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Chapter 7: Discussion
Finally, we consider some of the key issues to emerge from the research in more detail.
Motivations for purchasing under the Right to Buy
The research suggests that tenants' motivations for buying their home under the Right to Buy are very different from typical first time buyers. Linked to this, although the tenants often described Right to Buy as a way into home ownership or a step onto the housing ladder, in practice they approached home ownership very differently from other new buyers.
Critically, tenants tended to wait until their 'ideal' property was available to purchase, rather than purchase a compromise property with a view to moving. Whereas, typically non-Right to Buy purchasers will compromise on earlier purchases, with a view to 'trading-up' through successive purchases to a property that more closely matches their ideal property. To some extent this makes sense as tenants do not have the option of property search that is open to other first time buyers; their 'search' is restricted to transfer activity. It might be argued that this lack of control of the home search process should motivate tenants to buy 'non-ideal' properties, with a view to moving to more suitable properties. However, clawback on their discount (which applies for the first five years post-purchase) will act as a disincentive to purchasing a property that a household would want to move from in the short to medium term, while the continuing accrual of discount years while awaiting a more suitable property will act as an incentive to pursue transfer to the 'ideal' property.
There may be some differences in the definition of ideal property between purchasing tenants and other purchasers. Clearly issues of property size and type were taken into account (and because Right to Buy tenants are typically older than first time buyers, they will generally be looking for slightly larger properties, and for family-type properties, as opposed to the smaller, flatted properties that are marketed at first time buyers). Location, which is always critical in house purchase decisions, was absolutely vital to tenant Right to Buy owners, but for very different reasons: the tenants were primarily interested in areas they would be happy to live in rather than resale potential. Further, as is discussed below, Right to Buy appears to have contributed be a 'polarisation' of council areas; consequently, the area choices available to tenants may be somewhat different to those available to first time buyers. Tenants may have a real incentive to wait for a transfer to their location of choice prior to making a Right to Buy application - their current and preferred location may be very different standards of area, whereas open market purchasers are likely to be choosing between fairly similar standards of areas.
Finally, the notions of investment were very different for tenant Right to Buy owners than for other owners. Despite the potential for significant capital gain presented by the Right to Buy discount, the purchase was discussed in terms of investing in their future and/or their family's future. This implies that people were often not intending to move, and that the home was seen as a fixed resource - again as a place to live in, rather than as a financial asset, at least for some time to come.
Housing costs
From the outset of the Right to Buy, there were some concerns from authorities that purchasers would not be able to afford the full costs of home ownership. The research suggests that the purchasers interviewed appear quite relaxed about their housing costs; respondents indicated that they were aware of the range of costs that they were liable for - the mortgage, repairs, insurance - and indicated that these were under control.
Although most of the Right to Buy owners were no longer in a position to provide a direct comparison of rent and costs of owner occupation, they tended to consider their current housing costs to be typically around the same or even less than rent levels. They tended to feel that even if current costs were slightly higher, that in the long run, their costs would be lower - their mortgage costs would be unlikely to rise (assuming no changes in interest rates, and these may be fixed at least in the medium term) and would eventually be paid off; rent would be a continuing obligation, rent levels have been rising and are likely to continue to do so. Critically, they tended to report that their current costs were affordable, and at the end of the mortgage period they would have an asset.
It is however important to stress that the research is a qualitative study, which need not be representative of Right to Buy owners as a whole. Rather, it represents the views and experiences of a range of people, both tenants and owners, which are likely to be shared in some way by others across Scotland.
The costs of home ownership were thought to be a significant barrier by many tenants who had not yet bought. In some cases, costs were seen as a barrier simply because the household thought it did not have enough money to cover the cost of a mortgage. These were often people relying on benefits or low wages. However, a number of other important issues were also raised by respondents.
- Stability of employment - which suggests that, although current income may be sufficient, the reliability of future income streams were a concern.
- Debts - these would make getting a mortgage difficult, or would make the tenant wary about taking out a mortgage.
- Responsibility for repairs and maintenance - which can result in a range of cost-related reasons, including the total cost of repairs and maintenance being too much to cope with (especially for certain types of property), the unpredictability of costs, the volume of repairs required on the specific property.
These issues are significant and, with the exception of the very last point, are unlikely to be restricted to access to Right to Buy - they are equally applicable to other home ownership options that are currently being implemented to increase access to affordable housing, such as Homestake.
Repairs
The issue of repairs and improvements emerges as key during the research. It fits with common perceptions of the Right to Buy that sold housing will be identified by new windows, doors, and so on. Indeed, in some cases, respondents noted they were disappointed if fellow owners did not undertake such work; it was expected, that the profile of the whole area would be improved and enhanced by Right to Buy, and this relied on owners undertaking visible (improvement) work on their property. In line with past research, respondents indicated that additional mortgage finance, or a re-mortgage, was sometimes used to enable this work to proceed ( DTZ Pieda, 2002).
However, a number of potentially crucial repairs-related issues did not come through in the research:
- The cost of general repairs
- The cost and management of communal repairs
- The inability to participate in improvement programmes
The research found that although respondents were aware of the costs of repairs and maintenance, they tended to take these in their stride, welcoming the opportunity to rectify problems that the council had not, to control the quality of the work, and to incorporate improvements in the works. Yet some local authorities are noting from local house condition surveys that the ex-Right to Buy sector contains a significant level of disrepair (unpublished reports). This may suggest that there is a underlying condition problem within, at least part, of the ex-Right to Buy sector.
