The failure of “right to buy” policies

Written By: - Date published: 3:03 pm, December 11th, 2017 - 19 comments
Categories: housing, Privatisation - Tags: ,

In doing my media rounds today, I noticed that there has recently been a UK Freedom of Information request that revealed that 40% of council houses1 sold under Thatcher’s “Right To Buy” policy have now made their way into the hands of landlords who are renting them out for double their original price, an incredible policy failure that essentially did nothing but increase the effective market price for rentals by depleting social housing stock.

It got me thinking about National’s attempt to sell off our own state houses, and how that scheme was also a failure, ostensibly they were trying to put the houses in the hands of charities, (because the optics of selling them to private owners was so bad) but only very few of them were willing to consider buying them. Unlike Thatcher’s scheme, there weren’t enough people in a financial position to buy out the state houses they were living in themselves, so National had to focus on selling unoccupied State Houses instead to try to bleed out the housing stock, and kicking people out for spurious reasons like trace amounts of methamphetamine to enable those sales.

In pondering the failure of both programs, I started thinking that perhaps an easy win for the new government would be to consider putting a preventative measure in for future attempted selloffs inside some of its new legislation, such as creating a new type of property ownership that doesn’t allow for private landlords to rent the whole thing, while still protecting the right of owner-occupiers to sublet in a limited fashion, and move all of our state houses onto that legal basis, and then entrench the legislation that did it so it can’t be easily repealed. National wouldn’t be able to help making a big deal of the provision, which would bring the whole news cycle back to their failures on housing and privatisation, costing them support. It also explicitly doesn’t prevent privatization as such, it just requires the purchasers don’t intend to be landlords, and essentially want to use the house for residential or charitable purposes, so they can’t even complain that they want to sell state houses to charities or their occupiers: that would still be explicitly allowed, and the Government parties would need only point to the failure of the thatcher-era policy to justify it’s existence, saying they don’t want to build affordable houses just to have them end up being rented back out but on a more expensive basis.

This would also allow people to sell their own private homes under the new legal basis, preventing them being used as rental properties. It’s a bit of a bazooka-level solution to the property speculation problem, but in the medium term it might just be helpful, despite potential problems down the line.2 It does have the advantage, unlike a CGT, of being something New Zealand First would likely vote for.

It also addresses one of the frequent left-wing criticisms of Labour governments: that they don’t do enough to reverse National’s laws and make things difficult for them when they get back into government, when National’s policies effectively sabotage the country for the next left-wing government and make them spend years digging us out of policy holes and infrastructure debt. I say let’s return the favour, but do it with good policy that’s populist, justified, and might even put a small dent in the housing problem if it’s widely adopted.

Photo credit: Eliot Phillips. Used under a CC-BY-NC license.

1 A UK social housing program run by local councils, as you’d expect from the name.

2 Potentially, in the long term, you could end up with condemned properties that can’t be sold even though the owner didn’t want them, because the type of legal title prevents landlords renting them out, and there might be other unintended side-effects. I think though under those circumstances you’d have broad parliamentary support to relax the law. You’d probably want to put the idea in front of some policy wonks to address potential pitfalls before charging ahead, but broadly I can’t see any pitfalls that would eventuate in the next decade or so.

19 comments on “The failure of “right to buy” policies ”

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  1. savenz 1
    11 December 2017 at 3:40 pm

    Keep it simple – State houses should never be sold. There will always be a need for housing for vulnerable people who for what ever reason will never be able to get a mortgage or buy a home. Having middle men, aka social housing providers or different models is just adding additional bureaucracy. Essentially there should be 10 – 25% of renting housing by the state for vulnerable people.

    BUT I do think that people in them should be encouraged to act more like a home owner, do simple things like painting and gardening and create communities and have pride in the places. Obviously some people can’t do that, but again it should be encouraged not don’t touch this house.

    There should be less central control and maybe a handy person trained up to troubleshoot repairs like the supervisors in apartments in the US. Not always rely on private practise.

    • indiana 1.1
      11 December 2017 at 4:05 pm

      How do you measure when someone is vulnerable to not being vulnerable? If you do not have this measure, can state housing be considered a home for life?

      • One Anonymous Bloke 1.1.1
        11 December 2017 at 4:39 pm

        You no doubt believe (because dogma) that State houses shouldn’t be ‘homes for life’.

