Policy paper

A review of the increased Right to Buy discounts introduced in 2012

Published 30 October 2024

Applies to England

Purpose of this document

1.The government’s manifesto committed to reviewing the increased Right to Buy discounts introduced in 2012 to better protect the existing stock of social housing. On 30 July, the Deputy Prime Minister confirmed that the government had started to review Right to Buy discounts and that further details and secondary legislation to implement changes would be brought forward in the autumn. The review been conducted internally within government, informed by external analysis and reports, as well as engagement with councils, social tenants and other stakeholders. This document is the conclusion of the review.

Executive summary

2. The Right to Buy (RtB) was introduced in 1980. It has been an important route for social housing tenants to access home ownership, but this has had a negative impact on council housing stock, with many of the homes sold not replaced. The government’s objective is a fair and sustainable scheme where council tenants can buy their own home, but in a way that provides value for the taxpayer and doesn’t erode council housing stock. Overall, the stock of council housing has decreased since the early 1980s from 5.1 million to 1.6 million^{[footnote 1]}.

3. In 2012, the maximum cash discounts were increased significantly from regional levels of £16,000 - £38,000 to a new national level of £75,000. In 2013 the maximum was increased further in London to £100,000 and, from 2014 the maximum discounts increased annually in line with the percentage change in the Consumer Price Index (CPI) rate of inflation. The current maximum discounts available are £136,400 in London and £102,400 outside of London.

4. Alongside the significant increase in discounts in 2012, a one-for-one replacement target was introduced that has not been met. Between April 2012 and March 2024 there have been over 124,000 council RtB sales, and in the same period fewer than 48,000 homes have been replaced.^{[footnote 2]} Demand for social housing has, however, grown with 1.27 million people on the social housing waiting list and record numbers of households, including over 150,000 children, in Temporary Accommodation (TA).^{[footnote 3]} Housing pressures are particularly acute in London.

5. The RtB has reduced the number of larger family and social rent homes,^{[footnote 4]} both of which are more expensive for councils to replace and essential to meeting homelessness pressures. The scale of RtB has further reduced the motivation and confidence of councils to build, and restricted broader investment in council housing, due to fears that an unsustainable amount of new stock will be sold under the scheme (as soon as 3 years after being built).^{[footnote 5]}

6. Additionally, many of the homes sold under the scheme have been sold and relet, often as poorer quality and more expensive rentals (with heightened costs to the state, including housing benefit), which has further impacted the ability of councils to meet the demand for social housing in their local areas.^{[footnote 6]}

7. RtB sales have been muted in the last year, compared to the average for the period since 2012.^{[footnote 7]} This is partly because of wider economic conditions making it more challenging to buy, but also likely because of residualisation and the scarcity of the remaining stock. This may reduce the opportunities to take advantage of the scheme. In the three years before the maximum discounts were increased in 2012, annual council sales were less than 3,000 a year, whereas in the period 2014 to 2018 (which followed the increase in the maximum discount to £100,000 in London), annual council sales were over 11,000 a year. Stakeholder engagement undertaken to inform this review found that some tenants who take advantage of the scheme struggle with homeownership, for example managing the responsibility and costs of maintaining the property.

Government action

8. RtB has supported a number of tenants to own their home and helped to create more diverse communities; it boosts social mobility and opportunity for families across the country. As such, the government will not be abolishing the Right to Buy scheme. We believe that it remains an integral way for social tenants to get on the property ladder; many of whom may not otherwise be able to access home ownership.

9. However, councils should not be losing homes through RtB quicker than they can be replaced. The scheme must be reformed in order to better protect the existing stock of social rented homes, provide better value for money for the taxpayer and ensure fairness within the system.

10. Discounts should be at a level that enables councils to replace the property sold whilst ensuring that tenants who have lived in, and paid rent on their social homes for many years, retain the opportunity to own their home.

11. The government has committed to delivering the biggest increase in social and affordable housebuilding in a generation and to supporting councils to invest in new and existing homes. As a first step, in July 2024, the government increased the flexibilities on how councils can use their RtB receipts to accelerate the delivery of replacement homes. The caps on the percentage of replacements delivered as acquisitions and the percentage cost of a replacement home that can be funded using RtB receipts have been removed, and councils can now combine RtB receipts with section 106 contributions. These flexibilities will be in place until the end 2025-26, subject to review.

12. The government, at Autumn Budget, confirmed that councils will no longer be required to return a proportion of the capital receipt generated by the sale of the home to HM Treasury, which has totalled c.£183m a year. This will ensure that councils are better able to replace homes sold under the scheme.

13. This review considers the impact of the significantly increased discounts that were introduced in 2012 on social housing stock. It concludes that returning discounts to their pre-2012 regional levels will deliver a fairer and more sustainable scheme that offers better value to the taxpayer. It will do this by better protecting council housing stock to meet future housing need, and better enabling councils to replace the homes sold whilst supporting a reasonable proportion of social tenants to buy their home.

