Council faces backlash after Right-to-Buy loophole costs millions

A council with the biggest social housing waiting list in England has come under fire for buying back ex-council homes for millions of pounds.

The Big Issue reports Newham council sold off 130 properties for £10.6 million, only to buy them back for £33.3 million, losing £22m on homes it had owned just a few years previously.

As previously reported on Property118, the number of council homes being sold under the Right-to-Buy scheme is set to hit its highest level in 20 years.

A choice has been made to buy back these properties at a loss

According to The Big Issue, a loophole in the Right-to-Buy system means that if homes are sold back to councils more than five years after the original sale, councils are unable to reclaim the discounts they were forced to offer.

In one example, Newham Council sold a property under Right to Buy in June 2015 for £49,300.

In March 2021, the council bought back the same home for £320,000, more than six times the price it sold for.

Green councillor Areeq Chowdhury told The Big Issue that the Right-to-Buy scheme is fundamentally flawed.

He said: “People will be astonished to find out that their money is being spent in this way in Newham, with such a massive waiting list, so many people homeless and living in temporary accommodation. It’s not good, if you think about £22m, that’s money which in an ideal world could be used on housing the homeless, but instead it’s used to create wealth.

“A choice has been made to buy back these properties at a loss, rather than fund the other public services the council has decided to cut.”

Buying back former council homes is cheaper than alternatives

However, Newham Council insists that buying back former council homes is still cheaper than alternatives such as purchasing on the open market or building new homes.

A Newham Council spokesperson told The Big Issue: “Most of the former council properties we’ve bought back are flats in council-owned blocks. These were sold under Right to Buy, which by law required us to sell to the tenants at large discounts.

“To repurchase, we must pay current market value, often much higher due to discounts and property inflation.

“Buybacks make sense for councils for several reasons:

• They’re in council blocks, helping us consolidate management.
• They provide a quick way to deliver much-needed homes.
• They’re far cheaper than buying on the open market or building new homes.

“The government has responded to concerns about Right to Buy and the shortage of social housing nationwide. Discounts are now less generous, and councils have greater flexibility in using funds to provide homes.

“Alongside buybacks, we also have ongoing programmes for delivery of new build homes and regeneration.”

Simply not enough social homes

A spokesperson for the Ministry of Housing, Communities and Local Government previously told Big Issue: “There are simply not enough social homes because of the housing crisis we inherited, and we are giving councils greater flexibility to use Right to Buy receipts so they can build and buy more homes.

“Our priority is to reform the scheme to better protect social housing stock and support councils to deliver new homes.

“We will continue to support long-term tenants to buy their homes, alongside building the biggest boost to social and affordable housing in a generation – backed by £39 billion investment.”

Although the Labour government has not abolished Right-to-Buy, it sharply reduced the maximum discount in last October’s Budget, cutting it from £136,000 to £16,000 in most London boroughs, and from £102,000 to £38,000 outside the capital.