Scottish Government

4. THE IMPACT OF THE RIGHT TO BUY ON THE AVAILABILITY OF HOUSING ACCOMMODATION

4.1 Introduction

4.1.1 With over 470,000 homes transferred from social housing to owner-occupation since 1980, many have argued that social housing has, as a result, become less accessible. However, any exploration of the impact of the Right to Buy on the availability of housing accommodation must also consider demand-side factors. Households that might have previously rented social sector accommodation may now have a preference for home ownership, including ownership of Right to Buy properties, purchased either by them or sold on as 'resales'. The role of former Right to Buy properties that transfer into the private rented sector must also be taken into account.

4.1.2 An earlier chapter noted the absolute reduction in the social housing stock, and identified a greater loss of certain types of properties, particularly houses and larger properties. This chapter starts by looking at the impact that this has had on the number of lettings in the social rented sector. It then goes on to consider the role that Right to Buy resales have in the housing market, and the role of former Right to Buy properties that transfer into the private rented sector. The chapter also looks specifically at the impact of the Right to Buy on the availability of housing in rural areas.

4.2 Impact of the Right to Buy on new lets including lets to homeless applicants

4.2.1 It is clear - at least in terms of numbers of units - that the ability of the social rented sector to house new tenants has been reduced as a direct result of sales under the Right to Buy. The capacity of the sector to house applicants in housing need can be looked at more meaningfully by examining the relationship between Right to Buy sales and the number of lets to tenants.

4.2.2 The Right to Buy does not have an impact on the number of available social lettings at the time it is exercised. Rather, the impact is felt when the property is no longer occupied by the original buyers. At this point, it can be assumed that if the property had stayed in the social rented sector it would have become available for relet. ¹⁶ Historically, the number of local authority dwellings let to all new tenants ¹⁷ has not fallen at as fast a rate as the reduction in stock through the Right to Buy. Figure 4.1 ¹⁸ shows that, between 1985/86 and 1998/99, the total number of lets to new tenants remained fairly constant, with the exception of a fall in the early 1990s. This could have been as a result of the high Right to Buy sales in 1989 and 1990.

4.2.3 Figure 4.2 shows that, more recently, the number of lets does appear to have fallen. ¹⁹ The total numbers of lets by local authorities remained broadly constant in 2001 and much of 2002, but began to decline in the latter part of 2002 and continued to do so in 2003. The number of lets then saw a pronounced decline from around 10,000 to around 8,500 over the course of 2004, before levelling out during 2005. Over the course of 2004 and 2005, lets to homeless applicants increased from around 2,000 to around 2,500, and lets to other new tenants reduced from around 7,500 to around 6,000.

4.2.4 It is not surprising that the lets within these overall totals to homeless applicants have increased, and that the lets to other new tenants have decreased, given the obligations upon landlords towards housing homeless applicants. This most recent fall in local authority lets appears to follow the upturn in Right to Buy sales in 2002 and 2003, where sales in each year for all social landlords exceeded 16,000. It is also possible that the fall in lets may coincide with an increased level of scrutiny of letting rates by local authorities. This increased scrutiny has been associated with efforts to assess the impact of meeting the 2012 homelessness target, when all unintentionally homeless applicants will be entitled to housing accommodation.

4.2.5 The national figures do, to a large extent, obscure the picture at the local area, especially in the more 'pressured' local housing markets. Research by Pawson et al. (2002) which focuses on a number of case study areas that might potentially be considered pressured areas found that there was generally a significant decline in the overall volume of lettings during the 1990s in such areas.

Figure 4.1: rate of new lets of local authority stock 1985 to 2005

Figure 4.2: rate of new lets of local authority stock 2001 to 2005

4.2.6 Generally, there have been increased numbers of lets to homeless applicants, and decreased numbers of lets to transfer applicants. This may, in part, reflect changes to homelessness legislation. In 1984/85 transferring applicants accounted for 35% of all council lets. This reduced to an estimated 24% of all lets in 2004/05. ²⁰ In 1984/85 lets to homeless applicants represented 10% of all lets by councils. This had increased to 27% of all lets in 2004/05. In the past, social housing tenants commonly transferred within social housing until they achieved the type of housing they were looking for, such as a bigger property, a house with a garden or a house in a more desirable area. The options for such transfers are now much reduced.