14. Reversing the 2012 increase in discounts is estimated to reduce RtB sales by circa 25,000 over 5 years, meaning that those homes will stay within the social rented sector and the sector will be larger as a result (see Annex A for the analytical methodology). The lower discounts will result in fewer replacements in total compared to the current discounts (since fewer homes will be sold) but where homes are sold, councils will be in a stronger position to replace them. The overall net impact on social housing stock will therefore be positive. Reducing the chance of homes being lost under RtB will also improve the confidence of councils to scale-up delivery thus further ensuring that the number of social homes is increasing and sustainable.

15. Secondary legislation to return discounts to their pre-2012 levels is being laid in Parliament on 30 October and is intended to come into force on 21 November. The reduced discounts will be kept under review to ensure that the right balance between protecting social housing stock and enabling tenants to access home ownership is being struck. We will update Parliament by the end of 2026 to 2027 on whether any changes to discount levels are needed.

16. The Statutory Instrument will also increase the cost floor period from 15 years to 30 years. The cost floor limits the discount on RtB properties to ensure that the purchase price of the property does not fall below what has been spent on building, buying, repairing or maintaining it over a certain period of time.

17. A public consultation is being launched shortly seeking views on wider reforms to the RtB scheme to further support the government’s objective of achieving a sustainable scheme that enables long-standing tenants to buy, protects new build stock, represents good value for money and enables councils to develop their capacity to build new homes.

18. Detail of the external reports considered and stakeholder engagement carried out to inform this review are at Annex B.

Review of impact of increased Discounts

Overview of Discount levels 

19. The RtB is primarily available to secure council tenants and not to most housing association tenants. The exception is those secure tenants who were living in a council home when it transferred to a housing association as part of a stock transfer and retained their entitlement to Right to Buy (on an assured rather than secure tenancy) – this is known as Preserved Right to Buy). The RtB is not available to tenants in the Private Rented Sector (PRS).

20. When the RtB was introduced in 1980, the legislation set out the discounts as a proportion of the property’s value that eligible tenants were entitled to, which increased with the number of years of tenancy. Cash caps then set out the maximum discounts that tenants can obtain under the scheme.

21. For houses, tenants currently receive a discount equivalent to 35% of the property value if they have been a public sector tenant for between 3 and 5 years. After 5 years, the discount goes up 1% for every extra year they have been a public sector tenant, up to the maximum of 70% or the cash cap (whichever is lower).

22. For flats, tenants currently receive a discount equivalent to 50% of the property value if they have been a public sector tenant for between 3 and 5 years. After 5 years, the discount goes up 2% for every extra year they have been a public sector tenant, up to a maximum of 70% or the cash cap (whichever is lower).

23. In 1998/99, regional maximum cash discounts ranging from £22,000 in the North East to £38,000 in London were introduced, lower than the £50,000 cap that had previously applied nationally. In 2003, due to concerns around the pressures on stock and companies lending money to tenants to buy, the maximum discount in 41 boroughs in London, Eastern and South Eastern regions was reduced to £16,000. This resulted in the following discount levels between 2003 and 2012:

Region	Maximum pre-2012 discounts
London except Barking & Dagenham and Havering	£16,000 £38,000
South East except Chiltern[footnote 8], Epsom & Ewell, Hart, Oxford, Reading, Reigate & Banstead, Tonbridge & Malling, Vale of the White Horse and West Berkshire	£38,000 £16,000
East of England except Watford	£34,000 £16,000
South West	£30,000
North West	£26,000
West Midlands	£26,000
East Midlands	£24,000
Yorkshire and Humberside	£24,000
North East	£22,000

24. In 2012, as part of ‘the reinvigoration’ of the RtB, the maximum cash discounts were significantly increased, to £75,000 nationally. In 2013, the maximum was increased further in London, to £100,000, to take account of higher property prices in the capital. From 2014 the maximum cash discounts increased annually in line with the percentage change in the Consumer Price Index (CPI) rate of inflation.

25. The current average discount is £72,000, with a maximum discount from April 2024 of £136,400 in London and £102,400 outside of London. The average percentage discount for council sales is currently around 40% of the property’s value.^{[footnote 9]} The discounts received, particularly in areas of higher house prices, will often be subject to the cash caps.

26. The discounts may sometimes be higher than necessary to enable a tenant to buy, i.e. the tenant could still buy with a lower discount (thus representing poorer Value for Money for the Exchequer). A 2023 report commissioned by the Local Government Association (LGA) from Savills suggested that discounts provided could be higher than needed to facilitate a purchase and that reducing the discounts would have the potential to offer improved Value for Money.^{[footnote 10]}

27. The discount received can also be higher than the tenant has paid in rent. Both the LGA and the Chartered Institute of Housing (CIH) have compared the average discount under RtB to the average rent paid, where they suggest that the discounts received by some RtB purchasers far exceed their cumulative rent payments.^{[footnote 11]} The 2023 LGA report includes the following example:

• A property is worth the national average (outside London) = £138,000
• A tenant occupying a property for three years has paid rent (at the national average of c£85/week outside London) = £13,260
• The minimum discount for a house is 35% after 3 years, or around £48,000.

Impact of increased discounts on sales

28. The RtB has provided an important route for council tenants to be able to own their own home, with over two million tenants having bought under the scheme. The scheme supports social mobility for those who are able to buy under the scheme and has helped to create more diverse communities. The extent to which eligible tenants are able to buy under the scheme is often dictated by the level of discount available to them.

