When right to buy came into effect in the mid-1980s, rising house prices and surging inflation created the hope there would be a mass movement of wealth from the state to individuals. The market today is far more complex.
While price inflation is rampant post-pandemic, as it was in the late 1980s, housing supply is now much lower. The issue we face with UK housing is an issue of supply.
The proposed extension to right to buy is a short-sighted response to housing supply logjams. Only 5% of the 2.6 million homes sold under the scheme have been replaced and in the three decades since the scheme began, the differentiator, and therefore structural issue with UK housing, is still supply.
Almost 40% of ex-council homes sold under right to buy are now in the private rented sector, which speaks volumes about the lack of new supply replacing old council housing stock. Just 6,239 starts were made on social rent housing in 2020-21 – small change, when you consider that half a million social housing units have been lost since the turn of the century.
To make matters worse, new legislation is reportedly stalling the delivery of 100,000 homes by stipulating that all schemes must prove they do not contribute nitrogen, phosphorus or other harmful chemicals into water supplies during construction.
Demand-side solutions like right to buy do not address the problem at hand: chronically low levels of ageing housing stock. We need supply-side solutions.
Council tenants can now buy their homes at a discount of up to £87,200, with most proceeds going to the Treasury. Councils only retain a small sum, giving them no incentive to deliver new social housing and representing a £75bn loss to public housing since the 1980s. Why would councils fork out to build homes when they are sold at a loss and without full recompense, compounded by the loss of future rental income?
Meanwhile, many housing associations have long-term development finance deals reliant on private rental income to offset debt repayments and inflation. Altering this ailing ecosystem with demand-side intervention risks mass disruption to the housing market and jeapordises the development pipeline.
So, extending right to buy to housing associations will be costly and take years to implement – far from the short-term solution it’s being positioned as. Containing the fallout would cost the government £14.6bn over the first decade, based on the pilot scheme in the Midlands – £3bn more than the Affordable Homes Programme.
Housing is not protected by the macro-environment, and stifling supply, rocketing demand and seemingly uncontrollable house price inflation are wreaking havoc across the market.
The only way to level the playing field is via supply-side intervention and expanding infrastructure to support this. Rapidly mobilising innovative solutions like modular construction will produce energy-efficient homes at pace, at a fraction of the long-term cost, adding much-needed volume and sustainability to Britain’s ageing housing stock.
Creating a sustainable infrastructure for modular housing and encouraging production would be a supply-side intervention to kickstart a market in decline, proving a cost-efficient solution that stands the test of time.
Dave Sheridan is executive chairman of modular housing specialist ilke Homes