What is Right to Buy and what could change under government’s plans?

Downing Street announces extention of Thatcher’s totemic housing policy

Boris Johnson has announced plans designed to help lower earners buy houses as he seeks to reset his faltering premiership after Monday's damaging confidence vote.

In a speech in Lancashire, the prime minister had been expected to set out a blueprint with two main planks.

The first was a pledge to extend the Right to Buy scheme for people renting from housing associations. The second was to allow people to use their housing benefits to pay for mortgages.

There was no official document published by Downing Street ahead of the speech. A press release was sent out last night containing a flavour of what Mr Johnson was due to say.

No 10 had, however, given briefings to the media in recent days about what the package might look like.

Mr Johnson confirmed both central tenets of the plan in his speech.

"They're trapped, they can't buy, they don't have the security of ownership, they can't treat their home as their own or make the improvements that they want,” he said as he confirmed the extension of the Right to Buy scheme. He said some 2.5 million tenants renting will be given the right to purchase their properties.

Right to Buy was first introduced by Margaret Thatcher's under the 1980 Housing Act.

It gave tenants of council homes and some housing association properties the opportunity to buy their homes at a discounted rate, helping them onto the housing ladder for the first time when they might not have been able to otherwise afford it.

Ms Thatcher's Right to Buy scheme has become a totemic Conservative policy and several of her predecessors have tried to resurrect it in varying forms, including David Cameron in 2015.

But it is controversial because council housing stock sold off under the scheme has not been replaced at the same rate. Many of the homes bought by tenants have been sold on to private landlords.

This has resulted in fewer homes being available for housing association tenants to live in. The UK also has not been building enough homes to keep up with demand - this lack of supply has driven up prices, which are at an all-time high due to pent up demand during the Covid pandemic and a stamp duty holiday.

The average house price in London, for example, is now more than half a million pounds - well out of reach for the vast majority of first-time buyers.

There are also specific global factors which affect the market in London, such as foreign investors buying up properties for investment purposes.

Out on the broadcast round earlier, Michael Gove, the levelling up secretary, insisted that his government’s plan would see social homes replaced “instantly”.

“Overall, we want to be in a position where we’re increasing social homes, increasing the number of homes that are there for ownership, and ensuring that in the stock of social homes as people move from renting to ownership so that we replace those numbers as well,” he told ITV News.

In his speech, Mr Johnson said it was “time for change”. “Over the coming months we will work with the sector to bring forward a new right-to-buy scheme," he said.

He added the scheme would give "millions" more people the chance to own their own home and would see "one-for-one replacement of each social housing property sold" while being affordable within existing spending plans.

Mr Johnson's extension of the plan will have to be delivered within existing government budgets. This means government will not provide any new money for the plan to be extended.

The second part of the policy, allowing people to use housing benefits to pay for a mortgage, has raised eyebrows among experts.

According to The Times, Mr Johnson would argue that £30 billion provided by government for housing benefits, which goes towards rent, would be better spent helping people to become first time buyers. He confirmed this in his speech.

He said that he would change welfare rules so that the 1.5 million people who are in work but also on housing benefits will have the choice to use their benefits towards a mortgage, rather than automatically going directly to private landlords and housing associations.

The UK government will launch a review of access to mortgage finance for first-time buyers, with the aim of making it easier to widen access to low-cost, low-deposit finance such as 5 per cent deposit mortgages, he added. It will report back in the autumn.

Lenders said the plan would need to be looked at carefully.

Charles Roe, director of mortgages at trade association UK Finance, said: "The mortgage industry recognises the importance of homeownership and today's announcements by the prime minister could help more people realise their dream of owning their own home.

"Firms are committed to lending responsibly, with regulatory rules in place to ensure that mortgages are affordable - it will be important to carefully consider any changes to ensure they deliver good outcomes for customers throughout the life of the mortgage.”

Housing policy expert Toby Lloyd said the extension of the scheme is unlikely to have much impact for the low-earning people it intends to benefit.

Speaking on BBC Radio 4's World at One programme, Mr Lloyd, who was former prime minister Theresa May's housing adviser, said: "Clearly there are imperfections in the way that the mortgage market works at the moment, but fundamentally the problem is that house prices are way too high.

"That's why there's an affordability crisis."

When asked whether the government's new housing plan would have much effect, he said: "I'd be very surprised if it happens in anything like the scale they expect, and if it does I don't expect it to have that much impact."