29. The following graph below shows sales since 1980, together with the key changes to the discount levels, and provides an overview of how those maximum cash discount levels have impacted on the number of sales. Maximum discounts will not be the only factor affecting sales - other key factors will be household incomes, mortgage rates and house prices, which will impact on the affordability for tenants, and also the stock available to be sold.

30. However, it can be seen from the graph that the increases and decreases in maximum discounts have directly impacted on sales and the ability of tenants to own their own home.

Note that 2023 to 2024 figures on eligible sales are from data submitted by councils as part of the Pooling of Capital Receipts return and are included as an indicator of RTB sales in 2023 to 2024. The definitive statistics on RtB sales are the Social Housing Sales and Demolitions statistics, which will be released in December 2024/January 2025.

31. In the 3 years before the maximum discounts were increased in 2012, annual council sales were less than 3,000 a year, whereas in the period 2014 to 2018 (which followed the increase in the maximum discount to £100,000 in London), annual council sales were over 11,000 a year.

32. Sales have been muted in the last year. This is partly due to the challenging economic climate but also likely because of residualisation and the rationing of the remaining stock. The statistics for 2023 to 2024, which were published on 11 July, showed that there were 6,275 eligible sales in 2023 to 2024, a decrease of 43% compared with the previous year.^{[footnote 12]}

Conclusion 1: Substantially increasing discounts in 2012 led to an increase in sales

Challenges of replacing sold stock since 2012

33. A national replacement target was introduced for the first time in 2012, to replace all additional sales (above the original baseline of sales calculated using 2010 sales figures) with a new affordable home. The number of replacements is calculated from the sum of starts-on-sites and acquisitions. This is measured against the one-for-one replacement target, in which every additional RtB sale since 2012 should be replaced by a new affordable home nationally within 3 years. The one-for-one replacement target has not been met since 2017-18. During the period 1 April 2012 to 31 March 2021 the replacement target was 62,485 but only 47,864 replacements were delivered, which means there were 14,621 fewer replacements than the target.^{[footnote 13]}

34. Alongside the introduction of the replacement target, councils were permitted, from 2012, to retain the receipts from additional sales to use towards new affordable housing (so-called one-for-one receipts). The level of an authority’s receipts available to fund replacement housing is the total amount of its receipts arising from Right to Buy sales, net of the discount (which is paid to the tenant) and a number of other deductions including the costs of administering the scheme, paying down debt and paying a share of the receipts to HM Treasury. The higher the discount, the less capital the council is able to retain to finance a replacement home.

35. Between April 2012 and March 2024 there have been over 124,000 council RtB sales, and in the same period fewer than 48,000 homes have been replaced. Over the last 5 years there has been an average of c.9,000 council sales annually but only circa 5,000 replacements (starts and acquisitions) each year. Overall, the stock of council housing has decreased since the early 1980s from 5.1 million to 1.6 million.^{[footnote 14]} This has come at the same time as the housing crisis has intensified, with 1.27 million people on the social housing waiting list and record numbers of households, including over 150,000 children, in Temporary Accommodation (TA).^{[footnote 15]}

36. The following graph below shows replacements since 2012, against the one-for-one target. From 2020, the time period that councils had to spend receipts was increased from 3 years to 5 years. While the target was not changed, the graph also includes a line showing the number of replacements that would need to be delivered if the target was measured on a 5 year basis.

37. The challenges of replacement have been further evidenced through the pilots of a Voluntary RtB scheme for housing association tenants. There have been two pilots. The first was a small-scale pilot in 2016-17, followed by a regional pilot in 2018 to 2021 across the Midlands.^{[footnote 16]} In the Midlands pilot, eligible housing association tenants in the East and West Midlands were able to register for a place on the pilot, with those who were successful given the opportunity to buy their home at a RtB level discount. The government funded the discounts and housing associations were able to retain all of the receipts from sales under the pilot. Even so, as of September 2023, only 859 of the 1,839 homes sold between 2018-21 had been replaced.^{[footnote 17]}

Conclusion 2: Councils have not been able to replace all stock sold since 2012 in spite of a one-for-one replacement target indicating that discounts have not been at a level that enables councils to retain a sufficient portion of the receipt to replace sold stock.

Regional variations

38. There are marked regional impacts from the current discount levels where there is a flat rate for London and another for the rest of the county. The 2023 LGA and Savills report suggested that consideration should be given to different maximum discounts for each region.^{[footnote 18]} The report found that whilst discounts were, on average 41% of the market value of a property across the country (in 2021-22) they varied between 36% of the property value in the South to 48% in the North.

39. The high national discounts particularly impact on areas with lower house prices, where councils receive a lower receipt from the sale, making it more difficult to replace the homes sold. This can be seen from the replacements by region in the RtB statistics, where comparatively fewer of the replacements since 2012 have been in the North East and North West.

40. As noted above, from 1998 to 2012 the maximum discount levels were set regionally, to take account of the different house prices in each region. House prices continue to vary significantly between regions and discount levels that take into account these regional variations would better enable all councils to replace the properties sold.

Conclusion 3: Regional discount levels would better reflect local housing markets as compared to current discounts.

