Holyrood

Op-Ed: Right to Buy and Housing in Scotland, an Analysis with Kate

The Right to Buy scheme is broken fundamentally, and Scotland voted to get rid of it not too long ago. So why is Holyrood re-establishing it, and what will the ramifications be? A history of Council Housing, Right to Buy, and the Housing Market with Captain_Plat_2258 MSP.

Olivia Jones

• 14 min read
Op-Ed: Right to Buy and Housing in Scotland, an Analysis with Kate

By Captain_Plat_2258, MSP for Scottish Labour

The United Kingdom has a long history with social housing. The principle of the government having an obligation to provide temporary or even long term subsidised rental properties to the working poor dates back to before the first Labour government, and council housing is one of the single most important aspects of our entire housing system. In this article I intend to give a brief background on social housing, go over the rent to buy scheme, talk about it in the context of Scotland and Holyrood attempting to revive the policy, then address the single biggest cause of the problems within the housing market.

In the 1900’s, Labour-run local councils saw the overcrowding of Edwardian cities and the failure of landlords and developers to deal with it - and indeed the glee with which they exploited it - and constructed some of the first municipal houses in Britain. They carried on this building on a large scale right through the century, and by the early 70’s some Labour local councils even began buying up entire streets to re-develop and guarantee to the public in a council housing scheme (Andy Beckett ‘The Right to Buy: the Housing Crisis Thatcher Built' 2015). It worked, it drastically lowered homelessness rates and resulted in more people in homes overall. Interestingly; at the same time that public renting went up, private ownership also had risen. By the time that Right to Buy was about to be introduced, 32% of all housing stock was publicly owned and being rented out to the working poor and low income families. Across the 20th century the number of homes being privately rented fell from 79% to just 9%, with the other 68% of homes that were private most commonly being owned-homes rather than tenancy properties.  (Colin Jones and Alan Murie ‘The Right to Buy’ 2006).

All of this shows the popularity of public renting. It seriously positively impacted the lower-income, working class people of the UK. Now let’s look at the Right to Buy policy, with help from one of the only properly conducted welfare analyses of the issue in popular circulation; ScienceDirect’s ‘The Right to Buy; public housing in Britain’ (2017).

The Right to Buy policy was first implemented on a small scale in the 20’s-50’s when local councils sold small amounts of council homes to their tenants when those tenants could afford them for full price. By 1972, a slightly left oriented Tory Environment Secretary, Peter Walker, would declare to his party conference that the ability to buy council homes was a ‘human right’ and they could be offered at a discount. During the mid-70’s Walker, a back-bencher at the time, suggested that municipal governments should just give their council homes to tenants. Across the aisle, some influential Labour figures like Joe Haines and Gavyn Davies began to wonder whether renting for life was a satisfying lifestyle. In the late 70’s a housing study conducted by Jim Callaghan’s administration concluded that a Right to Buy policy was a popular desire among some people (Andy Beckett).

According to Beckett, as the 1979 general election came around the Conservative party began devoting massive amounts of space to a new Right to Buy policy that would allow tenants to buy their homes at a massive 33-50% discount. It also guaranteed 100% mortgages. These were massive bonuses for late middle aged or older Britons, and in the words of Gavyn Davies ‘you would be insane to not buy one’ under this plan. But the manifesto ignored something important; was this a good deal for municipal and local governments who would lose the rental income from the homes. Furthermore, it didn’t address whether the country would have enough homes after the sell-off? What would happen if the population grew? According to Alan Murie, this policy was introduced at a time without a housing shortage and indeed a time of complacency. Nobody knew what they were getting into.

Right to Buy ended up being responsible for an increase in the share of home ownership among those living in the UK; a rise from 55% in 1979 to over 70% in the early 2000’s; thereby introducing a large scale change in asset ownership among UK households in a relatively short period (ScienceDirect). At the time it was introduced, however, new council-house construction almost disappeared while social housing construction (not for profit housing) continued. Sales of council homes peaked. Sales of council homes peaked in the 80’s, but continued steadily into the mid-2000’s for a variety of reasons. For one, new tenants became eligible by attaining residency requirements and took advantage of low mortgage rates throughout the period. Secondly, residual opposition from Labour councils impeded the process and speed of sales; such as handing over stock to social housing associations with stricter restrictions. This meant it took a while to deplete the stock of council housing.

