700,000 council tenants priced out of Right to Buy

Hundreds of thousands of council tenants, who live in the most expensive parts of the country, cannot afford to buy their home under the Government’s Right to Buy programme, according to a new report.

The report by the think tank Adam Smith Institute warns the discounts available for tenants under the scheme are not enough for them to buy their own homes.

The controversial scheme currently offers a maximum discount of £80,900 across England and £108,000 in London boroughs.

It is based on how long you’ve been a council tenant, the type of property you are buying and its estimated value.

According to the Adam Smith Institute, there are almost 700,000 council homes in areas where the average house price is higher than £250,000.

More than 200,000 of these are in areas where the average house price is more than £500,000.

‘Too many social housing tenants would prefer to be owner occupiers, but are prevented from this because the homes they live in are not suited to their financial circumstances, even after a Right to Buy discount,’ the report states.

The report quotes the example of a couple who live with their two children in a two-bedroom flat in Camden and pay £105 a week rent.

The couple both work and each earn £18,000 a year, which means they could get a mortgage of up to £167,000.

But their flat is valued at £550,000 and even with the maximum discount available, they would still be facing a shortfall of £275,000 still to find.

It also quotes the example of a couple who live in a two-bedroom flat in Cambridge and pay £115.59 a week in rent.

The couple have a combined income of £33,000 a year and could borrow up to £113,000, but the property is worth around £257,500.

Because the maximum discount available to them is £80,900, they would still need to find an additional £63,000 to buy the property.

Instead, the think tank recommends the Government overhaul the current Right to Buy system and introduce a flexible right to buy’ scheme for council and social housing tenants.

Under a flexible scheme, tenants would be offered a grant equal to the discount they would be able to receive under Right to Buy, and use that sum to buy another home.

The Local Government Association (LGA) has also called for the Right to Buy scheme to be reformed.

In June, the LGA said that two-thirds of councils will have no chance of replacing homes sold off under Right to Buy on a one-for-one basis in five years’ time unless a significant restructuring of the scheme takes place.

To read the full report by the Adam Smith Institute click here.