Wider impacts of Right to Buy on meeting housing need

41. There is significant demand for social housing, with, as noted above, 1.27 million people on the social housing waiting list. The number of families living in TA is at record levels, with 117,450 households in TA, including over 150,000 children.^{[footnote 19]} This is particularly acute in London, where on 31 March 2024, there were 17.8 households living in TA per 1,000 households, compared with 2.5 households per 1,000 in the rest of England.^{[footnote 20]} As noted above, in 2003, maximum discounts were reduced in areas of high pressure on social housing in London, the South East and the East.

42. Whilst a one-for-one replacement target was introduced in 2012, the target does not require like-for-like replacement. The replacement stock can be social rent, affordable rent, shared ownership or First Homes and of any size and location. This is to accommodate changes in local housing need and because a like-for-like replacement is also not always financially viable for councils.

43. The result of not requiring a like-for-like replacement has led to a particular reduction in the number of social rent and larger family homes both of which are more expensive to replace and vital to meeting homelessness pressures. 98% of council housing stock is let at social rent and thus the vast majority of properties sold under the Right to Buy are social rent properties compared to only around a third of the replacements in the last 3 years. In 2023 to 2024, 36% of replacement properties were for Social Rent, 57% were for Affordable Rent, and 7% were for Shared Ownership.^{[footnote 21]}

44. The replacements have been, on average, smaller in size than those sold. Between 2012 to 2013 and 2022 to 2023, 14% of RtB sales were 1-bedroom properties, 33% had 2 bedrooms and 53% had 3 or more bedrooms. For acquisitions and completions between 2012 to 2013 and 2023 to 2024; 25% of these were 1-bedroom properties, 43% had 2 bedrooms and 32% had 3 or more bedrooms.^{[footnote 22]}

Conclusion 4: The failure to deliver social rent homes to replace those sold is a contributor to the urgent and rising need for social rent homes in most communities across the country. The need for more social rent homes is particularly acute in London.

45. The Chartered Institute of Housing (CIH) has highlighted concerns around the number of homes sold under the RtB which end up in the PRS, often as poorer quality and more expensive rentals. CIH analysis^{[footnote 23]} and a report by the Greater London Authority (GLA) estimated that 40% of homes sold under RtB are in the PRS.^{[footnote 24]}

46. Research commissioned by the Communities and Local Government Select Committee in 2016 suggested that homes ending up in the PRS places greater demand on housing benefit and public expenditure than if the same households had continued to rent from councils. It found that average weekly housing benefit awards in the private rented sector were over £20 per week higher than in the social rented sector. This equated to increased housing benefit costs of over £1,000 per year per claimant in the private rented sector rather than in social housing. By 2019, that figure had increased to £30 per week, equating to £1,500 per year per claimant.^{[footnote 25]}

47. The CIH also raised concerns around the costs to councils of buying back ex-council homes, that were previously sold at a discount under the RtB, at full market value.^{[footnote 26]} As well as the challenges that councils face in replacing the stock which is sold, the RtB disincentivises and reduces the confidence of councils to build more widely, which is essential to meeting the demand for new social housing. It is harder for councils to secure sign off for new developments if there is no guarantee on return, and where new stock is at risk of sale.

Conclusion 5: Right to Buy has resulted in properties being lost to the PRS and has disincentivised the delivery of new social homes. This has impacted councils’ ability to meet housing need and homelessness pressures.

Returning discounts to pre-2012 levels

48. If maximum discounts were kept at the current level, modelling suggests that there would be an average of 7,000 sales annually to 2030 to 2031. The impact on stock would continue to be significant and negative, with replacements around 3,000 to 4,000 a year. This would not support the government’s objective to deliver a fair and sustainable scheme and to protect existing social housing stock since councils would not be able to replace and grow their stock.

49. Returning to pre-2012 discount levels would still offer tenants significant financial support to buy their own home. An estimated 1,700 tenants a year would still be able to buy their own home. If the discount were removed, and only the right to buy the home retained, sales under the scheme would be considerably lower, with only those tenants on higher incomes in relation to the average incomes of social tenants able to afford to buy.

50. Under pre-2012 discounts as compared to current discounts, there would be an estimated 25,000 fewer sales over 5 years, meaning that those homes would stay within the social rented sector and the sector would be larger as a result. Stock in areas of high housing need would be better protected from sale. The lower discounts would result in fewer replacements in total compared to the current discounts (since fewer homes will be sold) but where homes are sold, councils would be in a stronger position to replace them. This would result in a more sustainable scheme that represents better value of money to the taxpayer.

Conclusion 6: Returning to pre-2012 cash discount levels would have a net positive impact on social housing stock, unlike retaining discounts at current levels.

Uprating discounts

51. Since 2014, maximum cash discounts have increased annually by CPI. Prior to that they did not do so, with the increase in house prices expected to be reflected in the percentage discounts since the cash value of the percentage discount would be based on the market value of the property.

52. Three options on uprating are considered below: to increase maximum cash discounts annually in line with percentage changes to CPI; to increase maximum cash discounts annually by house price inflation; and to have no annual uprating of the maximum cash discounts.

1. Increase maximum cash discounts annually by CPI. Discounts that take into account annual increases in inflation would give tenants greater opportunity to own their home as house prices by ensuring that discounts increased at regular periods. However, discounts that increase annually may reduce the ability of councils to replace sold stock since discounts could increase more rapidly than average house prices in all areas of the country.

