The biggest transfer of wealth to the working class in our history - why right-to-buy is a great policy.

The first thing they did was change the front door, replacing the dour municipal plank with a bright new door. Shortly they replaced the old windows with clean, warn doubled glazed plastic units and maybe paved part of the front garden for a drive. You could walk round the estate and point to the houses that had be bought under right-to-buy and you'd hear just how happily excited were to join the home owning democracy.

Between 1979 and 1995, 2.1 million council homes were transferred from state ownership into private ownership under the 'right-to-buy'. One of the biggest transfers of wealth to the working class in English history, a welcome transfer opposed by the Labour Party and many within the state housing sector (municipal trade union NALGO tried to get its members not to process right-to-buy sales). After all the transfer of ownership didn't just usher millions of people into home ownership, it also reduced the power of councils, housing officials and councillors to control who lived where.

I recall a Labour councillor in Bradford bemoaning the changes to council housing allocations policies because they removed what he called "management discretion". What the councillor really meant was that him and housing officers couldn't sidestep the allocations process any more - part of the councillor's power was lost as he could no longer pay back a political favour by getting someone a council house. What these changes had done, rather as did right-to-buy, was mean that people were no longer dependent for housing on the largess of the state and the benevolence of its agents.

Today it is still, however, almost a requirement for people in the housing sector to believe that right-to-buy was a terrible policy even to the point of claiming that it is responsible for today's housing crisis. Housing waiting lists are too long? Blame right-to-buy. The rent's too damned high? Blame right-to-buy. House prices are through the roof? Blame right-to-buy.

While there are people who remain ideologically opposed to the idea of home ownership (or at least home ownership by the working classes), the more common criticisms of right-to-buy relate to the loss of social housing stock and the numbers of former council proporties that are now rented privately. There are (mostly unevidenced and unsubstantiated) further claims that investors are encouraging tenants to use right-to-buy so they can get the property for private renting - even to allegations that this results in former tenants becoming homeless.

When right-to-buy was introduced the expectation was that we wouldn't need large amounts of new social housing. After all the fact of a home transfering to the ownership of the former tenant didn't reduce the total amount of housing, it only reduced the stock of council housing. With a stable population the view taken was that new social housing (other than specialised provision of one sort of another) would not be needed. This expectation turned out to be wrong as, from the mid-1990s the UK population grew (largely as a result of immigration) significantly. Compounding this growth, the success of London as a city meant that after a long period of population decline that city began to grow rapidly.

The problems now laid at the door of right-to-buy (high rents, lack of social housing stock, waiting lists) were not, in reality, a consequence of the policy but rather a consequence of wider housing policies as well as a more liberal attitude to immigration. As population grew from 1995 onwards, the supply of housing didn't especially in London and the South East. The period from 1995-2010 saw some of the lowest rates of new housing provision since WW2 and, coupled with a national policy of low interest rates, this resulted in a house price boom. Because the provision of new social and affordable housing is largely tied into the planning system (a proportion, determined in the local plan, of new homes have to be affordable), the result was higher rents, increased homelessness and growing waiting lists. Horror stories about sub-letting, illegal rentals and living in sheds began to emerge as London simply couldn't meet the demand for housing that the success of the city's economy produced.

As anyone who has watched TV programmes like 'Homes Under The Hammer' will know, the private rental sector has transformed UK housing markets. The majority of the homes featured in these programmes are bought and refurbished for rental. In large part this trend reflects the problems with housing supply across all tenures, a problem largely created by unaffordable housing markets created by the lack of new supply. For young professionals in London, renting is now the norm whereas the previous genneration of young people were able to buy. It is a nonsensical idea that sorting out the social problems that flow from high density rented accommodation (most notably the delay in family formation) requires large amounts of essentially similar social housing featuring state-subsidised rents.

It may well be the case that right-to-buy should have featured more new build social housing but remember that demand for social housing, especially in London, didn't take off until some 20 years after the right-to-buy policy was introduced. Similarly, the shift of property into the private rented sector didn't occur during the main period of right-to-buy sales but was a consequence of later dysfunctional housing markets. And even so, around 60% of homes sold under right-to-buy remain owner-occupied (very often by the people who bought them in the 1980s).