By the mid-2000's around 2.8 million council homes in the UK had been sold, most under Right to Buy. These sales comprised around half the total stock that had existed at the start of the policy. So who gained and who lost from this policy? Well surely the ex-council tenants who had been able to purchase properties at discounted prices. However, by exercising their Right to Buy they became responsible for their own mortgage finances and upkeep of their home, something which they perhaps weren't ready for in many places. Moreover; the resale restrictions meant that if a purchaser was no longer in a position to pay off their mortgage they were at risk of foreclosure. This is a non-trivial cost of the policy, given council homes are meant specifically for people with low incomes and often wouldn't be able to. But this is only the tip of the iceberg.

Another group that potentially benefited were taxpayers, particularly those paying higher taxes. After 1990, local authorities typically only had access to 25% of the receipts from sales, meaning 75% of the profits could not be used to replenish housing stock. Indeed, even the 25% could only be used for maintenance and renovation of existing stock rather than new construction. All of this meant that less homes were being built, meaning more room for tax cuts (and cut Thatcher did). The bill put to Holyrood addressed this issue, and I'll get to it in the next section - but I'll preface this by saying it doesn't actually solve the fundamental issues. In the most basic terms, the Right to Buy scheme was originally intended to offset lowering taxes by not allowing a large portion of profits to go towards replacing council homes; but when you're devoting money to trying to prevent council stock from dwindling at the same time you run into austerity. What you get is a double-ended system where either you lose the point of the scheme entirely, or you get austerity. This isn't the only issue and I will address the other ones as we go.

There are two groups of potential losers from the Right to Buy policy as first enacted, and as it continued to exist for many years. First; local councils. According to Peter Malpass in his 1999 collaborative book with Alan Murie entitled 'Housing Policy and Practice';

“Although the Right to Buy program reduced the need of covering maintenance costs and subsidizing rents, local authorities had received little of the receipts from sales and still had a statutory duty to rehouse the homeless and those with pressing housing needs”

The book points out that subsidies paid by local authority to cover council tenants had "fallen, in nominal terms, from £2.1 billion pounds in 1980 to 1.2 billion pounds in 1990". While this is a clear saving on the part of local government, the author goes on to state that the number of applicants for council housing related to homelessness actually more than doubled in the same period of time; from 63,000 to 146,000. This reflected that as more homes were bought up by individuals and transitioned into the private market, local council was incapable of replacing that stock. And the private housing market simply wouldn't make lower-quality homes for people that needed them but had low income conditions, because that wouldn't turn a profit.

By allowing the sell-off of council homes, local government lost the ability to house low-income families that needed it and couldn't build houses fast enough to replace their stock even if they were returned 100% of the profits (as suggested by the RTB revival in Holyrood right now) to maintain that stock. This is because one of the main elements of the Right to Buy scheme is the government subsidising the cost of the home at between 33% and 50% of market value. Without a discount, there's no point in the policy because the entire reason people go into council housing is because they cannot afford a market-value house or tenancy. With a discount, the government can never make enough money back to continue construction at a fast enough rate. This meant that local councils had to house homeless families in unsuitable or more expensive housing (such as private tenancies and even hotels); and even the savings local councils were getting from not paying maintenance subsidies were eroded. Over time under the Right to Buy policy, housing stock shrank as council homes became private and private residencies served the purpose of council homes. Because people began buying up council homes at low rates, and new prospective council tenants had to be put in available private housing lest they be homeless, everybody suffered.

Another group being harmed by the Right to Buy policy are, as hinted at before, later generations of people who need council housing and have faced longer and longer waiting times due to the diminishing stock. Now, to be fair during this time a Housing Benefit to try and support low income families into homes was established by the national government. However, would-be tenants ended up facing difficulty due to not only the lack of public but also of private stock. Because as council-home stock dropped, local government had to put homeless and low-income people into subsidised private housing at greater cost than it did when it owned those houses completely. The housing market grew at a slow rate in terms of units, and the lack of council homes merely worsened the shortage. Before Right to Buy, shortage in affordable homes through the 1970's was ridiculously low. Once it was put in place, shortages abound.

