Right to Buy: What happens if it goes under in England?

When the Right to Buy (RtB) scheme was first introduced in 1980, then Prime Minister Margaret Thatcher praised the programme as a way for the UK to create a "property-owning democracy". In the nearly 40 years since, the scheme has proved to be anything but. Rather, it has become a huge drain on taxpayers.

Mounting data shows that RtB has created a wealth transfer scheme whereby some council renters have purchased their homes at a great discount only to turn around and resell them for excessive profit. As evidence mounts in favour of ending the programme in England, there is a very real chance of that very thing happening. So what if it does?

RtB was shut down in Scotland back in 2016. It came to an end in Wales at the start of 2019. In both regions, would-be home buyers have shifted their attention away from council homes and to a small handful of popular mortgage brokers capable of finding them affordable deals for purchasing homes at market price. Would the same thing happen in England?

Abusing the System

RtB is seen by many as the only way to allow a certain segment of society to buy homes. There is little doubt that the programme was developed with ambitions much greater than were actually realised. Perhaps that's why so many are disheartened by data that shows what can only be described as abusing the system.

The BBC highlighted this abuse in a piece published in mid-March 2019. One example cited in their article described a former council tenant who purchased a home under RtB for £80,000. Just nine days later that same property was sold for £285,000.

According to the BBC, recently released data shows there are roughly 140 RtB buyers in Great Britain who have made a collective £3 million in profit by buying their council homes and reselling them within a month. That represents £3 million that could have gone back to the councils that originally owned the houses.

Proponents of the scheme say that it is the only way some people can secure their financial futures. While that may be true, RtB is an affordable housing scheme. It was never intended to provide a means of long-term financial security.

Prices and Mortgage Options

Opponents of the RtB scheme are trying to bring it to an end in England. They say there is a better way to solve the housing crisis. Among their many proposals is a suggestion to start focusing on prices and mortgage options. If we can bring those two things under control, the market should take care of itself.

Pricing in the housing market is almost always determined by supply and demand. So how do you bring down prices in any given area? You build more houses. Saturate the market with supply and prices fall very quickly. In order to do that though, there has to be a willingness to build. And more often than not, we say we want to build houses and the object when building projects are proposed.

In terms of mortgage options, there are just not enough available to lower income earners. Banks and building societies do not like to work with low income families because there isn't enough money in it for them. Mortgage brokers are more willing than banks and building societies because they have access to so many more products. But even they don't have enough choices to meet every need.

How do you fix the mortgage problem? You find ways to make houses cheaper and then you offer mortgages people can actually afford. It is fairly simple to do if every player is willing to sacrifice a little bit rather than trying to take as big a piece of the pie as possible.

It's Time to Make a Choice

To say that the recently uncovered RtB data is shocking is to state the obvious. The fact that the scheme has been abused is now out there in the open. That leaves us with the cold reality that it is time to make a choice. We need to decide once and for all how we are going to address the housing crisis.

Any workable solution has to be defined by either free-market opportunities or social housing. One or the other has to be at the core of the solution. Otherwise, we end up repeating the RtB mistakes all over again. We end up providing social housing that people then turn into free-market profit-making machines.

If we want the free market to solve the problem, then let's cut the regulation and let it work. If we want social housing to be the solution, we need to make it impossible for that housing to be abused. We cannot have it both ways.