Right to Buy and Right to Acquire schemes: England, Scotland and Wales
Last updated: 21 November 2016
The Right to Buy scheme in Scotland ended at midnight on 31 July 2016, marking the end of a two-year notice period after Scottish MPs voted to...More details
The Department for Communities and Local Government has released official statistics on the number of sales under the Right to Buy scheme in England - covering the...More details
Communities and Local Government (CLG) Select Committee published a report on its inquiry into Housing Associations and the Right-to-Buy on 10 February 2016. The CML had provided...More details
At a glance
- The Right to Buy (RTB) scheme gives eligible tenants of local authority landlords a statutory right to buy their home at a discounted price.
- Right to Buy has proved a popular route to ownership for social housing tenants who can afford a mortgage for the discounted price.
- RTB is currently available in England and Wales. It was abolished in Scotland at midnight on 31 July 2016. The Welsh Government, following a consultation, has announced it will reduce discounts, pending legislation to abolish the scheme in Wales in the term next Assembly.
- A similar scheme, Right to Acquire (RTA), is available to some housing association tenants but the discounts are less generous and it is open to fewer tenants.
- The Queen’s speech announced a Housing Bill to include provisions for extending the Right to Buy to housing association tenants in England. This proposal had previously been a Conservative Party manifesto commitment, in the run-up to the General Election.
- Although there are variations between the national schemes, the overall approach to supporting eligible buyers to purchase their social rented home is the same.
In the retail lending market, we are neutral on RTB as housing policy, but support lenders who participate in this market by ensuring that government understands lenders’ positions and does not have unrealistic expectations of willingness to lend.
In the commercial funding market, we have concerns about the extension of RTB to housing association landlords in England as there is a potential for this to undermine the value of funders’ security as well as the balance sheets of landlord businesses. We are developing our position on this issue through our Social Housing Panel.
Why this is important for lenders
Before the 2012 revival of RTB, lenders experienced the scheme as a riskier proposition because of lower quality of credit, a higher likelihood of default, with poor quality security in less desirable areas. Even since the scheme’s revival and the stricter affordability checks since 2013, the scheme is still regarded as riskier. This can cause tensions with government expectations that lenders will support it.
RTB buyers who require a mortgage will need to satisfy their lender that they can afford the mortgage, although a cash purchase may be an option in some circumstances. Government is aware of lenders’ obligation under MCOB affordability rules, which mean that customers under RTB are treated the same as any other, in relation to affordability.
The Right to Buy does not confer a right to a mortgage, so lenders need to manage expectations both of customers and government.
Even if lenders are satisfied that RTB buyers can afford the mortgage, other factors can influence lending decisions. As we have highlighted to government, these factors include:
- Location, and whether there is an established market for the property
- If few properties in the area, estate or block have been sold, there might not be a well developed market for them, and valuers would raise this in their reports.
- The type and construction of the property and whether it is suitable for a mortgage
- Historically, many properties in the social rented sector were not designed with private ownership in mind.
- Non-traditional methods of construction and design/ configuration of properties and blocks can mean some properties might not be suitable mortgage security.
- Properties in high rise blocks often fall outside lending policies
- The RTB Social Mobility Fund can provide eligible tenants with a cash payment to buy an alternative newbuild property on the open market if their social rented home is not suitable to buy with a mortgage because of its construction or design.
- High service charges and maintenance costs for some blocks can also impact affordability and the overall lending decision.
We continue to emphasise on behalf of members that lenders do not treat RTB applicants differently from any others, when considering affordability.
We worked with government to provide input on the DCLG guide Right to Buy and mortgages.
We continue to flag other factors which affect lending decisions, such as property type and the need for an established market, when dealing with government.
From the perspective of CML members who fund housing associations in England, we are engaging with government on the funder impacts of extending RTB to this sector.
We will engage with the scrutiny process for Housing Bill provisions on the RTB for housing association tenants.
Background to RTB
The scheme was first introduced in the early 1980s as a flagship policy of the Conservative government at the time. It proved very popular and many council houses were bought by tenants.
Scheme uptake gradually diminished from the late 1990s through to 2010 as the discounts were reduced by Labour government policy changes, which made the scheme less attractive.
The scheme was revived in 2012 by the coalition government, so that RTB offered more generous discounts and extended eligibility to a greater number of tenants than previously.
DCLG hosts a Right to Buy microsite, which helps those considering applying to check eligibility and affordability. The site includes a guide for customers Want to make your home your own? as well as Right to Buy and Mortgages which was prepared with CML input. More detailed information on eligibility and exceptions to the Right to Buy is available in the DCLG guide Your Right to Buy Your Home.
Right to Acquire
Most housing association tenants have had a statutory Right to Acquire their homes at a discount. The Right to Acquire works in the same way as the Right to Buy, but with some important differences:
- Associations may sell the tenant an alternative property to the one in which they live.
- The discount offered is significantly less generous than that offered under the Right to Buy.
- The discount is a flat rate and does not vary depending on the length of tenancy.