2. Increase maximum cash discounts annually by house price inflation. As with increasing by CPI, discounts that take into account annual increases in house prices would give tenants greater opportunity to own their home as house prices increase. However, house price inflation can vary more than CPI and is generally higher than CPI, so the impacts on the ability of councils to replace sold stock would likely be greater than increasing by CPI.

3. No annual uprating but consider changes to discount levels on an ad hoc basis. This would be a return to the pre-2014 position. The government would retain the option to increase cash caps on discounts via secondary legislation should this prove necessary, for example to reflect changes in market conditions and to continue to enable a reasonable proportion of tenants to access homeownership.

Conclusion 7: Uprating discounts annually by CPI or house price inflation may impact the ability of councils to replace sold stock. The maximum cash discounts should be kept under review.

Period of transition

53. On the introduction of any new discount, there is a balance to strike between giving those tenants on the cusp of ownership the ability to complete their sale, versus minimising a spike in sales that could result from an increase in applications, which would negatively impact council housing stock in a short space of time due to their ability to replace sold stock at pace.  Too short a time could be administratively difficult for councils and unfair to tenants.

54. When the discounts were reduced in 1998 to 1999 and 2003, there were spikes in sales. In 1998 to 1999, there was a 3-month period before the SI being laid and the new discounts coming into force, which resulted in a sharp increase in the number of applications. This led to increased sales with council RtB sales of 54,000 in 1999 to 2000, compared to 40,000 in 1998 to 1999.^{[footnote 27]} In 2003, there was a two month period between the changes being announced and coming into force. In 2003 to 2004, council RtB sales increased to 70,000, compared to 63,000 in 2002 to 2003.

Conclusion 8: A prolonged period between announcing reduced discounts and implementation is likely to result in a spike in sales.

Stakeholder engagement

55. A list of organisations engaged as part of the review is at Annex B together with a summary of the key points relevant to this review raised in stakeholder discussions. The principal discussions on Right to Buy discounts were at:

• The MHCLG/LA Strategic Advisory Group in August 2024.
• A roundtable between a number of councils and the Housing Minister on 11 September.
• A roundtable discussion with the Association of Retained Council Housing (ARCH) Tenants’ Group on 9 September.
• A meeting with the National Federation of Arms-Length Management Organisations (ALMOs) Tenants Advisory Panel on 12 September.

56. The prevailing view from the stakeholder engagement undertaken was that maximum discounts should be substantially lowered given the negative impact on council housing stock. While the benefits that RtB provided for increasing homeownership were acknowledged, both councils and tenant groups favoured reform of the scheme to ensure that social housing stock was preserved, and that the scheme works for both tenants and councils. There was also a strong preference for regional discounts, to better reflect local housing markets.

57. Many stakeholders, including tenants, emphasised the difficulty councils face in replacing homes sold under RtB, due to the high discounts and the challenges of replacement. Councils cited the high costs of building new properties and the financial strain caused by reduced rental income. They also suggested that discounts should be lowered to reduce the loss of dwellings for the long-term sustainability of the Housing Revenue Account, and to equalise those losses between regions. Some stakeholders, both councils and tenants, advocated suspension of the scheme to help address the social housing shortage. Councils favoured allowing a short period between announcing discounts and them coming into force to mitigate a spike in sales.

58. Some stakeholders, both councils and tenants, advocated suspension of the scheme to help address the social housing shortage. However, others noted that the RtB scheme should be retained to enable long-standing residents to buy their own home with a reasonable discount since the scheme is often the only route available to social housing tenants to access home ownership and the security that brings. Councils favoured allowing a short period between announcing discounts and them coming into force to mitigate a spike in sales.

Conclusions

59. The conclusions of this review are:

1. Substantially increasing discounts in 2012 led to an increase in sales.

2. Councils have not been able to replace all stock sold since 2012 in spite of a one-for-one replacement target indicating that discounts have not been at a level that enables councils to retain a sufficient portion of the receipt to replace sold stock.

3. Regional discount levels would better reflect local housing markets as compared to current discounts.

4. The failure to deliver social rent homes to replace those sold is a contributor to the urgent and rising need for social rent homes in most communities across the country. The need for more social rent homes is particularly acute in London.

5. Right to Buy has resulted in properties being lost to the PRS and has disincentivised the delivery of new social homes. This has impacted councils’ ability to meet housing need and homelessness pressures.

6. Returning to pre-2012 cash discount levels would have a net positive impact on social housing stock, unlike retaining discounts at current levels.

7. Uprating discounts annually by CPI or house price inflation may impact the ability of councils to replace sold stock. The maximum cash discounts should be kept under review.

8. A prolonged period between announcing reduced discounts and implementation is likely to result in a spike in sales.

60. The government will return maximum cash discounts available to pre-2012 levels via secondary legislation to meet its objective to deliver a fairer and more sustainable scheme that represents better value for money for the taxpayer. Reducing discounts to pre-2012 levels will protect council housing stock to meet housing need (particularly larger social rent homes), ensure councils are able to replace the homes sold, whilst enabling a reasonable proportion of social tenants (circa 1,700 a year) to buy their home.