Communal repairs are a particular issue in mixed tenure (or fully ex-Right to Buy) blocks. Many local authorities have taken full management (and often financial) responsibility for common maintenance and repairs in the past. However, as the Right to Buy is increasingly affecting tenement flats and even multi-storey flats, and the requirements of the Scottish Housing Quality Standard eat into capital budgets, authorities are increasingly withdrawing from this position. Owners are being required to contribute to the cost of administering and carrying out the routine maintenance functions and common repairs. That only one of the respondent commented on the management/cost of communal repairs and maintenance is more likely to be because local authorities in other areas are continuing to undertake tasks, rather than because of the smooth operation of this area. Glasgow's deeds of condition clearly set out factoring arrangement for common repairs and improvements until the GHA has no further interest in the block. Other local authorities, in parts of the country without such a strong factoring tradition, are investigating whether a factoring approach can be 'imported' to ensure robust management and financial arrangements for repairs and maintenance of common parts.
Finally, a phenomenon which is beginning to emerge is the 'divided mixed tenure estate', where improved properties sit alongside unimproved properties. However, unlike the situation described previously, in this scenario the improved dwellings are the local authority dwellings - generally, but not always, regeneration estates, improved at significant cost - whereas the unimproved dwellings are the Right to Buy properties, where the owners cannot afford to take part in the improvement programme. None of the respondents described this situation, but it is a reality in some local authority areas - improvements are being made to local authority stock, but not to owner occupied stock. In some areas, Private Sector Housing Grant is being used to support owners to take part; changes coming through the Housing (Scotland) Act 2006 will affect how this can be achieved in future.
Housing history
The Right to Buy has played a critical role in the growth of owner occupation in Scotland - accounting for around half the increase over the 20 years to 2001 Census. Crucially, it appears to have opened opportunities to home ownership that might not otherwise have been available - both in financial terms, by providing the discount, and in terms of role models and confidence, by increasingly populating local communities with neighbours, classmates, co-workers and family members who are owners. And once a household has become owner occupier, it is highly likely that future generations will also become owners. Typically, analysis would suggest that the best determinant of an emerging household's principal tenure is parents' tenure. This is borne out by the comments made by respondents in this research that their children would intend to buy their own properties.
Nonetheless, as discussed above, the study found clear evidence of a lack of confidence regarding home ownership among some non owners; they spoke in terms of risk and chance; they spoke of being frightened; and they listed aspects of home ownership which they did not how to deal with (the house buying process, repairs, finance).
Freedom
One clear theme that runs through the Right to Buy purchasers' commentaries is that buying their house afforded them freedom, in a number of respects. This included freedom to:
- Improve their property - often to make the repairs that they had been waiting for the council to do, but had not yet been done, or to have the work undertaken to their required standard, or to incorporate improvements in the work
- Move - to a property that better suits their family's needs. This might involve a move up the property ladder, but may also involve a move to smaller housing/accessible housing
- Stay in their house - one household was concerned that the council would require them to move from their house once their children had moved on and they had 'spare' room. They viewed their purchase as a way to guarantee staying in their home 5
- Benefit financially. In some cases the mortgage was less than rent, so the household had greater disposable income; there was also an expectation of a time when the mortgage was paid off, and there would be no mortgage costs.
- Self-improvement - probably the most important was the sense of 'betterment' that went with home-ownership.
However, several respondents appreciated that there was a social cost - that the Right to Buy had reduced the housing opportunities for others in the community. This affected young households just starting out as council tenants, and families needing council housing - opportunities for social renting were severely limited now - and some of the existing tenant households who had not yet exercised their Right to Buy - all the properties worth buying had already been sold.
Impacts on communities
Finally, turning to the wider impacts on communities. The research has stressed the positive impacts that Right to Buy has had on communities - property improvements, a real sense of ownership and involvement, neighbourhood cohesiveness, and so on. It has also touched on some of the less positive aspects.
Polarisation
The Right to Buy has indeed led to the improvement of some areas - often linked to the profile of the stock in the area; areas typified by low rise family housing, and especially three and four bedroom housing, detached, semi-detached and, to some extent terraced housing and four-in-a-block housing are generally considered high demand - both for lets and for Right to Buy. Although as the Right to Buy continued, the opportunities for lets in these areas would have declined. The areas where housing sold early will also have a healthy resale market, which will contribute to their continued 'improved' status mentioned by the participants. On the other hand, local authority areas with one and two bedroom properties; multi-storey blocks, tenements, and other high density housing, are typically in less demand. These are the areas where singles and couples have been housed, but increasingly other household types have had to be housed because of limited social housing options elsewhere. The distinction between the 'in demand' or improved areas and the 'low demand' areas may be stark.
However, as discussed above, there is Right to Buy on regeneration estates. As the level of Right to Buy in regeneration estates increases, and local authorities and RSLs continue regeneration and Housing Quality Standard improvement works, there are potential implications for Right to Buy properties that are unable to participate as the cost of these programmes can be substantial.
Private rent
A further consequence of Right to Buy in lower demand properties is the movement of these properties onto the private rented market - either because the owner/estate is having difficulty selling the property so decides to rent the property out instead, or because the property has been bought specifically for rent.
These are typically properties in lower demand areas or hard to let type stock (multi-storey blocks, poorer tenements, regeneration estates). Rents may be higher that council rents for adjoining properties, but screening may be less scrupulous; and quality of landlord services and the quality of property may be poorer. 6 Some limited mention of this was made in the research. As yet there is little detailed evidence of this trend in the broader literature, but local authorities are becoming aware of the issue and are looking for approaches to investigate the issue systematically (Tribal HCH, 2005).
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