Policy

Helping people to buy a home

Supporting detail:

Right to Buy

Right to Buy gives eligible people who live in council properties in England the right to buy their home at a discount. The scheme is open to people who are secure tenants of a local council and who have spent at least 5 years as a public sector tenant.

Tenants of housing associations who had secure tenancies when their homes were transferred from the local council to the housing association also have a preserved Right to Buy. Landlords have a legal duty to explain how tenants can exercise their Right to Buy.

Further information for tenants including a Right to Buy calculator and guidance on applying can be found on the Right to Buy website.

Changes to Right to Buy

The government announced its intention to increase the caps on Right to Buy discounts to encourage more tenants to take up the Right to Buy in October 2011.

The main changes to Right to Buy that took effect from 2 April 2012 were:

  • the maximum discount that buyers can get on the market value of their home was increased to £75,000 (from 25 March 2013, this increased further to £100,000 in London boroughs)
  • extra homes sold under Right to Buy will be replaced by a new home for affordable rent nationally, with money from extra sales put towards the cost of replacement
  • we made provision to cover some of the cost of withdrawn applications: councils will now retain £2,850 in London and £1,300 in the rest of England per sale
  • we decided to retain the ‘buy back provision’, following representation from councils, but this will be capped at 6.5% of those receipts available for replacement stock

There was no change to the qualifying criteria for Right to Buy or Preserved Right to Buy.

Our response to the ‘Reinvigorating Right to Buy’ consultation sets out how we will:

  • retain and extend the ‘cost floor’ from 10 years to 15 years: this means that the discount is reduced if the landlord has spent money building or maintaining the home in the last 15 years (so landlords won’t have to sell homes for less than they cost to build)
  • allow councils to sign an agreement to use the money from additional council home sales in their local areas for one-for-one replacement

In January 2014 the government announced that the maximum discount for a house will increase from 60% to 70% of its value, and the £75,000 cap will start increasing in line with the consumer price index rate of inflation.

Plans are underway to reduce minimum eligibility criteria from 5 to 3 years. These changes are planned to be in effect in 2014, subject to parliamentary approval.

Interest rates for Right to Buy mortgages lent by local authorities

Until 1993, local authorities had to offer mortgages for tenants who wanted to exercise their Right to Buy but who couldn’t get a mortgage on the open market.

Paragraph 1 of Schedule 16 to the Housing Act 1985 specifies how local authorities must set their interest rate on mortgages arranged since 3 October 1980. The legislation requires authorities to charge their borrowers the higher of 2 interest rates:

  • the Standard National Rate, which is set by the Secretary of State for Communities and Local Government, or
  • the applicable local average rate, based on the authority’s own borrowing costs

The Standard National Rate of interest is currently 3.13%. It was last changed on 1 April 2009.

For further information, please email paulG.martin@communities.gsi.gov.uk.

More information

We have provided more information and advice for tenants on the costs and responsibilities of buying and maintaining a home. This will help tenants to make informed decisions about their suitability for Right to Buy.

We have also produced factsheets for local authorities and lenders about the changes to Right to Buy.

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