61. RtB has supported a number of tenants to own their home and helped to create more diverse communities but this has come at a significant cost to social housing stock. Pre-2012 regional discount levels will better take into account local housing markets and the particular necessity to protect London’s housing stock given the significant levels of housing need in the capital. Maximum cash discounts will not be uprated annually in line with inflation as they have been since 2014 to ensure that discounts remain proportionate and councils are able to replace sold stock. The government will keep discount levels under review to ensure that the right balance between protecting social housing stock and enabling tenants to access home ownership is being struck. We will update Parliament by the end of 2026-27 on whether any changes to discount levels are needed.

62. Returning to pre-2012 maximum cash discount levels is estimated to reduce RtB sales by around 25,000 over 5 years, meaning that those homes will stay within the social rented sector and the sector will be larger as a result. The sector will, therefore, be better able, in the long term, to support families in housing need. Reducing the chance of homes being lost under RtB will also improve the confidence of councils to scale-up delivery thus further ensuring that the number of social homes is increasing and sustainable.

63. There will be a minimum period between confirming the reduced discounts and the changes coming into force, in order to minimise a spike in sales as seen previously. Applications for the RtB received by social landlords up to the implementation date of the secondary legislation will be eligible for the current discounts. The secondary legislation to make this change will be laid on 30 October and will come into effect from 21 November.

64. A consultation is being launched shortly seeking views on wider reforms to the RtB scheme to support the government’s objective of achieving a sustainable scheme that protects new build stock, enables councils to develop their capacity to replace sold stock and build new homes, and represents better value for money. This consultation will explore amending the percentage discounts to better align with the new maximum cash discounts. Amending percentage discounts requires primary legislation and given the imperative of moving quickly to reduce discounts to protect social housing stock, changes will be implemented after initial action is taken to reduce cash caps via secondary legislation.

Annex A: Analytical methodology

This section provides an overview of the methodology underpinning the estimation of RtB sales under the scenario of returning discounts to pre-2012 levels.

Datasets and variables

The RtB sales projections presented in this review are estimated using a set of regional sales equations. The parameters of these equations are derived from a statistical model – specifically, an error correction model – developed for MHCLG, as part of a larger model of the housing market, by Professor Geoffrey Meen, alongside other leading housing economists at the University of Reading.

The model measures the relationship between RtB sales and several key drivers of those sales to determine the coefficients of our regional sales equations. These drivers are:

• historical RtB sales
• local authority housing stock
• RtB discounts
• RtB house prices
• house price index
• mortgage rates
• earnings
• consumer expenditure deflator

For forecasting purposes, the data used for historical RtB sales, local authority housing stock, RtB discounts and RtB house prices is published by MHCLG, and can be found in the local authority housing statistics.^{[footnote 28]} These are updated annually. Forecasts for the house price index, mortgage rates, earnings and consumer expenditure deflator are obtained from the Office of Budget Responsibility (OBR). These are updated at every fiscal event, with the latest published version from March 2024.^{[footnote 29]}

Estimation approach

Key determinants of tenants’ decision to exercise their RtB include house prices, mortgage rates and earnings. Another key factor that would affect the affordability of their purchase is the level of the discount. We varied this input to obtain our sales projections.

Currently, secure tenants are eligible for the RtB if they have been public sector tenants for at least three years. Starting from a 35% or 50% discount on the market value of their house or flat, respectively, after 5 years the discount available to them rises by 1% for houses for every extra year and by 2% each year for flats, up to a maximum of 70% or the cash cap, whichever is lower.^{[footnote 29]} The cash cap is currently £102,400 across England, except for London where it is £136,400, and is indexed to the previous September’s CPI rate, rising in April of each year.

The model incorporates the latest year’s outturn average regional RtB discount per sale as a percentage of the average regional market value per sale to obtain a discount rate,^{[footnote 30]} and assumes that these remain constant in future. This reflects the fact that tenants may buy their homes at a discount below the cash cap. It also incorporates estimates of the discount rate implied by the cash cap, derived by taking the cash cap (uplifted by the OBR forecast for CPI) as a percentage of estimated RtB house prices (uplifted by OBR’s forecast for the House Price Index). The model compares the two in each future year and applies whichever is lower.

As the cash cap options are lower than the 2022 to 2023 discount rates in every region, all modelled cash caps bind. In all options, the modelled sales projections adjust to their new long-run trends by 2026 to 2027, after which they remain relatively stable. This stability over the long run is a feature of this type of statistical model.

Limitations and uncertainty

The statistical model used to derive the parameters of the RtB sales equations uses historical data from 1991 to 2019 to establish the quantitative relationship between sales and its drivers by region. As with any statistical model, fundamental sources of prediction error include data quality issues/measurement error, omitted variables and model misspecification.

The lead option of reducing RtB discounts to pre-2012 levels represents a meaningful change from the recent past. Whilst the historical data used to estimate the parameters of the model would incorporate behaviour at a time where the pre-2012 discounts applied, it is possible that other changes to the RtB scheme and how they interact with the included drivers of sales are not adequately reflected (a potential source of omitted variable bias).