In regards to the Right to Buy issue there are two other groups that need to be considered, and are mentioned in the ScienceDirect study. Firstly, tenants who decided not to buy their home because of the benefits provided by public renting; most commonly the lowest income council tenants. Better-off tenants would cherry pick comparatively better homes to buy, which would result in the majority of remaining council homes being the lowest quality of the bunch - at odds with the original principles of public housing to provide balanced but cheap shelter for the working poor. This process of inadvertent ghettoization left the lowest income tenants in the worst homes.

The other group are the people with the money to be home owners in the existing housing sector. The public-private balance was an equilibrium struck from the state filling a gap that the market couldn't. The Right to Buy scheme, in its infancy, did now allow houses bought under it to be re-sold under statutory limits. However, over time such properties would inevitably be re-sold due to foreclosure or upscaling. This meant houses intended to be council homes would move onto the private market, and changed the distribution of available types of properties. This resulted in the stock of council-quality homes being eaten up by the private market which would inevitably put them up for higher prices and at higher rents, defeating the purpose of the niche filled by local-council owned homes. The Right to Buy scheme, nationally, only served to harm the housing system and reverse years of progress.

How about Scotland? Well, as is common knowledge the Scottish Parliament ended up abolishing the Right to Buy not too long ago. This was a move backed by multiple housing organisations and unions, including the Scottish Federation of Housing Associations (SFHA) and the Association of Local Authority Chief Housing Officers (ALACHO). Mary Taylor, the chief executive of SFHA, has this to say about the abolition;

“Right to Buy has had its day and has no place in modern Scotland. Although particular individuals have benefited from the 'Right to Buy and at significant discounts', the sales have been at a loss to the greater public good. Half a million social rented homes have been lost over the three decades of this policy in Scotland, and very often the better stock in the more popular areas. By ending the Right to Buy, we will be able to preserve much-needed social housing stock for rent that is affordable to people on low incomes. Going forward, we have a chance in Scotland to adopt a housing policy that is focused on the supply of well-designed, energy efficient social rented homes that are truly affordable to people on low incomes.”

Statistically in Scotland, even with provisions to try and offset the losses to local stock brought about by Right to Buy, on average only one home was built for every three sold under the policy. Furthermore, the policy manager of the ALACHO, Tony Cain, said of Right to Buy;

"Ending the Right to Buy will allow social landlords to plan longer term, manage assets and income more effectively, and most importantly to invest to increase the number of social rented homes for the first time since 1981. That means more long term jobs and apprenticeships to maintain our homes and more households taken out of housing need and living in warm, dry and genuinely affordable housing".

So did the abolition of Right to Buy actually help? Well, according to Shelter Scotland, in 2011 (pre-abolition) there were 55,227 applicants for social/council housing and 41,530 people assessed as 'homeless' by the Scottish Government. According to them, in 2019 (post-abolition) there were 36,465 applications for social/council housing and 29,894 people assessed as 'homeless' by the Scottish Government. These figures are all confirmed by the Scotland Public Health Organisation (ScotPHO). There is a clear and obvious drop in the number of people out-of-home or in waiting for a council home.

But of course it could be argued that the new Right to Buy revival on the floor of Holyrood will fix the issues with the scheme, which were only 'flaws' in the design of it. Well, how will it do that? Well, the only provisions of the bill that actually amends the original scheme reads as follows;

(1) Where a property is sold in accordance with the Right to Buy, the local authority must use the revenue from the sale solely for the purpose of increasing and maintaining social housing stock levels where:
(a) Less than 15% of the housing stock within the same local government ward is social housing; and
(b) The local authority does not reasonably need the money to pay the salaries of staff or for the provision of basic and essential services; and
c) Social housing does not make up more than 25% of the total housing stock within the local authority

Now the first two points are decent, they at least provide some guarantee that council will replenish their stock. But the issue there is that, as previously established, unless the discount of RTB is eliminated the local council will never have enough money to build council homes fast enough to keep stock stable. And, again, if they did eliminate the discount then the scheme would be useless as the original intent to 'get people onto the property ladder' would be lost.

