There is a council flat in a posh part of London where the buyer has exercised his (or her, we don’t know the name) right to buy. The price? The agent who arranged the sale said it was worth around £1.1m. We don’t know the final price paid but it was supported by a £100,000 giveaway by the taxpayer.
The agent was from Righttobuy.coop, one of the country’s biggest brokers for council house sell-offs and responsible for about a fifth of the market. But is this the sort of taxpayer giveaway the government should be indulging at a time when the waiting list for social housing is more than 3 million people?
The bung to the right-to-buy tenant – something no private tenant will ever see – is even more shocking when you consider how these deals work in practice. “With some of these valuations, the council may value the property at £1m [on the open market] but the [sale] valuation comes in at £780,000-£800,000 because of the restrictions on the sale of the property,” said a spokesman for Righttobuy.coop.
This is because, I am told, right to buy comes with restrictions: the tenant is not able to sell for five years without having to repay some or all of the discount. A property with restrictions attached is valued by surveyors at less than one without.
So the council accepts a valuation of, let’s say, £790,000, then applies the discount the tenant is entitled to. The maximum discount is £77,900 across England, except in London boroughs where it is £103,900. “So for £690,000 of mortgage, the tenant gets a £1m property,” says the agent. For the tenant, this is a fantastically good deal; in five years’ time, if house prices remain static, they will trouser upwards of £300,000 if they sell, courtesy of the taxpayer. This is a sum equal to more than 10 years of average pay in England.
The question remains, though, how a council house tenant stumps up a £690,000 mortgage. Even if he or she managed to get the very best deal on the open market, it would cost around £3,000 a month.
But now something else emerges about the right-to-buy process. According to the agent, there can be up to six names on the purchase agreement, in what he describes as a “crowdfunding” arrangement – although they do have to prove a connection to the property.
In 1980 when Thatcher introduced right to buy, the average property in Britain was worth £23,500. Today, it is nearly 10 times that. In the London borough of Kensington and Chelsea it is £1.31m. The colossal rise in prices has randomly rewarded some people with life-changing windfalls but left others locked out in the perilously fragile private rental market.
Under the Conservatives’ new right-to-buy proposals, the result will be that a lucky few will be able to break in to the equity in homes they never owned, while further reducing the number of homes available for social housing. And sure as night follows day, individual right to buyers will cash in – and many will sell to landlords. The ex-council homes will then be filled with tenants once again, this time at a much higher rent, subsidised by housing benefit.
A right to buy, amid England’s desperate housing shortage, is nothing short of lunacy – unless you accept this is the right to buy votes.