Right to Buy homes being bought back at a significant loss

Wed, 03 May 2017

Right to Buy homes being bought back at a significant loss
Local councils across the UK have spent millions buying back the homes they sold at a discount under right-to-buy laws as a result of nationwide housing shortages.

A Freedom of Information request has revealed that Islington council have spent over £6.2m re-buying the homes they'd sold for less than £1.3m.

Charities dedicated to housing issues have blamed a lack of social housing investment.

In response, the government has called the current housing market "broken" and have vowed to build more affordable houses.

Right-to-Buy was initially introduced in the 1980s by the Conservatives and allowed tenants of council houses to buy their homes at a discounted price.

BBC News looked at areas with consistently growing waiting lists, in particular those where the waiting list has grown for four consecutive years, and chose 10 of these at random.

It was discovered that one property in Islington, north London, was bought back by the local authority for £176,750 having been sold for £17,600 just 11 years earlier.

Rightmove say that period saw a rise of 135 per cent in house prices.

Iona Bain, founder of the Young Money Blog, said: "The unfairness is accentuated by the fact that someone who could take advantage of Right to Buy has not only benefitted from living rent-free for 20 to 30 years but now can pocket inflated profits by selling at a time when councils are desperate for homes.

"They have lucked out from an extraordinary period of house price rises, unprecedented pressure on the housing system and major flaws in how this scheme was devised.

"If I was a young private renter struggling to pay my bills, let alone save for a deposit on my first home, I would be very angry."

2016 figures from the House of Commons Library show that affordable homes were not being replaced at the same rate as they were being sold.

Of the 10 local authorities questioned:

  • Islington had, in the previous two years, bought back 25 homes that had been sold between 1989 and 2005
  • Wakefield spent more than £2.5m on 35 homes that had been sold for a shade over £981,000
  • Camden had re-purchased 29 homes, at a cost of over £2.5m, with 11 of the homes being sold originally for around £335,000
  • Cornwall spent nearly £438,000 on four properties
  • Oldham spent £60,000 on two flats it sold for £27,260 but also spent £100,000 refurbishing them for use as council homes
  • Copeland bought back two homes but was unable to reveal costs
  • Brighton and Hove, Medway and Bolton all said they had not bought back any, while Isle of Wight said it no longer held any records
  • Birmingham, which is home to one of Europe's biggest councils, had agreed in its budget that it would buy back homes that had been sold under Right-to-Buy when they became available.
Kate Webb, head of policy and research at housing charity Shelter, said: "Ironically, soaring house prices means councils are paying vastly inflated sums to buy back what they once sold off at a discount.

"If Right to Buy is to work, then it has to be accompanied by an iron-clad guarantee to replace properties sold on a like-for-like basis, otherwise councils simple won't have enough properties for all those families crying out for a home, and will be left paying the price for generations to come."

The policy has been extended so that that tenants of housing association homes can buy their homes at a discount, a pledge that had been set out in the Conservative party's 2015 electoral manifesto.

Scotland has already ended the Right-to-Buy scheme while the Welsh government is hoping to ban the scheme in order to reduce the pressure on social housing.

Islington councillor Diarmaid Ward, who has responsibility for housing, said the council had bought back properties "at the low end of the market".

"We're no longer buying back ex-council homes," he said. "We've now embarked on the biggest home-building programme in a generation: building 500 new council homes for social rent by 2019."

Camden's housing chief councillor Pat Callaghan said: "We intend to build over 1,000 council homes - but with 5,000 people on our waiting list, we need government backing to fully meet our residents' needs."
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