It started off as an idea from Jeremy Corbyn’s campaign to become Labour leader but today it’s being backed by a right-wing think tank – giving private sector tenants the right to buy the home they rent.
Over the weekend the Guardian reported that the pro-market organisation Civitas says such a move would help currently-struggling 20- or 30-something tenants to get on the housing ladder.
The Guardian says the report’s author, Peter Saunders, a research fellow at Civitas, claims “generational inequality” has deepened over the last two decades as house prices have raced ahead of earnings. “The result is that the younger generation is now expected to pay a much bigger multiple of its earnings to buy a home than its parents did,” he says.
Saunders writes: “The baby boomers are now making capital gains at the expense of their children. Between 2000 and 2014, average earnings rose by 51%, but average house prices rose by 132%.
“Like council and housing association tenants, private tenants who exercise their right to buy would be entitled to a 35% discount off the market value of the house, up to a maximum currently set at £77,900 outside London and £103,900 in London. The same rules should apply to private-sector tenants who wish to buy their homes, but with two important riders.
“First, the discount should never be so high as to impose losses on the landlord. In the social rented sector, tenants cannot be given discounts which exceed the amount spent on the property by their landlords in the last 10 years, and discounts in the private sector should similarly be reduced to take account of recent improvements costs incurred by landlords.
“But in addition to this, the discount should be capped so the price at which the tenant purchases is never lower than the price originally paid for the property by the landlord (including the original transaction costs). This means landlords would never be forced to incur losses on their investments – an important safeguard for recent buy-to-let investors and for those who have bought in more depressed property markets. Without such a cap, existing landlords could be unfairly penalised.”
He says private sector Right to Buy would be limited to tenants in properties which are at least 25 years old and which they had lived in for several years. This would ensure that investors were not deterred from buying new properties to let.