More broadly, it is possible that the fundamental relationship between variables may change in future, including the demographic makeup of the sector, tenants’ propensity to buy their homes and the types of homes remaining, e.g. larger homes that may be more attractive to tenants may have long been sold. Ultimately, all forecasting is inherently uncertain and, even where statistical models fit the past data well, extrapolation outside of the historical range of data will be subject to greater uncertainty. As such, any estimates should be taken as indicative.

Annex B: Reports and stakeholder engagement

This review has been informed by stakeholder views and external analysis and reports, as well as through engagement with councils and tenants’ groups.

External reports

Key reports that have been drawn on to inform this review are:

• The Chartered Institute of Housing’s ‘10-Point Plan for More and Better Homes’ published in September 2023.^{[footnote 31]}
• a 2023 report commissioned by the LGA from Savills.^{[footnote 32]}
• a position statement by the LGA published in February 2024.^{[footnote 33]}

Stakeholder engagement

The organisations engaged as part of the review are listed below:

Representative bodies

• Association of Retained Council Housing (ARCH)
• Association of Retained Council Housing Tenants’ Group
• Chartered Institute of Housing
• Chartered Institute of Public Finance and Accountancy (CIPFA)
• Councils with ALMOs (CWAG)
• District Councils Network
• Greater London Authority (GLA)
• Local Government Association (LGA)
• London Councils
• National Federation of Arms-Length Management Organisations (NFA)
• National Federation of Arms-Length Management Organisations Tenants Advisory Panel
• National Housing Federation (NHF)

Councils

• Birmingham City Council
• Bristol City Council
• Camden Council
• Derby City Council
• Hackney Council
• Hull City Council
• Islington Council
• Leeds City Council
• Lewisham Council
• Mid Devon District Council
• Newcastle City Council
• North Kesteven District Council
• Nottingham City Council
• Oxford City Council
• Rotherham Metropolitan Borough Council
• Royal Borough of Greenwich
• Sheffield City Council
• Southend-on-Sea Borough Council
• Southwark Council
• Waltham Forest Council
• Wigan Council
• Wolverhampton City Council

Detailed below are the salient points relevant to this review from the minutes of discussions with:

• The MHCLG/LA Strategic Advisory Group in August 2024.^{[footnote 34]}
• A roundtable between a number of councils and the Housing Minister on 11 September.
• A roundtable discussion with the Association of Retained Council Housing (ARCH) Tenants’ Group on 9 September.
• A meeting with the National Federation of Arms-Length Management Organisations (ALMOs) Tenants Advisory Panel on 12 September.

Local Authority Housing Strategic Advisory Group, 12 August 2024

• The need for sustainable and simplified Right to Buy policy (RtB).
• Discounts should be substantially reduced to enable replacement of sold stock and discounts should be regional or local to better reflect different property prices across the country.
• Proposals to should include a ‘no discount’ option or a ‘no discount - support with legal fees only’ option.
• The discount could be limited to a 1% increase annually from date of build/acquisition. This would allow local authorities to plan effectively and pay off debt.
• Any changes to discounts should be implemented from the date of announcement; previous changes had a lead-in time that resulted in an influx of RtB applications, which should be avoided as far as possible.
• Many RtB properties have ended up in the private rented sector, which in turn impacts the Exchequer through higher welfare payments. One member noted that average private rents in their borough were £625 a week compared to £150 a week for social rent.
• A member suggested that Right to Buy impacts the ability of councils to secure institutional investment.

Council Housing Roundtable, 11 September 2024

• Many authorities have seen significant reductions in council housing, and councils’ capacity to rebuild is limited due to the cost of replacing stock compared to the receipt generated by the sale as well as restrictions on how receipts can be spent. One authority said it costs them three times as much to build a new property compared to the capital receipts.
• Right to Buy sales reduce rental income, which affects the ability of councils to pay off debt and invest in existing stock. For example, one council noted that it loses approximately £8.5 million per year in rental income due to Right to Buy, highlighting the financial strain on local authorities.
• There was consensus that current discounts are too high and prevent councils from being able to replace homes that are sold under the scheme although there are differences in the volume of stock sold under the scheme across the country.
• There was support for regional discounts at much lower levels than currently in place. Some argued that local authorities should be able to tailor policies based on regional housing pressures, including even suspending the Right to Buy in areas with urgent housing needs.
• Concern was raised about the number of properties that are sold through Right to Buy and end up in the Private Rented Sector. Equally some noted that Right to Buy properties can end up being sold shortly after purchase, with previous owners returning to social housing due to its stability, lower costs, and better quality and more support was needed to ensure that tenants understood the responsibilities of homeownership.
• Suggestion that government should also consider a transferable discount that supports council tenants to buy a home on the open market rather than their council home.

Association of Retained Council Housing (ARCH) Tenants’ Group, 9 September 2024

• Key concerns centred around the difficulty of replacing social housing stock lost through RtB, with participants advocating reform or even abolishing the scheme.
• Some participants suggested that there should be a suspension of RtB until waiting lists could be reduced.
• Discount levels should be reviewed and were too high, including in London, and returning to 2012 regional maximum discounts was sensible. 
• There were concerns about RtB homes falling into private landlords’ hands and it was suggested that covenants could be introduced to prevent homes from entering the private rented sector.
• There was an important difference between social and affordable rent and there was a need for adequate funding and policy adjustments to address local housing needs.
• Part-rent/part-buy schemes were proposed as an alternative to help younger people get on the housing ladder.

