Thomas Perrett unpicks why the Conservative Party is considering rebooting the long-discredited housing policy
The Government is considering a re-imposition of Margaret Thatcher’s ‘Right to Buy’ scheme, offering 2.5 million housing association tenants the opportunity to buy their properties at discounted prices of up to 70%.
The plan, which aims to help ‘Generation Rent’ onto the housing ladder, is intended to alleviate the staggering disparity between house prices and incomes. According to figures from the Office for National Statistics, a home in England in 2021 cost on average 9.1 times more than earnings – up from a figure of 7.9 the previous year.
Indeed, while the average annual salary in Britain has only risen from £10,000 to £30,000 since 1990, the average house price has increased from £50,000 to £260,000, culminating in 28% of young adults living with their parents.
This is made significantly worse by the increasing proportion of income taken up by rent payments – it has been estimated that, during 2021, tenants in the private rented sector across the country spent an average of 42% of their incomes on rent, a figure which rose to 54% with the inclusion of household bills.
It is unlikely that the discounts offered by Boris Johnson’s reheated Right to Buy scheme will bring down housing costs or prevent exploitative practices within the rental sector, such as landlords using buy-to-let mortgages to buy up existing housing stock, thus reducing supply and pushing prices up even further.
The plan has been criticised by Polly Neate, chief executive of the homelessness and housing charity Shelter. Arguing that the “hare-brained” policy was “the opposite of what the country needs,” she said: “Over one million households are stuck on social housing waiting lists in England, and with every bill skyrocketing, the Government should be building more social homes so we have more not less.”
A Property-Owning Democracy?
The Government’s new housing plan builds on the vision articulated by previous Conservative prime ministers – including Anthony Eden and Thatcher – of creating a ‘property-owning democracy’ in which private citizens, owning appreciating assets, would be dissuaded from engaging with radical politics, instead gradually assimilating into the ranks of the aspirational middle class.
In much the same way as the original Right to Buy Act of 1980 attacked the institution of council housing, promising that working families would have greater control over their futures – inculcating the individualistic ethos of Thatcherism – Johnson’s revival of Right to Buy can also be interpreted as a political ploy.
Despite Conservative victories in recent general elections, the party has a significant obstacle in voters under the age of 40. A 2017 YouGov poll which surveyed 13,000 voters found that, among women under 40, Labour led the Conservatives by 15%. Among men under 40, 32% of those surveyed backed Labour, compared with 31% supporting the Conservatives.
Sustained by an ageing population, and enjoying significant support among home-owners, the Conservatives could be looking to expand their electoral base.
Home-ownership is traditionally associated with the adoption of right-wing politics, as voters seek to protect their investments. Indeed, in the 2019 General Election, 57% of owner-occupiers and 43% of mortgage-holders voted for the Conservatives; compared with just 22% and 33% respectively who voted for Labour.
Boris Johnson’s crucial gains in former industrial ‘Red Wall’ constituencies were also starkly correlated with home-ownership. In only three constituencies that voted Conservative in 2019 (Chelsea and Fulham; Kensington; and the Cities of London and Westminster) did less than 50% of the population own their homes.
As the party’s popularity shows signs of waning in these areas, with polling from the beginning of the year demonstrating that the Conservatives trailed Labour by 16 points in key Red Wall seats – exacerbated by the loss of more than 400 seats in this year's local elections – the attempt to expand the party’s voting base seems a desperate, drastic move.
The Legacy of Thatcherism
The causes of the current housing crisis can be traced back to the original Right to Buy plan of 1980, which enabled council tenants to buy their homes at discounted prices of up to 50%.
This, however, led to a severely depleted national housing stock, as local councils were effectively prevented from reinvesting the proceeds of sales into new social housing. Consequently, there are just two million public houses in Britain today, compared to 6.5 million when the scheme was first introduced. Even plans such as those by the 2007 Labour Government to build 240,000 new homes per year by 2016 fell woefully short of addressing the scale of the problem.
The effects of the original scheme were compounded by the deregulation of the financial sector, which caused commercial banks to lend excessively to mortgage holders, ensuring a flood of speculative investment from which a bloated asset bubble emerged.
Households were encouraged to take out larger and larger mortgages, making mortgage-lending one of the most lucrative forms of investment. Today, domestic mortgage-lending has expanded to 60% of GDP, as the economy at large is dependent upon a buoyant housing market.
The bloated housing market has been bolstered by erratic monetary policy strategies pursued by successive Conservative governments since the Thatcher era, which have directed funds into this unproductive, speculative area of the economy, in lieu of productive investment.
Historically low interest rates, intended to stimulate growth in the aftermath of the 2008 financial crisis, in fact further incentivised mortgage borrowing, culminating in a 43% rise in house prices over the past decade.
Similarly, after 2008, quantitative easing became a mechanism by which central banks buying up government bonds from the financial sector could further inflate house prices, while austerity ravaged the real economy. According to the Bank of England’s own analysis, real house prices in 2014 would have been 25% lower than they actually were, if the first round of quantitative easing had not been implemented back in 2009.
Meanwhile, real wages have stagnated to for the longest period since the Napoleonic Wars, as even families earning middle incomes are beginning to fall prey to the cost of living crisis. An extra 2.2 million people will have to sacrifice essentials such as food and clothes this year, including families earning as much as £33,000 per year before tax, while housing speculation continues unabated.
The Government’s revival of Right to Buy demonstrates not only a sense of desperation driven by the Conservatives Party’s precarious electoral position, but an unwillingness to grapple with the multifaceted causes of skyrocketing housing costs.
The far-reaching, substantive measures required to help successive generations priced out of the housing market, which may include state-led housebuilding initiatives and a land value tax to encourage developers to build new homes, would be unpopular with the Conservatives’ asset-owning supporters, damaging their electoral hopes.
A significant subsection of the party’s supporters rely on artificially-restricted supply and high land prices to drive up housing costs and protect their investments. Political expediency and protective economics is damaging the prospects of the millions caught outside this system.
Right to Buy formed a key part of Margaret Thatcher’s war on Britain’s working class. Framed as a plan to allow council tenants to develop a greater sense of autonomy and independence through property ownership, the plan led to mass financial speculation and the inflation of property prices. The current Government, by proposing the revival of this policy, has demonstrated a similar inability and unwillingness to help those who lack access to affordable housing.
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