The prospect of forced Right to Buy schemes being introduced for private tenants is causing concern among the UK’s 2.6 million landlords. Currently, the government’s Right to Buy program provides council tenants with the automatic right to purchase their homes after three years’ continuous tenancy. More importantly, up to £82,800 (or £110,500 for properties in London) may be offered in the form of a discount. To date, no such scheme has been introduced for private renters, though this could be about to change.
In a recent interview, Shadow Chancellor John McDonnell spoke of a potential Right to Buy scheme in the pipeline for private tenants. If the proposal went ahead, it would give private tenants the right to purchase their properties after a certain period of tenancy, for a price determined by the government.
“You’d want to establish what is a reasonable price, you can establish that and then that becomes the right to buy. You (the government) set the criteria. I don’t think it’s complicated,” he said.
The basis for his argument lies in the growing disparity between the UK’s booming buy-to-let market and the availability of affordable inventory. The way he sees it, the scheme can and should be introduced for the greater good of the country.
Speaking on behalf of property letting specialists Apropos by DJ Alexander, David Alexander warned that any government-enforced scheme for private tenants and landlords would wreak havoc on the housing market.
“This is effectively a cash grab from the PRS. The state valuing private property and effectively compulsorily purchasing it would cause the PRS market to collapse and have an enormously negative impact on the housing market as a whole as individuals and investors would lose faith in the viability of property,” he warned.
“Lenders would be unlikely to provide loans to fund the purchase of these properties as values would be in freefall,”
“Why would anyone invest in property either as a landlord or as an individual, if the value of the sale price could be anything the government wished to pay and, in the case of individual homeowners if any gains above £125,000 are to be taxed at the highest rate of income tax.”
Echoing the cries of critics in general, Mr. Alexander reiterated the urgent need for the government to focus heavily on building more affordable and social properties across the UK.
“With the UK population forecast to increase by 360,000 a year for the next decade there is already a shortage of homes and destroying the PRS because of ill-considered ideology would only increase the numbers of those without a home,” warned Mr. Alexander.
“The PRS already provides 4.5 million households in the UK accounting for 20% of the total housing market The Labour party would need to commit to building millions of social housing homes in the first couple of years to replace this market and keep up with the increasing demand.”
He went on to criticise the Shadow Chancellor, accusing him of misleading the public as to where the root of the issue lies.
“Mr McDonnell said that the PRS has a greater problem with overcrowding when, in fact, the social housing sector recorded its highest-ever figure of 7.8% of all stock experienced overcrowding in 2017-18,” he continued.
“This right to buy scheme would permanently undermine the confidence of individuals and investors in property and cause serious and substantial financial losses for millions of homeowners across the UK.”For the time being, however, opponents aren’t expecting to see the introduction of new Right to Buy legislation. A semi-voluntary scheme with appropriate incentives, perhaps, but not a scheme that threatens the livelihoods of more than 2.6 million of landlords across the UK. – UK Property Finance