A prominent feature of Thatcher’s 1979 Conservative manifesto, Right to Buy launched in 1980 as a way to springboard hard working people who before had only been able to rent from the Local Authority. Overnight, the dream of home-ownership which for some seemed so far away became a reality. That has continued throughout the decades to the current day.
News outlets are now reporting that since 2000, homeowners who purchased through the Right to Buy Scheme have together made a total profit of £6.2 billion, sparking outrage in some quarters, but is this entirely fair?
The first thing to note is that the Government are giving people a chance to move up the social ladder and better themselves and their families. Of course, the aim of the scheme is not to give an instant profit, but to reflect hard work and dedication over a period of time. Homeowners tend to feel more stable and secure in their area, contributing to the local economy and the communities in which they live. Furthermore, if you buy a home in an area in which you have lived for a number of years, the chances are, you have put roots down there and are looking to cement this. Looking at the situation from a purely financial point of view can be seen to be naive.
It reflects rent paid and time in the property
Renting a property has long had a rather harsh adage that ‘Rent money is dead money.’ Whether you agree with this or not, Right to Buy can change this. Those renting from a Local Authority or Housing Association, regularly paying their rent can see a reward for the money they have paid and the length of time they have paid in. An important matter to remember, which is sometimes overlooked, is that the discount given on these properties is not automatic. It is calculated on a formula which means the longer you have resided in a Property or with a particular Local Authority, the more discount you get. In other words, an individual cannot simply move in to a council house and automatically purchase it at much below the market value.
Funds for the council
One thing overlooked by the News Agencies reporting this story is that of course, selling the Property brings in sometimes much needed funds for the Local Authority. Already facing a stretch on their finances, in areas such as Social Care funding, the money from the sale of the properties may be reinvested to the benefit of the community at large.
Similarly, the Transfer to the homeowner may place obligations on them to maintain things like fences, boundaries and accesses, removing the liability from the Council or at least sharing it. In the long run, this can be said to benefit the Local Authority.
It may give the council an opportunity to build new homes & the homeowner to improve them
Some Council estates and blocks, built between the 1930s and 1970s are now showing their age. The money received from sales can be used to invest in homebuilding (which costs less than market value) and therefore provide quality housing, and another available home, to a growing population. This also would provide work for builders, roofers, electricians, gas fitters, and of course solicitors to name but a few, boosting employment rates. New homes tend to be more environmentally friendly and efficient to run. A walk around a new Local Authority estate will show solar panels and some even have heat pumps and wind turbines attached. Homeowners may invest in their former Council properties, with new windows, new exterior decoration, new windows or landscaped gardens, which in turn improves the overall look of an area, making it more desirable.
The discount is not ‘free money’
One misunderstood factor is that you can’t simply purchase at an undervalue and flip the property for a quick buck. Local Authorities and Housing Associations place Charges on the Property, meaning that if it is sold within 5 years from the date of Transfer from the Council can claim back all or some of the discount provided, on a sliding scale depending on how long the Property has been owned for.
The housing stock is not necessarily depleted
Yes, fair enough, in some areas, lots of people buying at once may deplete the housing stock. As mentioned above however, the funds may be re-invested to build new, eco friendlier and more efficient housing. To protect against this, however, the Council will place a Restriction on the Property it has sold. This means that if it is disposed of within 10 years (which also includes gifted) the Council have a right of first refusal to purchase the Property at its market value. In other words, the house may not stay in the hands of private owners forever. A misunderstood fact is often the fact that upon first disposal within the first 10 years, the Council have to certify that they don’t want to buy the Property before it can be sold to a person of the homeowner’s choosing.
Ison Harrison Solicitors are extremely experienced in dealing with Right to Buy transactions. If you are considering purchasing your Local Authority home, contact us for a quote today. If you require any more information, contact Ashley Mallet on firstname.lastname@example.org or alternatively call 01904 917 982.