Right-to-buy was a huge transfer of wealth and that the use of discounts to incentivise transfer enabled that transfer. Given subsidised rents, this discount can be seen as, in effect, a net present value of that subsidy (I'd note that this doesn't hold up well in places where the margin between social and market rents is low). Some people have, however, done very well from right-to-buy (and that house price boom of the 2000s):

As north London security guard John Holland put it in an interview with the BBC: "There's no way we'd be property owners now if it wasn't for her. It was perfect, absolutely perfect." The discounted home he bought for £39,000 31 years ago is now worth around £600,000.

The principle that people should be able to own a stake in the nation remains a great principle, and right-to-buy enabled millions to do just that. Attacks on the policy come from those who think providing homes is the job of the state and its agents rather than the market, those with an interest in keeping lots of people dependent on local state housing management, and those who mistakenly blame the policy for the problems within today's housing markets.

We urgently need a new programme designed to get more people out of rented property and into home ownership. At the heart of this is a housebuilding programme only possible with significant reforms to the planning system but we should see programmes like right-to-buy as contributing to this process. Blaming right-to-buy for problems that arose twenty years after the policy was introduced is wrong. As is a sort of rosy-hued nostalgia for council housing and the belief that the only way to meet housing need is to create a new generation of state-dependent tenants.

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Extending right-to-buy won't solve our housing problems but it is still a great idea

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Let's be clear about one thing at the outset, right-to-buy doesn't mean there are more houses and certainly doesn't mean there are fewer houses. All it does is transfer ownership to current tenants from government and wealthy subsidised owners. A right-to-buy policy isn't about resolving housing problems (such as London's undersupply) but is about sharing the nation's wealth more equitably. And if you see it in these terms, it is a policy that people will welcome - or would do if they didn't either have a direct financial interest (local councils and housing associations) or else an ideological objection to poor people owning property (socialists).

There's a devil in the detail of any right-to-buy (RTB) policy and no-one has seen those details in respect of Conservative proposals to extend RTB to housing associations. When the property involved is state-owned the issue of discount could be lost in the endless (and byzantine) debate around local government finance but this extension of the policy means that RTB applies to properties that are not directly-owned by the state. Leaving aside the issue of eminent domain (as the Yanks call it), any policy has to compensate the housing association for the loss of its asset and/or rental stream. The way to achieve this is to ensure that there is a pipeline of new property to replace transferred homes. Indeed it was the lack of this pipeline that provided the principle criticism of the 1980s RTB programme.

While we're on about 'taking other folks property' bear in mind that Shelter (in cahoots with the development industry and planners) is very keen on compulsory purchase when it suits them:

A royal commission should decide in an impartial way where new garden cities should be located, and new development bodies should have the power to compulsorily purchase any necessary land, their report recommended. This would help to stop landowners from making excessive profits and instead could share the proceeds with the local community once land is sold on to developers, garnering support for new housebuilding, they said.

There is - other than that this is big business calling for subsidy and discount - no difference between such a development approach and the concept of RTB. Yet selling homes at a discount to ordinary folk is a terrible awful policy that will do dreadful things to the housing market while purchasing loads of private land at below its market value is a thought through policy from experts. And of course those new towns and garden cities will be filled with properties rented to the less well-off by worthy corporations - managed naturally by men and women who live in lovely privately-owned barn conversions nowhere near those rows of little boxes they're renting.

Today there are a lot of housing association directors taking to the airwaves and tweeting madly about RTB. None of them point out that their concern isn't for the tenant but rather for their associations' balance sheets. Just as a lot of the objection (not all to be fair) to the so-call 'bedroom tax' was really about housing association cash flow.

Instead of defending the current status quo, we should be looking at how to secure the transfer of ownership to tenants with the financial capacity while maintaining our provision of good housing for people who otherwise wouldn't be able to afford such housing. I really don't see RTB as a barrier to such provision.

Update:

Indeed it seems some housing associations were keen on RTB only a year or two ago:

Mark Henderson, Home Group chief executive, said: “When the Government published its Housing Strategy at the end of 2011, improved right-to-buy opportunities for council tenants were at its heart. Home Group highlighted then that a far more seismic economic impact would be felt if the same opportunity was extended to housing association tenants providing we can replace a new property for each one sold.

“Updating the right-to-buy rules for housing association tenants not only offers individuals the same chance to become a homeowner as residents in council homes, it will give a phenomenal boost to the UK economy.”

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