The beginning of the end of Right to Buy in England?

Scott Dorling and Jessica Arczynski look at the latest Government announcements on the Right to Buy.

As promised in Labour's election manifesto and subsequently confirmed by the Housing Secretary in late July, the level of Right to Buy (RTB) discounts in England were to be reviewed alongside a consultation on wider reforms to protect new build stock from being sold off. Yet the scale of the reduction in RTB discounts, as announced in the Autumn Budget, signals the effective end of RTB in some high value regions in England.

With the statutory RTB having already been abolished in Scotland and Wales for some time, many in the sector had been calling for reform of the policy in England, particularly given the continuing net loss of social rented homes arising from the lack of replacements for the homes that are sold under RTB.

At the same time, the new government has had to refute suggestions that it was planning to abolish RTB altogether in England. In early September, a spokesperson for MHCLG confirmed that "Right to Buy remains an important route for council housing tenants to be able to buy their own home … Increasing protections on newly-built social homes and eligibility criteria will be looked at as part of our wider review but there are no plans to abolish the Right to Buy scheme".

Having undertaken its review into the levels of RTB discount, the government's conclusions were published in a policy paper alongside the other documents accompanying the Autumn Budget. This paper confirmed that RTB discount caps will be reduced with effect from 21 November 2024, and that going forward, these maximum cash discounts will not be indexed in line with inflation.

Moreover, it was further confirmed that local authorities will, as expected, be able to use 100% of their retained receipts from RTB sales to fund replacement affordable housing, rather than returning a share of those receipts to HM Treasury. This, alongside the other flexibilities announced in July as to how local authorities can use such receipts, is intended to enable better replacement rates for any homes that are still sold under RTB with the new lower discounts.

But the key detail not mentioned in the Chancellor's Budget speech, nor in the accompanying main Budget report, was the scale of the reduction in the RTB discounts. Rather than merely "reviewing the increased right to buy discounts introduced in 2012" (as stated in Labour's manifesto), the government has reversed them altogether. This means that the discount caps going forward will revert back to the figures set in 2003, when property prices were considerably lower, especially in London and the South East.

Notably, the maximum cash discount in all but two London Boroughs (Barking & Dagenham and Havering) will revert back to £16,000, in contrast to the current figure of £136,400. Outside of London, the current maximum discount is £102,400 but the 2003 regional discount caps of between £16,000 to £38,000 will now be reinstated. 

It is probably fair to say that these lowered maximum cash discounts will likely mean that in high value areas such as London and large parts of the South East, RTB sales will largely be eliminated. Indeed, the government's policy paper estimates that across England as a whole, the total number of RTB sales per annum will fall from 7,000 to 1,700 (i.e. a 75% reduction). Many in the sector will undoubtedly welcome this change, as it will mean that even in just the next five years, an additional 25,000 social rent homes will be retained.

Finally, the policy paper also confirms that the forthcoming consultation on wider reforms to RTB will consider ways in which to protect new build stock from being lost, as well as "explore amending the percentage discounts to better align with the new cash discounts". But arguably, any such further reforms will be much less significant in light of the vastly diminished number of RTB sales expected to occur as a result of the reduced cash discounts.

In the meantime, any tenants wishing to take advantage of the current levels of discount will need to submit their applications prior to 21 November, which is the commencement date for the secondary legislation that was passed to effect these changes.

Scott Dorling and Jessica Arczynski are Partners at Trowers & Hamlins.