The End of Right to Buy

I was interested to read a report by the Scottish Federation of Housing Associations calling on the Scottish Parliament to endorse reduced right to buy notice period from 3 years to 1.  The Scottish Government proposes to end the right to buy policy which was introduced in the 1980s.  Andy Young of the SFHA stated:

“Right to buy has had its day and has no place in 21st century Scotland.  It has been beneficial to a relatively small number of individuals but clearly a loss to the greater public good.  Half a million social rented houses have been lost in the 30 years of this policy in Scotland, very often the better stock in the more popular areas.” 

This got me to think about the nature of house buying in the UK in general and Scotland in particular.  What makes people move house?  What makes people spend money on their property, carrying out superficial and decorative improvements?   In my opinion house ownership is aspirational and quite often aside from changes ineconomic or personal circumstances, people move houses for aspirational reasons – they are doing well and they want a slightly bigger, better, more expensive property.  This is where I do disagree with the Scottish Government and the Scottish Federation of Housing Associations.  I agree that the basic flaw with the right to buy policy is that there was not a sustained mechanism to assist Local Authorities and Housing Associations to carry on building new properties to fulfil the housing requirements of the population.  I am strongly of the opinion that there is a huge benefit to society in improving the conditions that people live in and it is something that should be the focus of all governments, however, I am of the opinion that given the aspirational nature of home ownership in this country it is a mistake to end right to buy.

My proposals would be: 

1.         That either the Scottish or UK Government changes the rules in relation to Capital Gains Tax meaning that if you sell a property within a certain period of time, be it your sole or main residence and you make a gain, then there is a liability for Capital Gains Tax.

2.         I would also tweak the Stamp Duty Rules – perhaps not to the extent that is being proposed by the Scottish Government but certainly to increase the amount of money raised from this very efficient tax (I do not agree with the Mansion Tax which I am very much of the view is anti-aspiration and could be highly damaging to the economy as a whole.

The money raised from the above two methods would be ring fenced and used to fund housing associations in relation to the building of new social housing.  The housing associations would require to retain any new build properties for a minimum of 5 years and thereafter the tenants would be entitled to purchase the property under right to buy legislation but perhaps for a smaller discount than previously given.  Housing associations would be rewarded by an increased share of funds corresponding to the percentage of houses they build and sell – rewarded  if they managed to build houses that their tenants wished to buy. They would also retain and be allowed to spend the money raised from sales.

In my opinion the above proposal would create a sustainable fund for the development of new social housing and improvements to the housing stock whilst still allowing social tenants the ability to fulfil their aspiration to get on to the housing ladder.  As people own their properties this gives them a vested interest and more of an anchor in their community and society as a whole.  I also think that there would be economic benefits coming with an increase in housing association development activity.

Lindsay Darroch
Partner – Head of Property 

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