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UK Authorities Sold Off Social Housing at a Discount — Now They Are Buying it Back at a Loss

As Britain's housing crisis escalates, at least nine local councils are repurchasing at market value homes they once sold off at low prices under Margaret Thatcher's controversial Right to Buy legislation.
December 16, 2014, 5:45pm
Image via Reuters

British local authorities looking for ways to combat an escalating housing crisis are buying back social housing they previously sold off at a discount — incurring huge losses in the process.

In the United Kingdom, social housing is provided at low rents on secure terms to people who would otherwise not be able to meet housing costs.

Allocated on a basis of need, around 17 percent of the British population lives in social housing, which is normally owned by local councils or not-for-profit organizations like housing associations.

A government policy — first put in place by Conservative Prime Minister Margaret Thatcher — which encourages tenants to buy these homes at a discount has led to the sale of 20,000 homes since 2012. However, just 5,000 new homes have been built in their place.

An investigation by The Times of London has found that at least nine local authorities are repurchasing at market value homes they once sold off at a discount of up to 70 percent.

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Leeds Council paid nearly £1.24 million for 15 homes it had sold over the decades for the collective sum of £411,000 in today's prices.

The local authority sold off 462 council properties to tenants in 2013-14, and plans to buy back another 100 former council properties next year.

In 1980 Thatcher encouraged home ownership under the "Right to Buy" scheme, which allowed social housing tenants to buy the property from the state at a 33 percent to 50 percent discount.

David Cameron increased the Right to Buy discount to a maximum of 70 percent in 2012 as a way of revitalizing the housing market and funding new housing.

The scheme has been criticized for handing properties to private landlords, however, ultimately heaping more pressure on local authority waiting lists for social housing. There are currently 1.7 million households on this list, according to government figures.

Brighton and Hove Council in southern England used this argument last week as it made a formal request to the government to become the first local authority to scrap Right to Buy. The scheme will be abolished in Scotland from 2017 following a Scottish government ruling last year.

Other local authorities have also bought back social housing, including Barnsley in south Yorkshire, which has purchased 35 homes in the past 18 months while selling off 111 in 2013-14. Welwyn Hatfield sold off 99 over the last financial year and has bought back 21.

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In October, Islington council was reported to be planning a buyback of 20 former council homes judged to be value for money — using money generated from the sale of Right to Buy homes. Doncaster, Sandwell, Ealing and Hillingdon authorities have also expressed interest in buyback.

Catherine Ryder, head of policy at the National Federation of Housing, told VICE News that Right to Buy was an "unworkable system."

She said: "We are calling on the government to reform the policy to ensure that not only are all houses replaced one-for-one, but also like-for-like, to help end the housing crisis within a generation.

She added: "The huge discounts being offered mean there is not enough money from the sales to build desperately needed new homes to replace them."

Brandon Lewis, the housing minister, said: "The reinvigorated Right to Buy helps social tenants get onto the housing ladder, increases housing construction and reduces social housing waiting lists. Every additional home sold will be replaced with an affordable home."

Follow Ben Bryant on Twitter: @benbryant