        I expect you’ll cite the politics of envy, your precious taxes are being spent on other people, all the usual selfish destructive rote-learned talking points.

        That’s why you vote for market failure over and over and over again.

      • Matthew Whitehead 1.1.2
        11 December 2017 at 4:46 pm

        Does is matter? IMO let them stay in the state house if there’s no active reason to evict them. (ie. actual damage to the property that necessitates remediation)

        If people have enough money to feel secure in moving out, they’ll do it on their own because they might for instance want a larger house to grow their family, or to live closer to work, or to move cities, etc… etc…

      • savenz 1.1.3
        12 December 2017 at 4:02 pm

        I think who gets the state houses is a good question. Ive had friends who started out as migrants and arrived in NZ with no job and got a state house in a top area of Auckland. They then got jobs in IT and banking soon enough and were earning in the top income bracket but (and this is 20 years ago) but still were living in the state house! They then were offered to buy the state house at 10% below market value by the state but decided not too. (big mistake obviously).

        So it’s important that people’s salary’s and income in taken into consideration as this can change.

        But typically I think Maori, disabled and low income families should be the priority and for people born in NZ because it did seem very unfair that our well educated friends who had decent jobs got the state houses and had only just arrived in NZ as migrants having paid zero taxes. They were not refugees so who knows how they got priority for the state house.

        Anyway there should be reviews on income and unfortunately welfare seems to help smarter more educated people who can fill out 75 pages of application well and get the welfare, while those who are semi literate, have various issues and could do with the help, get nothing because they can’t follow the arduous process.

        There should also be different types of state housing, smaller ones for elderly and the bigger homes for the families and they should be INTEGRATED into normal housing areas, not some apartment block that will soon turn into a crime filled slums like what has occurred in the US and UK when they did large scale dedicated social housing.

        Large and centrally run, is often not good when it comes to social services. Maybe each WINZ offices have a general repairs person/social worker for example catering to that areas housing.

    • Matthew Whitehead 1.2
      11 December 2017 at 4:08 pm

      I agree they should never be sold, but trying to entrench that might be a bit hard. 🙂

    • red-blooded 1.3
      11 December 2017 at 4:54 pm

      The thing is, life’s not that simple. Sometimes state housing probably should be sold – if there’s no demand for it in its current location but there’s demand elsewhere. I doubt if there’s much housing stock in that category, but there may well be some (or might be in the future).

      I’m not sure how you would encourage a state house occupant to plant a garden etc. In the past, when the houses were basically provided for the life of the occupant, they were seen as long term homes and people were more likely to do this kind of stuff. It would be hard to sell that idea to wider society, though. After all, if someone’s situation improves or changes significantly (eg, the kids grow up and move out) and they no longer really need a state house, it’s hard to argue that someone else in greater need shouldn’t have the chance to access it. I do think leases should be fixed term, but for a reasonable length of time (maybe 3-5 years) and able to be renewed.

      Perhaps there could be a rebate scheme, with a small(ish) proportion of the rent returned to those who actively maintain their homes and properties?

      • Matthew Whitehead 1.3.1
        11 December 2017 at 4:59 pm

        Those are good points, cheers, and I have no ideological objection to state houses being sold so long as the money is used to build at least the same number of houses in high-demand areas.

      • One Anonymous Bloke 1.3.2
        11 December 2017 at 5:20 pm

        It would be hard to sell that idea to wider society, though.

        If we’re going to let the “they stole it from us” brigade destroy people’s lives rather than confronting their malice, why bother? Fuck what they think: people need shelter.

        Turn the narrative around, expose the bitterness and greed for what it is. Win the argument.

      • savenz 1.3.3
        12 December 2017 at 4:14 pm

        I have to say I don’t buy this idea that the state houses needed to be sold because there was no demand in that area. Personally feel it’s a Natz lie. Maybe if people had been given more information, money to move and more support it would be more helpful. Obviously if the location is filled of crime and violence then it would scare people off. But that should be a police issue not a housing issue. If an area is not safe then call the police in to clean it up. Not sell or leave the state houses empty and then have more people in hotels at $1000 p/w and build them a new house at $600k. That’s crazy!

        Also there used to be a lot more housing in Auckland and many people are used to moving around Auckland and it not being a problem so a lot of state tenants and vulnerable tenants got caught out and actually could not find anything. It’s just a recent thing that there is now practically zero low cost rentals in Auckland.

