Common Wealth Study Labels Mass Sale of Council Homes as One of Britain’s Biggest Giveaways
The right-to-buy initiative established by Margaret Thatcher has reportedly led to nearly £200 billion in costs for UK taxpayers, as detailed in a new analysis examining the policy’s impact on the country’s housing issues.
The Common Wealth thinktank’s investigation into the deeply discounted sale of millions of council homes to tenants since 1980 highlights that this policy has significantly contributed to the severe shortage of social housing and escalated disparities. The analysis describes the initiative as one of the most substantial handouts in the history of the UK.
According to the report, this strategy, which has seen 1.9 million council homes in England sold off, now means that one in six private renters in England lives in a house that was once owned by the local authority.
Although local authority tenants have had the option to purchase their homes since 1936, the surge in sales began in 1980 following modifications introduced by Thatcher’s government, which offered these homes at considerably lower prices than their market values.
The thinktank calculated the “opportunity cost” lost through these sales, estimating that these former council properties are currently valued at around £430 billion, considering inflation and the sharp rise in property prices since 1980. Out of this, approximately £194 billion represents the value lost due to the discounts applied during the sales. The average discount provided between 1980-81 and 2023-24 was 43% below the market price.
The timing of this report coincides with efforts by Angela Rayner, the deputy prime minister, to address the housing crisis in Britain by proposing significant reforms to the right-to-buy scheme. These reforms aim to make it more challenging for tenants in England to purchase their council homes by extending the required residency period from three to ten years before eligibility for purchase at a discounted rate.
Thatcher’s introduction of right to buy was intended to appeal to older working-class voters, promoting the concept of a “property-owning democracy.” While the policy helped millions achieve homeownership, it also drastically reduced the stock of affordable housing since these homes were not replaced.
Since 2004, homeownership rates have declined after decades of increase, with a notable drop among young adults. From over half of 25- to 34-year-olds owning homes in 1990, less than a quarter now hold property, resulting in a significant rise in private renting and more young people staying longer in their parental homes.
With property prices climbing steeply over the years, local governments have lost significant housing assets that could have been utilized for higher-value market sales or social housing, according to Common Wealth.
Chris Hayes, the chief economist at the thinktank, remarked, “The dire financial conditions faced by councils should be viewed within the broader context of a long-term undermining of local government, where right to buy played a key role in stripping councils of the autonomy on how to best utilize assets they developed.”
Now, a significant number of these properties are rented out, often to individuals receiving housing benefits, costing local authorities over £20 billion a year, while funds to replace these sold homes have been insufficient.
The left-leaning thinktank, which maintains connections with senior figures in the Labour cabinet, noted that local government has experienced “net disinvestment” almost every year since 1988-89, indicating that more assets have been sold than built. A recent study by the Centre for Cities estimated that restoring the number of affordable homes to 2010 levels would cost the government £50 billion.
Labour has committed to a “social rent revolution,” planning to allocate £39 billion for social and affordable housing over the next decade and aiming to ease planning regulations to boost private sector housing development. However, there are concerns that the government might struggle to achieve its goal of constructing 1.5 million new homes in total.
Kwajo Tweneboa, an advocate for social housing, criticized the right to buy for “devastating council housing and converting public wealth into private assets.”
“We are facing a housing emergency, with millions on waiting lists and tens of thousands residing in temporary, often unsuitable and unsafe accommodations, while homes that were once publicly owned are now income sources for private landlords,” he stated.
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