McDonnell’s distorted and dangerous version of Right to Buy

by Property 118

9:01 AM, 5th September 2019
About 2 weeks ago

McDonnell’s distorted and dangerous version of Right to Buy

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McDonnell’s distorted and dangerous version of Right to Buy

The think tank Centre for Policy Studies (CPS) has written an article for release describing Labour’s private sector ‘Right to Buy’ policy as dangerous and damaging.

This is superficially similar to a scheme proposed by the Centre for Policy Studies in October 2018, but is a damaging and distorted version of that policy.

‘From Rent to Own’, authored by Alex Morton, Head of Policy at the CPS (and formerly responsible for housing and planning in the No 10 Policy Unit), argued that landlords should be incentivised to sell to tenants, to redress the rise in buy-to-let and fall in owner-occupation in recent decades.

Commenting on the story, Robert Colvile, Director of the Centre for Policy Studies, said:

“It is gratifying that Labour appear to have been reading the Centre for Policy Studies’ recent work setting out a way to help renters buy their home, but they seem to have completely missed the point.

“The big story of the housing market in recent years has been a surge in private rental at expense of owner-occupation. It is vitally important to reverse that – for example by incentivising landlords to sell to tenants through CGT reliefs for both (a policy which our research has shown is practical, affordable and highly popular).

“But it is equally vital that this is done in a way that is fair to tenant and landlord alike. Labour’s proposed ‘right to buy’ for private tenants appears in effect, to be the expropriation of private property, and is likely to have all kinds of unintended consequences.”

“From Rent to Own’ proposed that the Government should turn the Capital Gains Tax payable by a landlord on sale of a rented home into a rebate shared between landlord and tenant creating an incentive for the former to sell, and giving the latter a significant contribution towards a deposit.

“This scheme, entitled Help to Own, would mean that for every £1 a tenant invested to buy the property they rent they would receive a total of £3 for their deposit.”

‘From Rent to Own’ Proposal by the CPS:

A fully costed policy which would actually raise substantial sums of money for the government while increasing the rate of home ownership substantially.

The report proposes that for a single year, the Government should turn the Capital Gains Tax payable by a landlord on sale of a rented home into a rebate shared between landlord and tenant – to the former as an incentive to sell, and the latter to contribute towards a 10% deposit so that they can purchase the home.

  • This rebate would be split 33% to the landlord and 66% to the tenant, capped at 6.66% of the property.
  • The landlord would receive 33% of their capital gains back.
  • All tenants would receive 6.66% of the value of their property toward a deposit.
  • There would be a mechanism to pool capital gains receipts, and further shared ownership schemes to help those whose landlords were reluctant to sell, or who could not afford the entirety of their property.

In order to ensure fairness, the tenant would have to contribute 3.33% of the value of the property to the deposit, although they would be given time to save or find this money. This would be a hand up on to the housing ladder, not a handout for nothing.

This scheme, entitled Help to Own, would mean that for every £1 a tenant invested to buy the property they rent they would receive a total of £3 for their deposit. For an average property worth £228,000, they would be putting in just over £7,000 and getting £22,800 back.

Now it would be interesting to hear what Landlords think of the above policy proposed by the CPS.



Comments

Binks

16:15 PM, 5th September 2019
About 2 weeks ago

The consequences are far more damaging than decimating PRS and housing market. Any government that is stupid enough to so grossly disregard property rights - actually let’s call it by its real name - expropriation, will cause a swift withdrawal of all foreign investment, several notch downgrades to UK’s rating and massive rise in borrowing costs etc etc. Anyone that’s voting for these Marxist nutters must be insane.

Peter G

17:12 PM, 5th September 2019
About 2 weeks ago

Reply to the comment left by Simon Williams at 05/09/2019 - 10:06
Apparently many overseas landlords HAVE been buying property with the intention of keeping them empty, as they have the perception that they will remain "pristine" and hold their value better than a "used" property. Hence the actions by Councils to penalise such Landlords with increased Council Tax. However, the effectiveness of this Council strategy is debatable.

Dr Rosalind Beck

17:40 PM, 5th September 2019
About 2 weeks ago

I critiqued the CPS and Onward policy suggestions when they came out:

https://www.conservativehome.com/platform/2018/10/rosalind-beck-why-the-cps-and-onwards-plans-for-housing-sales-to-private-tenants-are-wrong.html

They were pretty stupid and very unfair but McDonnell's idea is on another scale. It is to steal other people's property and give it to the lucky few. If this came near to being policy we would have to vigorously defend our interests and assets in the courts.

