Affordable Housing Institute : US

“It was twenty-five years ago today.

Missus Thatcher put the homes in play.”

– With apologies to Sir Paul McCartney

 

 

On the silver anniversary of Britain’s right-to-buy policy, Britain’s weekly Housing Today (subscription required) tells four tales that together paint a fascinating picture of how changing tenure changes behavior:

 

More than two million people have bought their council homes since Margaret Thatcher gave them the right to buy in 1980. 

 

 

In a country of 55 million, that’s a seismic shift — 8% of the national housing stock.

 

The policy has always been controversial: 60,000 social homes are lost through the policy each year, while social house-building has nose-dived from 110,000 in 1980 to 22,000 in 2002.

 

The dive in building has nothing to do with the properties ‘lost’; it just makes their loss more noticeable.  The right answer is to build new affordable housing to replace housing that goes market, but at what price greenfield?

 

Aside from its change in tenure, right-to-buy has also changed two million Britons from public housing tenants into homeowners with equity (nearly all right-to-buy purchases, especially in the early years, were at discounts from fair market value).  Has changing their tenure changed their thinking?

 

Owners benefit from appreciation, which creates mobility: Len Bonnington, Brighton

 

For Len Bonnington, right to buy has been a “mixed blessing”. In 1986 he paid £10,250 for his two-bedroom, ground-floor flat in central Brighton and he is about to sell it for £145,000 more [a handsome 15.1% annual appreciation, before considering capital costs — Ed]: with this equity, he will be able to move to a residential home for the elderly in Horsham, West Sussex.

 

Len Bonnington, Brighton

 

Owners are more active than tenants: Len Bonnington, Brighton

 

But, he says, ownership has not always been easy.

 

John Tierney and Len Bonnington (pictured) have each had problems with their former council landlord

The problems started in the summer of 1999 when he received a bill from Brighton & Hove council for more than £17,500. This was the estimated cost of repairing a subsidence problem in Bonnington’s flat. He had noticed the problem in 1991 and contacted the council to voice his concerns, but the council took no action until eight years later – when he received the bill.

 

 

He says: “I could see that something was wrong as far back as the early 1990s. The council didn’t seem to take my concerns seriously and neither did my neighbours. At the time I was the only leaseholder in the block, which had 10 tenants, and no one else seemed to have the same degree of concern about the property as I had.”

 

Bonnington belives the discrepancy between his stake in the block and the council tenants’ caused tension. “I was a homeowner and they weren’t. They didn’t feel the same sense of urgency about asking the council for the repairs the block needed,” he says.

 

Owners are more demanding customers: John Tierney, Manchester

 

It takes John Tierney a full five minutes to decide whether buying his one-bedroom, top-floor flat from Manchester council in 1996 was a good deal. The flat is in the Bentley housing estate, better known as Redbricks, in Hulme, just south of the city centre, and he paid £10,000 for it. He looks out of his living room window and surveys the black, heavy-duty barbed wire that forms a thick trim around the blocks of flats opposite and says that his neighbourhood is looking more and more neglected these days. He’s not sure when the estate is to be refurbished.

 

John Tierney, Manchester

 

Finally, he says: “Up until last year I’ve always said to the people on this estate that, if they could, they should buy their property because it would give them more control over their lives. And I suppose I am glad I bought this place: it is good to feel that you own it. But for people new to right to buy, I’m not sure it is worth it, around here at any rate. Apparently the council values these flats at around £80,000 apiece, but I find that hard to believe. There’s not been enough investment in these flats – and it shows.”

 

The dilapidated state of the three-storey block he lives in makes Tierney angry because, he says, it makes him wonder what happens to the £200 service charge he pays each month to the council. “I have never known exactly what the service charge is for – I’ve never received a detailed breakdown of what the charges cover and I’ve found it nigh impossible to get a proper explanation out of the council,” he says.

 

The thought of a service charge rise concerns Tierney because he has found it difficult to contest past rises. “The council runs you ragged,” he says. “You can never speak to the same person twice about what the charges mean and any information you do receive is written in legal language. You need money and resources just to work out what your rights are as a leaseholder and then more money to fight for those rights.”

 

 

Tenants who become owners become sellers: Jonathan Price, London

 

The right to buy is also the chance to sell.

 

But are resale prices so high that they take properties out of the country’s social housing market?  Property developer Jonathan Price should know; he’s bought two former council properties in the past two years and they both came with big price tags attached.

 

Last year Price paid £180,000 for a one-bedroom flat in Islington, north London, which had been bought through the right to buy in 1988 for £28,000 – a discount of £35,000, based on an estimated open market value at the time of £63,000.  Last year he also paid £200,000 for a similar ex-council property in Islington, though he does not know how much the former owner of this second flat originally paid.

 

Stock migrates to different income classes:

 

After carrying out some minor refurbishment in the flats, Price now rents them out to young professionals. He says that their being former council properties has made no difference to the rent he is able to charge and he’s confident the flats are a good long-term investment. “Other than flats in high-rise blocks, I am more than happy to purchase former council flats as buy-to-let investments. In a sought-after area like Islington, the origins of a property really don’t make that much difference.”

 

And it’s not only in London that former social homes have found their way into the mainstream housing market. In 1998 the Joseph Rowntree Foundation conducted a wide-ranging review of the right-to-buy policy, and found that former council properties, on resale, do not offer a “way in” to homeownership for people who cannot buy elsewhere in the market. This was partly because the right to buy is used most often by people on popular council estates offering family houses and in areas of high housing demand.  People on estates in areas of low housing demand are less likely to buy.

 

In other words, right-to-buy, as expressed in the UK, has been a tenure shift (and wealth transfer) that benefited sitting tenants. 

 

The result is that properties go out of housing affordability: Christina Greenhorn, Forest of Dean

 

Christina Greenhorn and her family feel stuck in the small, three-bedroom house in Cinderford, Forest of Dean, that they rent from a private landlord. Greenhorn can’t afford a bigger house in the area: houses sell for more than £160,000, and that’s more than she can afford on her modest salary as a senior support worker for the local council.

 

As they can’t buy their own home, the women want to live in a council or housing association home because they don’t trust their private landlord. Greenhorn says he has increased the rent by £70 in the past year (to £420) [3.2% of presumed value — Ed.] and she’s now afraid to ask him to repair their bathroom, where the ceiling has gone black with damp, in case he raises the rent again. She says: “With a private landlord you never know where you are – they might suddenly want to push up the rent or sell up. Though I don’t think the rent for a council house would be a lot less than what we pay here, at least we’d have more security.”

 

The trouble is, the council just doesn’t have enough properties to go round. In its 2001 housing needs survey, the Forest of Dean council estimated that 1,600 extra affordable homes were needed in the area. The council says that the shortage is a result of the right to buy draining its housing stock, though house price inflation is also to blame.

 

Though the council shifts the blame, Ms. Greenhorn is no greenhorn herself:

 

Greenhorn is all too aware of the lack of council homes in her area. “A lot of people I know have bought their home, and I know of estates that have gone totally private,” she says. “But I’m not knocking those people. Why not buy if someone is offering you a good deal? The problem is these homes haven’t been replaced, and that leaves people like me stuck.”

 

One other change characterizes these residents: they’re older — and wiser?

 

“Will you still feed me, will you still need me, when I’m sixty-four?”

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