The last point is actually quite alarming though; the provision of the bill discontinues the need for local authorities to replenish stock if local council homes exceed 25% of the market - meaning local wards would build houses based not on the need for them but based on the size of the market as a total. And, as established, the market has serious issues with providing houses based on need rather than based on profit. The bill put to Holyrood should have instead based it off of the need for housing based on homelessness and poverty rates.

The entire bill, however, fundamentally misses the point. Right to Buy may benefit a select few people, but because of the way it depletes stock and money that local councils need to build it results in shortages, price hikes, and austerity - to such a point that the largest housing associations in Scotland were advocating against it. It has been established multiple times through this article and in countless scholarly/academic articles since 90's; Right to Buy just does not work.

And now for the big one. What causes the housing crisis outside of Right to Buy? Is it landlords raising rents and increasing prices on homes meaning those who haven’t got the money are left without homes? Is it gentrification of the industry? Is it the issue with subprime mortgages and debt that have caused multiple issues in the past? Well, yes it is all of these things. But the simple fact is the housing market is literally incapable of fixing these issues. By its very nature everything the market does to solve the problem will make it worse. It is the market that distributes homes to only those who can afford them, it is the market that encourages development leading to gentrification, it is the market that facilitates large-scale borrowing leading to a debt based economy. By its very nature the market is the crisis. And it is this fact that politicians like us constantly ignore. We try and facilitate the market when really it is the market itself causing the problem. It’s not a problem of supply, in the market overall, but a problem of the willingness of politicians to make the changes necessary.

By looking at the issue this way we see the entire problem with Right to Buy policies is that they attempt to get people onto the property ladder. They put the houses in the market, they let the market in. That’s the very reason that now the housing crisis is at a high point, and in the 70’s before Right to Buy came about it was at a low. 32% social/council housing isn't a bad thing, it’s not this devil to be feared and eliminated. It is precisely because so many council homes were in operation that this low point in the crisis was observed! You fundamentally can’t solve an issue of distribution with buying and selling, because it is a fundamental fact of the situation that throughout the majority of housing crises in British history there have been more empty houses than homeless people. That includes right now. If we really wanted to we could instantly end homelessness by taking all those empty properties and putting people in them. And it is fundamentally the housing market that prevents those houses from being used in that way. The issue is how homes are being thought of, as commodities to be bought. When you treat it like that you cannot be surprised when people treat them like any other commodity.

If you come to accept the idea that the housing market and the housing crisis are inevitably linked, you are presented with an interesting set of ideas about how we consider property. Finding new ways to deal with poverty and homelessness, building off of the things that worked through the 40’s to 70’s. It’s a fact that the government can already use up property for things like shopping malls, rail and highways; why not for eliminating homelessness, guaranteeing housing at a human right? Surely, even if it’s just a theoretical idea, we should at least consider not thinking of shelter as a commodity?

But that’s a radical solution, and the balance struck by governments pre-1979 was - as previously stated - to gradually buy up low-quality accommodation, fix it up, and make it council housing. It’s a relatively centrist view if you consider the alternative of just doing away with the market that causes the crisis in the first place, guaranteeing people homes as a right. And perhaps the more radical solution is something we need to consider as we move forward in society. Maybe we need to reconsider how we think about human rights, to shelter and to other things - and start considering human obligation to provide human rights if they have the ability. Either way we must at the very least prevent the market from bringing its problems into the social network. This isn’t an ideological issue, this is one of plain hard facts. If we aren’t going to make radical changes, the only way to begin to reverse homelessness is to strategically minimise the market because, as established, the market is the problem. Allowing the market back in will cause the same problems it always has. People are better off either having the option to or just being under public care in a strong socialised system.

But what do I know, I’m just virtue signalling about maybe not letting some drivel about the first home buyer market subprime property ladder get in the way of actually digging down to the beating heart of the issue and trying to find an actual solution, cos what Tories and Labour alike have tried since Thatcher changed the game forever simply hasn’t worked. The Right to Buy scheme is broken fundamentally, because it lets the market take more and more. And the market is the problem.

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