Boris Johnson has announced the government’s new Right to Buy scheme during his speech in Blackpool this afternoon. This follows on from a pilot scheme rolled out in the Midlands between 2018 and 2021 which resulted in 1,892 sales to Housing Association (‘HA’) tenants.

What is the Current State of Play?

Ex-council tenants can currently purchase their home under the Preserved Right to Buy, but the number of eligible tenants is limited. Applicants must have been a secure tenant with their local council at the time their property was transferred from the council to a HA, meaning that those eligible will mostly have lived in their property since the 1980’s and 90’s. The discounts are however sizeable; up to a maximum of £87,200 outside of London and £116,200 inside London for those applying in 2022.
Tenants of HA’s might otherwise be able to purchase their home under the Right to Acquire scheme if their property was built or bought by a HA after 31 March 1997. Applicant eligibility is not therefore quite as restrictive as the Right to Buy, however the discounts available are limited to £9,000-£16,000.

Today’s Announcement

Boris Johnson confirmed that the government will be working with the Social Housing sector to introduce a new Right to Buy scheme. The devil is of course in the detail, and there was not a lot of it in today’s speech. However we can likely expect a scheme similar to the Preserved Right to Buy to be expanded to current HA tenants, where tenants are able to purchase the freehold or leasehold interest in their home at a discount of approximately 35% and upwards of 70% of the full market value of the property.

Potential Impacts and Concerns for HA’s

Expansion: Will a new Right to Buy scheme be rolled out across the entire country, or will it be capped and slowly expanded? Michael Gove indicated this morning that there will be a cap initially, and with reports indicating that the Government has a budget of circa £500 million for a new scheme the signs are pointing towards a conservative expansion.
HA’s will however need to keep a close eye on current social housing stock and will need to prepare for an increase in Right to Buy applications. A report into the 2018 pilot (published in 2021) indicated that HA’s found it useful to keep an active register of interested tenants in order to monitor demand from the get-go.
Eligibility: HA’s will need to keep a close eye on government proposals for applicant eligibility (including the mechanism for capping applications) as discussions unfold. Under the current Preserved Right to Buy scheme HA’s have a duty to ensure that they provide information to tenants on whether to exercise their right to buy, and we know that many HA’s provide an information sheet containing eligibility and an overview of the process and requirements. Something similar might be required for the new scheme.
Application fees: Under the current Preserved Right to Buy legislation, the tenant and HA must cover their own costs. Under the recent 2018 pilot however, HA’s were able to charge application fees to tenants at around £250.00 per application. If this applies to the new Right to Buy, HA’s may find that an administrative fee can help to ease the burden of increased applications.
Conveyance provisions: Some Preserved Right to Buy transfers (in the 80’s and 90’s mainly) contained overage provisions which effectively reserved any developmental value in the land to the HA. The courts have since ruled such provisions to be unlawful as they were not in keeping with the legislation. Interestingly however, overage provisions were included in the model sale contract as part of the 2018 pilot which led to some applicants struggling to obtain a mortgage. Some HA’s partaking in the pilot dropped the overage provisions altogether as a result. HA’s will therefore need to be mindful of whether overage provisions are introduced in the new Right to Buy scheme as they can cause issues both legally and with mortgage providers.

How Capsticks can help

Our Housing & Regeneration team have extensive knowledge and experience of both Preserved Right to Buy and Right to Acquire matters and regularly act for G15 HA’s on these. We can provide advice on the new scheme as the details emerge, and can provide both commercial and legal solutions to assist with demand as and when the new Right to Buy scheme is rolled out. Please contact Nalton Stembari or James Howard for more information.