The right to buy and the housing bubble

Graeme Brown, director of Shelter Scotland, writes in the Scotsman today:

RTB [Right to Buy] was introduced in Scotland in 1980 and operated largely unchanged for 20 years. Sitting tenants of public authorities had a right to buy their homes for a discount of up to 70 per cent for flats or 50 per cent for houses. The discount depended on how long you had lived there. While modernisation has slowed its impact, the overall consequences of RTB have been hugely popular.

The numbers are staggering – 490,000 social homes have now been sold in a nation of only 2.4 million households. For some households – not the poorest, but those on modest or below average incomes – it gave access to home ownership and to the accumulation of housing wealth that otherwise may never have happened.

In 2007, This Is Money reported that the cost of an average UK property had gone up by 90% over the previous 5 years: the Council of Mortgage Lenders also reported that the buy-to-let market was rising faster than the rest of the house-buying market. Five years later, the majority of new housing benefits are in work, and housing benefit is a profitable subsidy paid to those wealthy enough to take advantage of buy-to-let.

In 1975, the average house price in the United Kingdom was just over £10,000.