Right to Buy: the facts

In October 2011 the government announced its intention to increase the caps on Right to Buy discounts to encourage more tenants to take up their Right to Buy.

The main changes to Right to Buy that took effect from 2 April 2012 were:

  • The maximum discount that buyers can get on the market value of their home was increased to £75,000 (from 25 March 2013, this increased further to £100,000 in London boroughs).
  • Extra homes sold under Right to Buy to be replaced by a new home for affordable rent nationally, with money from extra sales put towards the cost of replacement.
  • Provision to cover some of the cost of withdrawn applications: councils will now retain £2,850 in London and £1,300 in the rest of England per sale.
  • Government retains the ‘buy back provision’ but this will be capped at 6.5% of those receipts available for replacement stock.

There was no change to the qualifying criteria for Right to Buy or Preserved Right to Buy but, in January 2014, the government announced that the maximum discount for a house will increase from 60% to 70% of its value, and the £75,000 cap will start increasing in line with the consumer price index rate of inflation.

The refresh succeeded in encouraging tenants to take up their Right to Buy. In the nine quarters since the government refreshed the Right to Buy in April 2012, there have been 5,368 sales of local authority owned dwellings in the North (1.2% of LA stock). This compares to 1,592 sales in the nine quarters preceding April 2012 (0.4% of LA stock). This equates to a 237.2% increase between the two periods.

Table 1 below shows the proportion of LA stock that has been sold in the three northern regions since the Right to Buy refresh in April 2012.

Table 1: Local Authority sales since April 2012 as a percentage of LA stock (2013)
Sales since 2012/13 Q1LA stock (2013% of stock sold
North East1,460112,7101.3%
North West1,00493,1501.1%
Yorkshire and Humberside2,904235,8601.2%
Figure 1: Right to Buy sales per 1,000 LA stock 2013-14

Figure 1: Right to Buy sales per 1,000 LA stock 2013-14

The increase in the popularity of the Right to Buy has increased capital receipts to local governments and Treasury. Between April 2012 and September 2014, a total of £214.6m was generated in receipts arising from sale of dwellings by local authorities in the North (and over £1.5bn in England) and the £25.3m generated in the second quarter of 2014/15 alone was a 402.6% increase on the first quarter of 2012.

Despite the pledge to replace all additional homes sold as a result of the increased discount (bullet two above), there has been some criticism aimed at the government that this has not happened. Inside Housing reports that the Treasury has collected almost one-quarter of RTB receipts nationally, making it ‘virtually impossible’ to fund replacements. DCLG figures show that, in the North, in only eight stock owning local authority areas have there been ‘starts on site and acquisitions of dwellings for the provision of social housing’. In these eight areas there have been a total of only 141 starts on site/acquisitions since April 2012. This equates to only 2.6% of the 5,368 Right to Buy sales over the same period.

Table 2: Starts on site compared with Right to Buy sales
LA AreaStarts on siteRTB sales% replaced
Newcastle upon Tyne283288.5%
North Tyneside212478.5%

If you have any queries regarding this article or the data contained within it, please contact Barry Turnbull, Policy Services Officer on (0191) 5661030 or email barry.turnbull@northern-consortium.org.uk.