helping those with the opportunity to buy their own home via any Right to Buy housing association tenants scheme to the best of our ability – by offering them advice in accordance with their needs and circumstances.

 

How we can help

Since its inception in the early 1980s, the Right to Buy Scheme has enabled millions of former council tenants to buy their own home.

A revival of those principles and their extension in the shape of a Right to Buy social housing could give further households a valuable first step onto the housing ladder.

Here at NeedingAdvice.co.uk, we believe that social housing which is sold and therefore lost to those in housing need should be replaced on a like for like basis. With that proviso, we remain eager to help today’s generation of applicants for any Right to Buy housing association mortgage.

FAQs – Right to Buy Housing Association

Will Right to Buy be extended to housing association tenants?

No, the government has confirmed that there will be no extension of the right to buy scheme to housing associations.

Why did the government decide against extending the right to buy to housing associations?

The government decided against extending the right to purchase as part of the Housing White Paper because it wanted to see how the market reacted to the introduction of the policy. It also wanted to ensure that the scheme worked well and that people who needed access to affordable housing got it.

Do I need a deposit to buy my housing association house?

Yes, you do need a minimum 5% deposit to apply for your Right to Buy housing association loan.