Right To Buy millionaires highlight flawed housing lottery in UK

Right To Buy, the scheme that changed the property market forever unlocked home ownership for millions.

In fact, more than 1.5 million council homes in the UK have been sold to council tenants. Now, new research has confirmed many suspicions, that the remarkable performance of the UK housing market means some of those council tenants who bought at a discount have gone on to become property millionaires.

Research carried out by bridging loans company KIS Finance has shown that hundreds of ex-council tenants had the opportunity to become millionaires – at least, those buying at the right time in London had that opportunity.

After all, figures supplied by Savills show that the average amount paid for a home in the capital in 1996 was £79,000 but that by 2016 it had soared to almost £489,000. And social housing tenants could receive a discount back then on their purchase depending on how long they had lived in the property – up to 60% for house and 70% for a flat.

KIS highlights some particularly eye opening examples. Such as council tenants in a 9 storey block in Clarendon Place, Westminster. A three-bedroom flat was bought for £180,000 in 1995 and is still owned by the same person. Similar properties in the black have sold recently for £2.25 million and £1.8 million.

And a tenant in Hackney’s Shepherdess Walk bought their home for £171,000 in 2000 thanks to Right To Buy and sold it for £1 million in 2014.

Understandable investment

It would be wrong to blame anyone living in a council home for making use of the Right To Buy offer. For those who qualify it would be bizarre if they did not – thanks to the discount available many lenders will offer excellent rates for a minimum discount. In England there’s a maximum discount of £78,600 except for London where it is £104,900. In Wales there is a maximum singer of £8,000 and the scheme is not available in Scotland.

For many buyers the mortgage can be cheaper than the rent had been and it means they have a valuable asset they can sell or leave onto their children. Buying their council homes is an opportunity that it would be senseless to ignore.

However, the fact that our current system allows some social tenants to buy and become millionaires while others struggle to find social housing at all highlights what a lottery state supported housing has become.

Social tenants typically have greater security of tenure than those who are privately renting, allowing them to put down roots, have confidence their children can remain in the local school and avoid the sometimes ruinous costs of moving whenever a landlord decides to up the rent or to sell the home.

Vanishing social homes

Part of the reason for this change is the drop in available social housing. The country is undergoing a seismic shift in how people rent.

In the year 2012/13 the English Housing Survey showed that the number of people renting privately finally overtook the number in social housing; with four million renting from private landlords compared to 3.7 million renting from councils and housing associations.

That compares to in 1980 when 31.4% of tenants rented socially, compared to just 11.9% in the private sector.

And there has been no improvement in recent years. In 2010-11 there were more than 36,700 new socially rented homes built with government money but by 2016-17 that number had fallen staggeringly to just 1,102.

Responding to statistics showing the drop in social housing, a spokesperson for the Department for Communities and Local Government http://www.independent.co.uk/news/uk/home-news/social-housing-government-funded-properties-rent-falls-97-per-cent-study-homes-communities-agency-a7799116.html said: “Making housing more affordable is an absolute priority for this government. That is why we have committed £25bn to get more homes built.

“These statistics demonstrate a step change in the delivery of affordable housing in this country. Through a wide range of affordable products, from affordable rent to shared ownership, we are helping thousands of people to buy or rent a home that is right for them.”

And the Conservative election manifesto promised to create a “new generation” of social housing.

It’s certainly needed. The housing charity Shelter says that in England alone there are more than 1.8 million households on the waiting list for social housing, an increase of 81% since 1997. Some families wait years for a suitable home but others have no choice but to live in the private rented sector. That can mean short-term contracts and unpredictability.

Last year the government’s Housing White Paper outlined a series of steps designed to resolve the UK’s housing problem, including taking steps to increase the number of homes for renters. However, some charities argued that not enough was planned that would make rent affordable.

Campbell Robb, chief executive of the Joseph Rowntree Foundation, said: “For many people in the UK, high rental costs make the difference between just about managing and not being able to manage at all: poverty in the private rented sector has doubled in the last decade, leaving millions trapped in insecure, expensive housing.

“Increasing supply is crucial, but the cost of renting matters too and today’s offer is out of reach for many of those on low incomes.”

More potential winners… and more losers

If the country continues down its current path then the housing lottery is going to throw out even more losers. The Chartered Institute of Housing has highlighted that the current drop off in social housing availability is likely to continue, meaning that by 2020 almost 250,000 social homes will have gone within just 8 years.

And the government’s recent Housing and Planning Act that extends the Right To Buy legislation to housing association properties rather than just council-owned homes, which makes an additional 800,000 flats and houses eligible for sale.

Unless there is an upturn in building social housing then more tenants will have no choice but to rent privately. For them, as yet at least, there is no Right To Buy, no discounted home ownership opportunity and all too often no security.