Annie Landlord

17:44 PM, 5th September 2019
About 2 weeks ago

I doubt anyone has conducted any research to determine how many existing PRS tenants would actually be in a position to buy their rented property. Many tenants require flexibility and need to upsticks and move due to job offers elsewhere in the country. Other are students or overseas workers similarly needing flexibility. The families reliant on welfare benefits are very unlikely to meet mortgage criteria. So who would actually benefit from this policy? Its yet another soundbite, full of sound and fury, signifying nothing

Dr Rosalind Beck

17:53 PM, 5th September 2019
About 2 weeks ago

Reply to the comment left by Annie Landlord at 05/09/2019 - 17:44
I did do a straw poll on this, which I reported on in my conhome article. I did that because I believe that there isn't any research on it. According to landlords I asked about 2% of their tenants in situ were in a position to buy. This may not be that reliable but neither would self-reports by tenants be that accurate - they may believe they could or couldn't buy and be wrong on either count.
I'd say the figure of 2% though is about right for my portfolio. The figures are likely to be miniscule working to the CPS and Onward policies.
However, if they were gifted the equity in the property - i.e. if our asset was stolen from us, possibly even leaving us with no asset and a debt on the property - then maybe more tenants would be inclined to try to buy. There would still be the issue of them getting mortgages. I wonder how McDonnell would get around that? Force lenders to lend to people who don't meet their criteria? Set up a state bank to provide mortgages to those who otherwise couldn't get them? Sounds like the sub-prime loans which kicked off the recession.

Annie Landlord

18:16 PM, 5th September 2019
About 2 weeks ago

Reply to the comment left by Dr Rosalind Beck at 05/09/2019 - 17:53
As you say only a small scale survey but no-one else has bothered to conduct any research. This is just a hastily cobbled together 'policy' to try to appeal to a wide range of people in readiness for a General Election. It's also interesting that Labour would come up with a policy to increase the number of owner occupiers - a cohort more likely to support the Conservatives. Maybe he thinks the new owners would be forever grateful and carry on voting Labour!

Denise G

19:24 PM, 5th September 2019
About 2 weeks ago

Reply to the comment left by JJ at 05/09/2019 - 11:24And if you start out in life thinking you're going to work hard and one day, finally own your home, perhaps after several decades of work paying off a mortgage, it's not a particularly smart message for a party to be saying, "...after you've done all those decades of work we're going to take all that off you anyway."
That is already EXACTLY where my (life time Tory voter) f-i-l, who is unfortunate enough in his last years to need to reside in a high dependency care home, finds himself!
He has been obliged to sell the home, which he spent his entire working life paying for, to fund his care - which is costing him a little over a grand a week.
His is not a unique case - I hear almost on a daily basis of friends whose parents find themselves in the same position.
My f-i-l wonders why he bothered!

Binks

20:45 PM, 5th September 2019
About 2 weeks ago

Reply to the comment left by Dr Rosalind Beck at 05/09/2019 - 17:53
I’d be bad for your statistics then as all of our tenants could afford to buy our flats. My husband and I have 5 high-end flats in an area of very average standard rentals - all of our tenants are doctors, army officers and professionals who rent for career flexibility. To add to that, all of our capital gains have been through hard work and a lot of risk taken - we bought a near dilapidated townhouse and spent 18 months making it into our beautiful flats. We had scary bridging loans, sleepless nights, 7 day weeks. Clearly gains that need to be shared with others according to Labour... we’ve just put our first flat on the market. Had enough.

Dylan Morris

20:57 PM, 5th September 2019
About 2 weeks ago

Most tenants I guess aren’t currently able to purchase their home, but give them say a 50% discount on the price (in some cases I believe even 70% under current RTB legislation) and suddenly a very large number of them WILL be in a position to buy. Add in the “too good to miss” opportunity of making a large capital gain by selling after 5 years with no repayment of discount and overnight massive numbers of tenants are going to be very interested indeed !!
In most cases landlords will lose all, or most of, the deposit they put down to buy the property and this is nothing but legalised theft.

Dr Rosalind Beck

21:17 PM, 5th September 2019
About 2 weeks ago

Reply to the comment left by Dylan Morris at 05/09/2019 - 20:57
Yes, very good point about them being able to later sell on and cash in the money which was rightfully the landlord's.

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