Right to Buy is not to blame for British housing shortage

Kristian Niemietz is senior research fellow at the Institute of Economic Affairs, and author of Redefining the Poverty Debate.

THE Right to Buy programme, which enabled council tenants to buy the home they lived in at a discount price, was one of Margaret Thatcher’s less controversial policies during her time in office. By 1987, 1m council houses in Britain had been sold to tenants, with the aim of paving the way to a property-owning democracy where everyone had a real stake in their communities.

But Right to Buy also had its opponents, especially among social policy experts who feared its political implications. If you give low-earners a taste of private ownership and the independence that comes with it, doesn’t that undermine support for government welfare more generally?

Another claim is that Right to Buy contributed to Britain’s current housing shortage. In this version of events, the Thatcher government short-sightedly sold off all the public stock, and as a consequence there is nothing left now to house the needy.

But there are problems with this interpretation. Even though Right to Buy was big in scale, Britain still has one of the largest social housing sectors in the developed world today. Social housing accounts for a fifth of the total housing stock, a higher share than in France and the Scandinavian countries, which social housing enthusiasts often present as role models.

How can the social housing sector still be so large after decades of council house sales? The answer is simple: because it was huge when Right to Buy started. In 1980, the public sector acted as a gigantic “over-landlord”, controlling a third of all housing units. As far as the housing stock was concerned, when Thatcher came to office the UK had the ownership structure of an Eastern European country.

Of course, critics of Right to Buy are right to point out that demand for social housing vastly outstrips its supply. In England alone, there are almost 2m households on a social housing waiting list. But it’s wrong to interpret this as a consequence of a specific lack of social housing. Rather, there is a lack of affordable housing in general, and the oversubscribed social housing waiting list is just one of its many manifestations.

Right to Buy did, however, coincide with a slowdown in the construction of council housing. But this would not have been a problem if the private sector had been allowed to take up the slack. In most of the developed world, housing is primarily delivered through market mechanisms. The problem in Britain is that private housing development has remained shackled by a planning system that opens every door to nimbyism. This explains why the rate of housing completions went down from 47 units per 10,000 inhabitants in 1979 to just 37 in 1990, and declined even further from then on.

Right to Buy had nothing to do with this. Rather, in a decade in which many sectors experienced deregulation and liberalisation, land use planning bucked the trend, and remained under tight regulatory control. It was probably the sector in which the Thatcher government was as far away from Thatcherism as it gets.

Kristian Niemietz is poverty research fellow at the Institute for Economic Affairs.

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