National Federation of Arms-Length Management Organisations Tenants’ Advisory Panel, 12 September 2024

• Some participants felt that the discount levels were too high.
• Some participants were of the view that the scheme should be ended, citing concerns over the lack of new social housing. It was suggested that in Scotland, where the scheme had been ended, waiting lists for social housing were shorter.
• Other participants believed that the RtB scheme should be retained to enable long-standing residents to buy their own home with a reasonable discount since the scheme is often the only route available to social housing tenants to access home ownership and the security that brings. Notably, the scheme should enable those who have lived in, and paid rent on their home for many years, and built up a support network in their local communities, to buy their own home.
• There was support for returning to maximum regional discounts, to 2012 levels.
• One participant regretted exercising the Right to Buy due to high repair costs, and others expressed concern about the financial burden of maintaining purchased properties.
• It was suggested that the alternative approach of cash incentive schemes should be explored, to enable tenants to buy a home on the open market and freeing up the social home for another tenant.
• RtB could add to the stigma around social housing and there should be more emphasis on having pride in renting social homes and the security that brings, without needing to buy them.

1. Live tables on dwelling stock (including vacants). 1.3 million from this total was a result of Large Scale Voluntary Transfers from councils to housing associations. ↩

2. Right to Buy sales and replacements, England: April 2023 to March 2024. ↩

3. Statutory homelessness in England: January to March 2024. ↩

4. Right to Buy sales and replacements, England: April 2023 to March 2024. ↩

5. Right to Buy needs reform to avoid social housing stock losses - Local Government Association. ↩

6. UK Housing Review 2022 shows England’s Right to Buy is a “strategic failure” and will exacerbate inequalities if left unchecked (cih.org). ↩

7. Right to Buy sales and replacements, England: April 2023 to March 2024. There were 6,275 eligible sales in 2023/24, compared to an average of c.9,000 sales annually in the last 5 years. ↩

8. Chiltern District Council was abolished in 2020 and its area is now part of the unitary Buckinghamshire Council. ↩

9. Social housing sales and demolitions 2022-23: Right to Buy sales. ↩

10. LGA, Research into the Right to Buy within the Housing Revenue Account - Local Government Association, February 2023. ↩

11. LGA, Research into the Right to Buy within the Housing Revenue Account - Local Government Association, February 2023. ↩

12. Right to Buy sales and replacements, England: April 2023 to March 2024 ↩

13. The replacement target of 62,485 is the gap between the level of sales assumed under the 2012 Housing Revenue Account self-financing settlement that would be delivered between 1 April 2012 and 31 March 2021 without increased discounts (33,660) and the actual number of total sales (96,145) delivered by end of March 2024 (allowing for 3 years for receipts to be spent although noting that this was increased to 5 years from 2020).  ↩

14. Live tables on dwelling stock (including vacants). 1.3 million from this total was a result of Large Scale Voluntary Transfers from councils to housing associations. ↩

15. Statutory homelessness in England: January to March 2024. ↩

16. Voluntary Right to Buy Midlands pilot: evaluation. Data on replacement showed that by September 2023 only 859 replacement homes had been started compared to the 1,839 completed sales under the pilot. Voluntary Right to Buy Midlands pilot. ↩

17. Voluntary Right to Buy Midlands pilot annual data release. ↩

18. LGA, Research into the Right to Buy within the Housing Revenue Account - Local Government Association, February 2023. ↩

19. Statutory homelessness in England: January to March 2024. ↩

20. Statutory homelessness in England: financial year 2023 to 2024. ↩

21. Right to Buy sales and replacements, England: April 2023 to March 2024. ↩

22. Right to Buy sales and replacements, England: April 2023 to March 2024. ↩

23. CIH, UK Housing Review 2022 shows England’s Right to Buy is a “strategic failure” and will exacerbate inequalities if left unchecked (cih.org). ↩

24. Tom Copley, Right to Buy, Wrong for London - London City Hall, January 2019. ↩

25. UKHR 2022-page renumber without LOT (ukhousingreview.org.uk). ↩

26. CIH, UK Housing Review 2022 shows England’s Right to Buy is a “strategic failure” and will exacerbate inequalities if left unchecked (cih.org). ↩

27. [ARCHIVED CONTENT] 183: The Impact of the 1999 changes to the Right to Buy Discount (nationalarchives.gov.uk) ↩

28. Local authority housing data. ↩

29. Economic and fiscal outlook – March 2024 - Office for Budget Responsibility (obr.uk). ↩ ↩²

30. This is explained in further detail at: Right to Buy: buying your council home: Discounts. ↩

31. Chartered Institute of Housing, ten-point-plan.pdf (cih.org), September 2023. ↩

32. LGA, Research into the Right to Buy within the Housing Revenue Account - Local Government Association, February 2023. ↩

33. LGA, Right to Buy position statement - Local Government Association, February 2024. ↩

34. The Strategic Advisory Group includes the LGA, CIH, the Association of Retained Council Housing (ARCH), the National Federation of ALMOs, London Councils and a number of councils. ↩