One of the few issues almost everyone agrees on is that Britain faces a serious housing crisis. The figures speak for themselves. As recently as 1996, 65% of those aged 25-34 owned their own home. Today, that figure is down to 41%. With data from yesterday highlighting how the average house price has reached another historic high this month – £289,099 – there are no signs that things are going to improve.
The exact causes of this parlous situation are much more contentious, but one argument that keep cropping up is that housebuilding has fallen due to a collapse in public-sector housebuilding. Thatcher’s Right to Buy policy has been a particular cause célèbre here, not only among left-wingers but also, sadly, some Tories.
The solution for these critics is simple: get the state back into the housebuilding business on a grand scale.
This analysis is, however, deeply flawed, as the latest report from the Centre for Policy Studies makes abundantly clear. Indeed, it is little more than a self-serving myth peddled by those who, for largely ideological reasons, prefer social housing to home ownership. To be clear, Right to Buy did not create the housing crisis – or even the social housing crisis.
For starters, the UK actually has an unusually high rate of social housing compared to other countries, and a relatively low rate of home ownership. Britain now has the fifth lowest homeownership rate in Europe, and rather than having sold off too much social housing, we still have the fourth highest stock in Europe.
What’s more, social housing waiting lists actually declined in the Right to Buy’s heyday of 1981-1997, falling by 200,000 from 1.2 million to 1 million – even though every year 100,000 social homes were being sold off on average, and only 36,000 new ones were being built. This was because private housing was more affordable, with house prices rising by only 8% in real terms in the same 16-year period. So, despite a large fall in the levels of social housing the waiting list also declined.
The rate of decline in the social housing stock slowed substantially from 1997 to 2009, yet the waiting list soared by 770,000. Why? Because house prices rose by 108%, meaning many who would previously have bought in the private sector were forced to look to social housing instead. What these figures underline is that the UK’s housing crisis is not a crisis of social housing. It is home ownership and private housing that is missing, not social housing: waiting lists track house prices in the wider market, not just the level of available social housing.
The crux of the crisis is that for decades the supply of housing has failed to keep up with increasing demand. On top of this, historically low interest rates and burdensome regulation have conspired to make the path to ownership – which is still a near-universal ambition – ever more precarious. Again, none of this has anything to do with Right to Buy.
Conservatives should not be afraid of embracing Right to Buy. It is one of the few policies that has embedded itself in the popular memory. It is not hard to see why: it became and remains one of the most impressive, most socially empowering measures of the 20th century. Around 4.5 million people, nearly 10% of households, used Right to Buy to move into ownership.
And be in no doubt – home ownership matters. Polling shows people perceive benefits such as a greater sense of freedom and control over their own life, as well as feeling more settled – and that non-financial elements are actually more important than financial benefits. Homeownership is linked to greater wellbeing and life satisfaction, and academic research has consistently pointed to a positive link between home ownership and participation in community organisations, political engagement, and greater social capital in general. Yet as things stand, Right to Buy is almost extinct, with numbers hitting a low of 9,319 last year.
Reviving Right to Buy
Today’s announcement from the Government, which commits to extending the Right to Buy to some 2 million housing association tenants, is therefore incredibly welcome. However, our latest report argues that it should go further than just extending the existing Right to Buy by revamping it in the form of a new Right to Own.
Under the Right to Own, tenants would obtain a mortgage worth 60% of the value of their home – which would be paid off in instalments that rise at the same rates as social rents do each year. Like any other buyer, once this ends the property is owned outright.
Our report also shows how the revenue from these sales, plus the sale of high-value council homes as they become vacant, could be used to fund the construction of a new wave of affordable social housing – expanding home ownership and the housing stock at the same time.
We have allowed a false narrative to develop around Right to Buy which views it as part of the problem, not the solution, to the housing crisis. Home ownership has long been a central part of the Conservative message of aspiration and prosperity. The Conservative Party needs to rediscover its pride in the Right to Buy revolution and the rising home ownership which was delivered in the 1980s and 1990s.
Of course there are no silver bullets and the Government must look beyond just Right to Buy – but a reinvigorated Right to Buy can be part of a renewed effort to get ownership back up, especially for younger people who are being let down and left behind. The question is whether the Government has the political will to rescue home ownership and resurrect one of the 20th century’s most popular, transformative and fundamentally Conservative policies.
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