The National Housing Federation has undertaken research on behalf of the government on RTB and lender treatment of the discount. The research was conducted in the context of the Voluntary RTB pilots and the extension of the RTB to housing association tenants. We will comment on any relevant points in the research when it is published.
The CML stands ready to engage with the Government on housing policies generally and any specific developments in relation to Right to Buy extension to housing associations in England.
Through our Social Housing Panel, we are developing our position in relation to the extension of RTB to housing associations in England.
In Wales, we will engage as appropriate on the future of the scheme there, now that the response to the White Paper consultation has been published and the Minister's decision has been announced.
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Communities and Local Government (CLG) Select Committee published a report on its inquiry into Housing Associations and the Right-to-Buy on 10 February 2016.
The CML had provided a written submission to the Committee in August 2015 and gave oral evidence to the Committee on 19 October 2015.
We have provided a summary of the committee's key findings and recommendations, along with our original written submission from August 2015.
In Wales, a White Paper Consultation Summary Report was published. It indicates support for reducing RTB discounts in Wales pending legislation to abolish the scheme,which could be introduced in the next Assembly. Minister Lesley Griffiths AM, in a statement, detailed her decision to reduce RTB discounts to a maximum of £8,000 and put in place action to end the RTB and the Right to Acquire in Wales.
The Queen’s speech announced a Housing Bill to include provisions for extending the Right to Buy to housing association tenants in England.
In Wales, the White Paper consultation on proposals to restrict or abolish the Right to Buy and Right to Acquire in Wales closed. The CML chose not to respond as our position on RTB in residential markets is neutral.
The Conservative Party manifesto was published, including a commitment to extend RTB rules and discounts to housing association tenants in England.
Maximum discount levels for England changed to £103,900 in London and £77,900 outside London
In England, government published the latest Right to Buy sales figures for October to December 2014 (Q3 2014-15) showing:
- 3,285 sales during the quarter, up 15% from Q3 2013-14
- 33% of sales in the quarter were in London local authority areas
- £247 million in sales receipts was generated for local authorities in the quarter
- £75k was the average receipt per home sold in the quarter
The general principle of Right to Buy is broadly the same, UK wide: an eligible social housing tenant has a statutory right to buy their home at a discount on the full market price.
Regionally, there are variations across the UK nations relating to the size of the discount, and the tenants who are eligible. These are detailed below.
England & London
- The RTB scheme in England was reinvigorated in April 2012 by increasing the maximum discounts and reducing the time for which tenants must rent before becoming eligible.
- Currently, the maximum discounts are £77,900 outside London and £103,900 in the capital.
- These maximums will rise in line with CPI in April each year.
- Currently tenants are eligible for RTB after 5 years
- Measures in the Deregulation Bill, currently before Parliament, will reduce this to 3 years.
- One-for-one replacement
- The Government’s aim is that for every additional property sold under the RTB, a new affordable home for rent will be built nationally under the one-for-one replacement policy.
- New homes provided in this way must be offered at an affordable/ intermediate rent of up to 80% market rent, rather than at social rent (35% to 50% market rent).
- Registered providers and housing professionals are concerned that RTB sales and one-for-one replacement is causing a long-term loss of homes for social rent.
The Right to Buy scheme in Scotland ended at midnight on 31 July 2016, marking the end of a two-year notice period after Scottish MPs voted to abolish it.
- The maximum discount is currently £16,000 but this will be reduced to £8,000 from summer 2015.
- The actual discount varies according to how long the tenant has rented the property.
More detail is available in the Welsh Government publication:
- Your right to buy your home (guide for tenants in Wales)
In order to protect the supply of homes for social rent, the Welsh Government consulted on White Paper proposals for The Future of the Right to Buy and Right to Acquire. The proposals would:
- Reduce the maximum discount to £8,000; and
- End the Right to Buy and Right to Acquire, by new primary legislation in the next Assembly
The consultation opened on 22 January 2015 and closed on 16 April 2015.
The CML did not respond, as we maintain a neutral position on RTB in residential markets. The Welsh Government’s response to the consultation will be published later.
The Equality, Local Government and Communities Committee of the Welsh Assembly is undertaking an inquiry into the general principles of the Abolition of the Right to Buy and Associated Rights (Wales) Bill. This is the Stage 1 scrutiny inquiry of the Bill, which was introduced on 13 March.
The Bill will provide for the Right to Buy, the Preserved Right to Buy and the Right to Acquire for tenants of local authorities and registered social landlords (RSLs) to be abolished in Wales after a period of at least one year following Royal Assent.
The CML does not propose to respond to the scrutiny inquiry, but will maintain a watching brief as the Bill progresses. We will keep members appraised of relevant key developments in the passage of the Bill.
In a statutory purchase scheme similar to RTB is available for tenants of the Northern Ireland Housing Executive and housing associations provided both the tenants and the property are eligible. Tenants can buy a portion of the property with a discount and rent the remainder through a part-rent part buy equity sharing arrangement.
The maximum discount available to NIHE or association tenants is £24,000, and the actual amount of discount varies depending on length of tenancy and the proportion of the property being purchased.