CHANGES IN THE RIGHT TO BUY SCHEME
With an option to opt out, forty-two local authorities, including Hammersmith and Fulham, have been invited into the new scheme that reduce discounts available to council tenants purchasing their homes.
Measures to bring the Right to Buy scheme up to date in those urban and rural areas under greatest housing pressure have been announced by the Deputy Prime Minister, John Prescott.
The change, aimed at meeting local housing
market pressures, reducing homelessness and exploitation of the Right
to Buy scheme, which is one of a number of the Government's home ownership
schemes, will mean maximum discounts available to council tenants purchasing
their homes being reduced to £16,000.
Forty-two local authorities in parts of London and the South East have
been invited into the scheme with an option to opt out, including Hammersmith
and Fulham.
Right to buy was one of the key measures
introduced under Margaret Thatcher's government, giving council tenants
the right to buy their homes with generous discounts. The popular but
controversial measure was introduced in 1980. Since then, the number
of council homes for rent has been cut by more than a million. Discounts
available were reduced by the Labour government to up to £38,000.
But the scheme has been target of abuses. The government is investigating
private companies which are raking off huge profits by exploiting a
loophole in the council housing right-to-buy scheme. Under the ruse
council tenants are encouraged to buy their discounted homes with the
offer of additional cash incentives from the companies. In return the
former tenants agree to move out as soon as the home is purchased, so
that the companies can let the properties to new tenants at market rents.
The home is owned by the former council tenants for three years, after
which time they can sell the property to the company without having
to pay back the right to buy discount to their former council landlord.
The Government is now widening the scope of restrictions on Right to Buy resale, to protect affordable housing in rural areas.
The Deputy Prime Minister will set out how a modernised Right to Buy scheme fits in with the Government's wider strategy on affordable housing when he announces his plan for sustainable communities shortly.
Mr Prescott said, "I am totally committed to the principle of Right to Buy. We are not abolishing the scheme, but modernising it. This Government supports home ownership and we are actively supporting alternative home ownership schemes, such as the Starter Home Initiative, which frees up social housing while promoting private home ownership.
"However Right to Buy has changed little over the past quarter of a century, despite the major transformation of much of the housing market. In certain housing crisis areas, Right to Buy has had an adverse effect on the supply of affordable housing, penalising those who desperately need somewhere to live. That is why I am taking urgent action to reduce the maximum discounts available. The cost of Right to Buy has escalated and the savings from lowering the discount can be put into new social housing.
"The Right to Buy scheme must be modernised, aligning the discounts available more closely with local market conditions such as the high housing pressure we are experiencing in the south of England - particularly London. I intend to consult with the local authorities concerned and will consider exemptions where there is a case to be made.
"The current maximum discounts will still be available to all tenants who apply for Right to Buy before the change comes into effect in March 2003. The new discount level will come into line with that available to assured housing association tenants under the Right to Acquire scheme.
"There is also concern about how local people in rural areas can afford their own home. I'm widening the restrictions brought in by the previous administration which prevent council homes bought by tenants from being sold on to those from outside the area, and I am today making it easier for local authorities to extend those rural areas protected by these restrictions".
Research into the exploitation of Right to Buy confirms abuse is happening in inner London. Between 1998 and 2001, five per cent of all council home sales in inner London were purchased by companies making deals with tenants to acquire the properties for their own speculative purposes.
Commenting on exploitation of Right to Buy, Mr Prescott said, "Reducing maximum discounts will straight away act as a disincentive to companies who are profiteering from the Right to Buy scheme. These companies are offering a short-term cash solution to those who are most vulnerable. We must nip profiteering and exploitation in the bud before it spirals out of control on a national level".
The Government will monitor the impact on sales under the Right to Buy scheme once the targeted lower £16,000 maximum discount comes into force.