In 1980, the UK introduced the Right to Buy (RTB) scheme, which granted council tenants the right to purchase their homes at a discount to the market value. Over time, the scheme saw over two million properties move from the public to the private sector.
The Right to Buy Scheme
The RTB scheme has sparked controversy, with supporters arguing that it has empowered tenants and raised attitudes toward civic responsibility. Yet critics argued that it removed affordable housing at a time of great need.
The recent article “Housing to Die For” by Savvas Savouri explores the potential economic legacy of the RTB scheme in London. Savouri asserts that the vast majority of profitable RTB purchases occurred in the years leading up to 1989, predating the now-infamous 1989-1992 UK residential property crash:
“The reality is that, over the next decade, many of Margaret Thatcher’s Right to Buyers will become generous benefactors; many having traded up and up a housing ladder which, over 40 years, has appreciated by a factor of nine”, Savouri shares.
Savouri, S. (2023, September 18). HOUSING – TO DIE FOR. Property Chronicle.
Savouri writes that many of the Right to Buyers of the early 1980s are now in their 70s, and that over the next decade, many of them will become generous benefactors as they bequeath their property wealth to their heirs.
The economist concludes that it is impossible to accurately assess what the impact of this inherited wealth will be for the wider UK economy. But that one thing is clear: such exceptional inherited wealth could easily be a populist target to a government looking at ending inheritance tax and to its electoral end:
“As and when this property wealth is bequeathed, the UK will experience inheritances from and into a socio-economic class which has no real tradition of such. The impact of this should not be underestimated.”, says Savouri.
Savouri, S. (2023, September 18). HOUSING – TO DIE FOR. Property Chronicle.
Implications for the London Housing Market
The potential economic legacy of the RTB scheme has a number of implications for the London housing market.
First, the influx of inherited wealth from Right to Buyers could lead to further increases in London housing prices. This is because the new owners of this inherited wealth will likely be looking to buy property in London, which is already one of the most expensive housing markets in the world.
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Second, the RTB scheme could lead to a decline in the supply of affordable London housing. This is because many of the properties that are currently owned by Right to Buyers are likely to be sold off onto the open market, where they will be out of reach for many Londoners.
Finally, the RTB scheme could lead to an increase in inequality in London. This is because the new owners of inherited wealth from Right to Buyers will likely be from more affluent backgrounds.
In Summary
The Right to Buy scheme has had a significant impact on the UK housing market, and its potential economic legacy is now close upon us. In London, the influx of inherited wealth from Right to Buyers could lead to further increases in housing prices, a decline in the supply of affordable housing, and an increase in inequality.
It is important to understand the potential implications of the RTB scheme for the London housing market so that we can develop policies to mitigate any negative impacts. For example, the government could introduce measures to increase the supply of affordable housing in London and to reduce inequality.
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