The Right to Buy Policy - Essay Example

Introduction: Most people, wherever they are in the world, dream of owing a home. It does not matter whether they have the means to do so, but the dream will be there. As a result there are various options that a family can resort to for purchasing an independent house or flat and call it a home. The primary option is to avail of finance from banks and other similar institutions through housing loans. But the high cost of property and finance can prevent majority of people from availing a loan in the first place. Their income may not make them eligible to avail of requisite finance which results in tenancy rather than ownership. But the scenario changes when the government of a country makes it easier and affordable for the people to buy houses. An example is the introduction of the ‘Right to Buy Policy’ (RTB) introduced by the Conservative government in the UK (later to become part of the Housing Act 1985 as sections 188 to 188). This paper is a review of the positive and negative effects of the policy and whether it has changed the quality and quantity of local authority housing beyond all recognition. The Right to Buy Policy: The right to Buy scheme was first introduced in 1980 and the policy aims at “at secure tenants of local authorities (councils) and those assured tenants of registered social landlords/housing associations who previously held secure tenancies with local authorities. It is open to virtually any secure tenant who can afford to buy” (Communities and Local Government). Relatively high levels of discounts were also provided for the tenants if they intended to exercise their rights to buy. Several changes in legislation have taken place over the years and it is not intended in this paper to go into its details. The primary purpose as mentioned earlier is to understand its effects and repercussions. It is clear from published literature and facts that the policy did have an enormous impact on the housing sector in the country. According to the Guardian newspaper, as of 2003, nearly 1.5 million homes have been purchased by tenants and the level of ownership has risen from 55 to 70%. (Weaver 2003). The figure for Scotland in 2006, according to Communities Minister Malcolm Chisholm was 67%. Balchin and Rhoden quoting Hamnett state that the near dormant housing sector radically changed gears within ten years of the introduction of the policy. The housing sector was not very dynamic for nearly half a century prior to its introduction (Balchin &Rhoden 2002, p. 10). There are more words of praise and appreciation. In the book Housing Law the authors state that the policy was fundamental in changing the home ownership scenario in the United Kingdom. (Clements & Fairest 1996, p. 363). The purpose in introduction of the policy by the Margaret Thatcher government was twofold. One was to ensure that ownership levels of housing should be high in a democratic setup. Another was to reduce public spending and introduction of privatization. Powell reinstates the above statement by stating that this particular Conservative policy succeeded in bringing down the role of councils in providing tenancy and as a result brought down public expenditure as well. (Powell 1999). In the ten year period starting from its introduction, almost two fifth of privatization proceeds came from sale of council houses. The other side of RTB: Despite its obvious impact, the ‘Right to Buy Policy’ has often been described as a lottery or an instance of unequal opportunity (Jones & Murie 2006, p. 51). The authors state that obtaining the real benefits of owning a home under the policy are dependent on several demographic factors, geographical factors and even luck. For example, the generation that belonged to the early post-war period who had been allotted council houses had since been eligible for better and bigger accommodation due to their length of stay. In other words they had been allotted better homes in more affluent localities. They were also eligible for higher discounts and more benefits. As a result, the actual property value of the homes bought under the scheme was highly advantageous in terms of instant capital appreciation. On the other hand, those people who had been allotted council housing after the 1980s had to be satisfied with smaller accommodation and that too in less desirable areas. The actual property value was much less and the capital appreciation was comparably very low when compared to the older generation mentioned earlier. Even otherwise, some sections in a particular area in a city or town had developed much more than others due to various factors. Council tenants who had been ‘lucky’ enough to live in such areas would find that the value of purchased property under the policy to be much higher when compared to those tenant owners living in a less developed area. One of the harshest criticisms of the policy is the decline in the quantity of public sector housing. As mentioned earlier, only those who could afford to buy a home could avail the benefits of the Right to Buy policy. According to Pacione, the number of council houses which stood at seven million in 1981 had drastically come down at present. The decline can be viewed in both relative and absolute terms (Pacione 2009, p. 227). In other words, accommodation for those who cannot afford houses has been seriously affected by the policy. The author also adds that the rising rates of unemployment and those dependent on state assistance have resulted in increased demand for council housing. The quality in construction has also gone down. The Right to Buy policy has also negatively affected the availability of housing for younger families with small children who usually cannot afford to buy a house due to financial constraints (Hendrick 2005, p.372). The author contends that government policies with regard to public sector housing have resulted in social disparity with a growing number of families being forced to live in ghettos. Jones, quoting other studies state that private landlords were unwilling to let out their property to younger people, especially in rural areas (ed. Rugg 1999, p. 150). Moreover, loopholes in the policy are being exploited by private companies for their own benefit. They enter into an agreement with the purchaser under the policy who will sell the property to the company (at a profit) after three years. The companies often finance the initial purchase and wait for three years so that the purchaser is not entitled to pay back the discount received to the council. The end result is that the purchaser has become homeless once again while the private company is in possession of a property paying much lower than the market price (King). The RTB has also no apparent effect on cost in case of private transactions in housing as is apparent from the following graph even after 25 years of existence. Market factors like availability and interest rates also play a role in pricing. (Source: House price growth gathers pace 2006) Conclusion: Despite the criticisms and the shortcomings, the Right to Buy scheme has been very popular with the electorate. Even the labour party, which had been against it, had to change their stance and continue the policy during their time in power. It has led to private ownership of homes to the extent of seventy percent in the country. It has also resulted in bringing down public expenditure. But housing prices continued to rise until the recent depression. Moreover, the fact that a large section of the population is without adequate housing even for rent should not be lost on the government and a practical solution is put in place to correct the situation. The RTB has managed to change both positively and negatively, the quality and quantity of local authority housing to a large extent. References Balchin, N. P. & Rhoden, M 2002, Housing Policy An introduction, 4th ed, Routledge. Clements & Fairest, P 1996, Housing law, Cavendish Publishing Limited, London. Communities and Local Government, Housing, Right to Buy, Viewed 23 July 2009, . Hendrick, H 2005, Child welfare and social policy, The Policy Press, University of Bristol, Bristol. House price growth gathers pace 2006, BBC News, Viewed 23 July 2009, Jones, C. & Murie, A 2006, The Right to buy: Analysis and evaluation of a housing policy, Wiley-Blackwell. King, B, The impact of the Right to Buy – A report by the Association of London Government, Association of London Government, Viewed 23 July 2009, . Pacione, M 2009, Urban geography A global perspective, Routledge. Powell, M 1999, New labour, new welfare state? The Policy Press, University of Bristol, Bristol. Rugg, J, (ed.) 1999, Young people, housing and social policy, Routledge, London Weaver, M 2003, Timeline: right to buy, Guardian.co.uk., Viewed 23 July 2009, . Read More