Hackney Council slams ‘dysfunctional’ Right to Buy as former tenants pocket £482m profit from selling homes on
- Credit: Archant
Thousands of Hackney council houses bought by tenants since 2000 have since been sold privately, making homeowners hundreds of millions of pounds in profit.
Since the Land Registry started keeping records at the turn of the millennium, some 2,153 Right to Buy homes in the borough have been sold on by former tenants, making a collective profit of £482million.
In many cases homes were re-sold in a short space of time and for more than 10 times what was paid to the council.
Hackney Council has long called for changes to the divisive 1980s Tory policy, which allows long-standing tenants to buy their home from the local authority at a heavy discount.
Mayor of Hackney Philip Glanville said: “It’s a national scandal that during an unprecedented housing crisis, so many homes bought under right to buy are sold on – often into the hands of private landlords.
“These are homes that should be providing a permanent place to live for some of the 13,000 families on our housing waiting list.
“It makes no financial, logical or moral sense to turn them into privately rented homes, with councils and the government often subsiding landlords with benefit payments to cover rocketing rents.”
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Since 2000, people in Hackney who re-sold made an average profit of £130,569 apiece – and in many cases hundreds of thousands of pounds more.
Eighty homes were bought from the local authority for less than £20,000 each, and were later sold on for a combined total of £5.69m.
One property purchased for just £13,000 in February 2002 was sold three months later for £157,000 – more than 12 times what was paid to the council.
Another bought in May 2003 for £57,000 was sold on 45 days later for £109,000, meaning the then-owner earned £1,156 for each day they hung onto it.
As house prices in London skyrocketed, the value of former council homes increased with them, with one property bought for £26,800 in November 2002 finally sold for £499,999 in January 2013.
Another purchased from the local authority for £90,000 in August 2004 changed hands a decade later for a grand total of £690,000.
Local authorities are hamstrung by arcane government rules around Right to Buy income, which only allow them to use the receipts to fund up to 30 per cent of the cost of a replacement home.
Town halls are also not permitted to combine those receipts with grant funding, meaning the other 70 per cent must be found without the help of the government or mayor of London.
And if councils cannot find a way to use the cash within three years, they must surrender it to the government.
Last year Hackney Council circumvented the rules by offering the £16m pot of money it could not use to housing associations, on the proviso that they spent it to build social or living rent homes.
Mr Glanville said: “We have long campaigned for reforms to Right to Buy, especially the freedom to fully reinvest income into building new homes so we can ensure we replace the social housing lost through this dysfunctional policy.
“I have personally argued that London boroughs or the mayor of London should have the power to reform, pause or end Right to Buy.
“It is a disgrace that these homes cannot be kept or returned to low-cost home ownership by recycling the original discount.”
Across the UK, Right to Buy homes re-sold since 2000 have made private individuals a collective £6.4bn profit, while more than a million people are on waiting lists for social housing.
A spokesperson for the Chartered Institute of Housing said: “We think the time is right to suspend it [the policy] to stem the loss of homes for social rent, which are often the only option for people on lower incomes.”
Polly Neate, chief executive of Shelter, added: “The chronic shortage of social housing available is nothing short of a disaster. Hundreds of thousands are homeless and millions are struggling in deeply insecure and expensive private renting, so replacing social homes on a like-for-like basis is critical.”
Right to buy sell-off: the national picture
Right to buy gives social housing tenants of two years or more the chance to buy their home from the local authority.
Properties are sold at between 35 and 70 per cent of the market rate, depending on how long the tenant has lived there.
According to the Land Registry, between April 2000 to March 2018 some 110,000 former council houses bought under right to buy in the UK were sold on.
Social housing in Britain has made private owners £6.4bn in collective profit, or £4.3bn in real terms - and £2.8bn in London alone.
The average time ex-tenants in the capital held onto their right to buy home was 2,400 days, or six and a half years.
But eight in London re-sold their ex-council home again within one week of purchase.
According to the latest government figures, less than a third of homes bought under right to buy in England since 2012 have been replaced.
In a statement, the Chartered Institute of Housing told the BBC the policy had effectively been “Britain’s biggest privatisation”.
Tenants who sell within five years should have to pay back some or all of their discount, and those who sell within 10 years have to offer their council the chance to buy it back first.
The government is now developing a new version of the policy which would apply to more people.
Housing minister Kit Malthouse MP said: “Under right to buy, the government has helped nearly two million people achieve their dream of home ownership and we are working hard to make sure that everyone in the country who wants it has a shot at getting on the housing ladder.”