Breaking Property News – 06/08/24
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Labour needs to get a housing plan that includes all
Angela Rayner Deputy Prime Minister, and Secretary of State for Housing has some big ideas about housing. Promising 1,800,000 new homes over 5-years and providing more social housing. But before she goes about all of that, Rayner needs to first end the Right to Buy of Council Housing passed in the Housing Act 1980 – brought in under Margaret Thatcher.
This scheme allows council tenants to buy the property they rent at a discounted rate, which meant over 2,000,000 council homes were sold off in the first 16 years of the Act being passed, a rate of 12,500 homes a year. Last year this rate had escalated to 24,392 council homes being sold off
Is it fair and equitable that everyone who does not own their own home and is renting in the Private Rented Sector does not have the support and benefits afforded to council tenants? As there seems to be a very skewed system, one which Ms Rayner was very much in the focus for recently.
For example most of the general public are unaware that council tenants – according to the GOV.UK,
‘Can get a discount on the market value of your home when you buy it if you qualify for Right to Buy. The maximum discount is £102,400 across England, except in London boroughs where it is £136,400. It will increase each year in April in line with the consumer price index (CPI).
The discount is based on how long you’ve been a tenant with a public sector landlord, the type of property you’re buying – a flat or house, the value of your home. If you’re buying with someone else, you count the years of whoever’s been a public sector tenant the longest. You’ll usually have to repay some or all your discount if you sell your home within 5 years. You might get a smaller discount if you’ve used Right to Buy in the past. There are different discount levels for houses and flats.
Houses
You get a 35% discount if you’ve been a public sector tenant for between 3 and 5 years. After 5 years, the discount goes up 1% for every extra year you’ve been a public sector tenant, up to a maximum of 70% or £102,400 across England and £136,400 in London boroughs (whichever is lower).
Flats
You get a 50% discount if you’ve been a public sector tenant for between 3 and 5 years. After 5 years, the discount goes up 2% for every extra year you’ve been a public sector tenant, up to a maximum of 70% or £102,400 across England and £136,400 in London boroughs (whichever is lower).
Selling your home
If you sell your home within 10 years of buying it through Right to Buy, you must first offer it to either: your old landlord, another social landlord in the area. The property should be sold at the full market price agreed between you and the landlord. If you cannot agree, a district valuer will say how much your home is worth and set the price. You will not have to pay for their valuation. You can sell your home to anyone if the landlord does not agree to buy it within 8 weeks.
Paying back your discount
You’ll have to pay back some or all of the discount you got if you sell your Right to Buy home within 5 years of buying it. You’ll have to pay back all of the discount if you sell within the first year. After that, the total amount you pay back reduces to:
80% of the discount in the second year
60% of the discount in the third year
40% of the discount in the fourth year
20% of the discount in the fifth year
The amount you pay back depends on the value of your home when you sell it.
Example
You bought your home worth £100,000 and got a 40% discount (£40,000). You then sold your home after 18 months for £120,000. 40% of £120,000 is £48,000. As you’re in the second year, you would repay 80% of £48,000 (£38,400). You may not have to pay back the discount if you transfer ownership of your home to a member of your family. You’ll need to agree this first with your landlord and then get a solicitor to do this for you.’
source https://www.gov.uk/right-to-buy-buying-your-council-home/discounts
Now I am all for helping those who need to own a property to get on the ladder, but with 17% of the population living in council houses, can we afford to be selling it off, especially at a discount! Also there are other factors to consider for example well over 40% of council tenants are having their rent paid partly or wholly by the taxpayer.
Which could mean for example a tenant lives for three years in a flat worth £250,000 and has their rent effectively paid by the state. Then has a change of circumstance and with a partner can afford to buy the flat at a 50% discount, so £125,000, they then live there for 6 years and sell, by which time with inflation the flat is worth £300,000.
Now brushing aside the £175,000 of equity that the council tenants benefit from, (yes they have to pay a mortgage for 6 years, but they would have been paying rent so the difference in cost is negated to a degree), the bigger issue is that a £300,000 flat is no longer in the housing stock of the those in the social housing system.
On top of this the actual new build cost of the £300,000 flat is actually 12% more than its second hand value, so each time a council house is sold, there is a deficit to replace it. Which adds to debt burden of local authorities.
I gave an example of council tenants not paying the rent, instead relying on the taxpayer, maybe the tenants are paying rent, but again we see an anomaly, as tenants in the Private Rented Sector pay of course a marketplace rent. But council tenants get a subsidised rent often 60% to 80% of that in the PRS.
Now I love the fact that we live in a liberal society looking after those who need help the most, but if tomorrow not a single council house was sold off, and certainly not at a knockdown price, within a generation the supply of such housing would be at a more sustainable level.
Instead we have the Secretary for State herself buying publically built and owned property assets at a discount. Maybe it is time for her to look in that mirror and start to put together a proper housing strategy that does not just look after those in council houses, but embraces the tenants living in privately rented homes, where they can live for decades without a penny of discount from the landlord should they be lucky enough to get the opportunity to buy.
Andrew Stanton Executive Editor – moving property and proptech forward. PropTech-X
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