        Now I think people might consider moving out of Auckland – there is literally no future here for the poor because it is so incredibly expensive. The Natz have created it like that and its going to be difficult to go back.

  2. Bill 2
    11 December 2017 at 4:46 pm

    I’m going to reference Scotland again. (I know – boring)

    ‘Right to Buy’ ended for all council and housing association tenants in Scotland on 31 July 2016.
    If you missed the deadline — you will still be a tenant with a secure tenancy.

    If you still want to buy your home
    Your council or housing association may agree to sell it to you. However, they don’t have to do this, and if they do, you’ll have to pay the full price of the home without any discounts.

    https://www.mygov.scot/right-to-buy/

    • Matthew Whitehead 2.1
      11 December 2017 at 4:48 pm

      Cheers for the extra info, Bill, I was sure it had been ended, but my main concern with it is that 40% sell-through to landlords, who then on-rent for more than the council rate. What an extraordinary market failure, eh?

  3. Craig H 3
    11 December 2017 at 5:36 pm

    Personally, I’d be happy with right to buy, as long as the proceeds are used to replace the house with another state house.

    • Matthew Whitehead 3.1
      11 December 2017 at 11:11 pm

      “Right to buy” policies are a figleaf to that idea that discounts the sale price in order to run down the number of social houses. I think the idea of it being a “right” is a terrible idea, too. The government should be retaining houses that are in critical areas regardless of whether people want to buy them.

      I don’t mind people buying a social house in other areas if they pay a market or premium price that allows the government to build or buy at least one more suitable house from the proceeds, or to divest housing stock in overstocked areas. (A premium price above strict market valuation might be necessary for areas with low house prices in order to cover a more expensive house elsewhere) Any actions like this that aren’t meeting the goal of housing more New Zealanders in high-demand or over-priced areas however, need to be evaluated purely in terms of their contribution to that primary goal of putting people in need of accomodation into good, affordable houses.

      Likewise, I don’t mind them having renewal of tenure and some longer-term security in two- or five-year chunks, so long as there’s a subsidized price for people in need vs a market price for people who just want to stay put but no longer meet normal social housing terms on their renewal, and provided there’s enough social housing supply in their area. Giving people a home for life is better, of course, but we need to be covering people who need a home that’s not a car first in my opinion.

      • Craig H 3.1.1
        12 December 2017 at 4:56 am

        Totally agree that the critical requirement of government social housing is to eliminate homelessness.

        Beyond that, the primary risk to government social housing, as I see it, is a change of government, so the strongest way to avoid that is to sell the house and replace it, as then we have two houses instead of one, and the new government can’t reverse that effect by selling off houses.

  4. Ian 4
    12 December 2017 at 10:06 pm

    Common sense and economics dictate that state houses on extremely valuable land could be sold and the sale proceeds can then be used to buy 2 houses. But the left seems to lack any common sense and are batshit crazy when it comes to economics. If people can afford to buy their state provided house why are they living in a state provided house ?

    • Ed 4.1
      12 December 2017 at 10:11 pm

      ‘Batshit crazy’
      First BM, now you…..

      Are those your stage lines to repeat ?

    • One Anonymous Bloke 4.2
      13 December 2017 at 5:06 am

      With costs come benefits. Crazy idea I know.

      “Your” “policy” will create extra costs that you haven’t considered. Sloppy.

    • Matthew Whitehead 4.3
      13 December 2017 at 9:30 am

      Actually it’s the right that’s off the reservation on economics, have a look at how the economy actually performs when we do everything they say they want. That said, this isn’t a thread about economics, so I’d suggest you take that subject to Open Mic, but if you’d like me to argue the superiority of left-wing economics and using collectivism where it functions best with you sometime, by all means.

      As to why you might not evict someone from their home if they no longer require the economic support, because they’re already living there, you don’t have a waiting list in that area, and they’re a good tenant? Weren’t you just talking about common sense economics? In social policy there are externalities to things like evicting people, even when they’re not at-risk, so it’s something you only do when you have a legitimate need to. We just talked a couple times up the thread about selling surplus houses to the market to build more state houses elsewhere where they’re desperately needed to fill the affordable housing gap, an idea you should absolutely be behind, so pay attention. 😉