4.2.7 The most recent Scottish House Condition Survey ( SHCS) (2000-02) indicated that tenants buying under the Right to Buy tend to stay longer in their properties than other council tenants. ²¹ Estimates for the tenants who bought during the 1980s and 1990s indicate that slightly over half of the properties sold in these periods have been retained by the original purchasers. Other factors leading to higher turnover in the remaining stock may be due to the nature or location of the properties, or changes in the characteristics of new tenants. This high level of retention suggests that these properties would have made a limited contribution to the availability of properties for let, had they remained in the social rented sector. Retention rates will, of course, decline over time as previous generations pass properties onto their inheritors. It may also be the case that over the period in question those in local authority accommodation have been more likely to move than in the past.

Figure 4.3: Lets to all new tenants (waiting list applicants plus homeless applicants)

4.2.8 Figure 4.3 shows variations in numbers of lets by local authority area for 2004/05. It does not show local authorities which have transferred their stock to RSLs. Just under 10% of local authority housing stock in Edinburgh was let to new tenants, compared to 3% in Midlothian. It appears that some areas with a relatively high need for affordable housing, and which have seen high levels of Right to Buy sales, tended to have lower relet rates. This is true for local authorities such as Midlothian, East Lothian and East Dunbartonshire, all of which have seen more than 40% of their social rented stock sold under the Right to Buy (see Figure 2.10). This pattern does not always occur. Edinburgh, for example, had the highest relet rate, and yet it has been found to have a high identified need for affordable housing, and has seen almost 40% of its stock sold. Edinburgh's relatively high level of relets may, however, be due to its draw for transient households from elsewhere in Scotland and beyond. East Renfrewshire also has a high need for affordable housing but it follows the same pattern as other areas with a significant need for affordable housing, as it has seen more than 40% of its stock sold. The next section explores the relationship between lettings and Right to Buy sales in more detail.

4.3 Impact of Right to Buy on lets in areas at the local level

4.3.1 The impact of the Right to Buy can vary between areas depending on the relative scale of unmet affordable housing need. The reduction in social housing stock through the Right to Buy is not the sole, or necessarily the main, factor affecting the scale of unmet affordable housing need. Other influencing factors include changes in house prices (in particular, the price of entry level properties), the rate of household growth, and the rate at which new social lets become available from the social housing stock. This section looks at the issues in areas with different levels of affordable housing need or surplus in meeting housing need, and the effect of the Right to Buy on these levels.

4.3.2 The impact of the Right to Buy on the availability of social rented accommodation depends largely on whether a local authority has a clearly assessed need for additional affordable housing, and on its assessment of the likely future level and location of Right to Buy sales. Table 4.1 provides summary details of relet rates and Right to Buy sales for local authorities. These are grouped according to an estimate of levels of affordable housing need derived from the findings of Bramley (2004) adjusted to acknowledge more recent house price increases in those areas.

Table 4.1: Summary of letting rates and Right to Buy sales in all areas as compared to estimated level of net need or surplus of affordable housing

Note: Significant net need = authorities identified by Bramley (2004) as being in most net need and where house price increases have continued to place pressure on affordability; Some net need = authorities identified by Bramley as having a small net need or a small surplus and in which there has been continued house price increases; Net surplus = authorities identified by Bramley as having a net surplus and where recent house price increases are unlikely to have altered that position.

4.3.3 This analysis shows that areas of net surplus have, on average, higher relet rates and lower Right to Buy sales rates than for Scotland as a whole. The analysis also shows that areas of significant net need do not, on average, have the lowest relet rates, with a mean relet rate of 8.3%. This calculation includes the high relet rate (11.0%) in Edinburgh. It is clear that the ranges of values within each grouping are actually much wider than the differences between the group averages. This would indicate that when assessing the likely impact of the Right to Buy and the response to it, there are no clear national patterns on which to draw.

4.4 Local authority areas with a surplus of affordable housing

4.4.1 Table 4.2 illustrates some of the key features of social housing stock in some local authorities which have an estimated surplus of affordable housing. In general, the relet rate of social housing in these areas tends to be higher than for Scotland as a whole, and significantly higher than in most of the areas with the greatest net shortage (see Table 4.3). The proportion of stock sold under the Right to Buy in 2005 was significantly below the Scottish average. Lower quartile house prices and median valuations of Right to Buy sales also tended to be below the Scottish average.

Table 4.2: Letting rates, Right to Buy sales and house prices in areas with an estimated net surplus of affordable housing

4.5 Local authorities with a significant affordable housing need

4.5.1 There is a great deal of variation between local authorities within each grouping of net need or net surplus. Table 4.3 shows some key features of recent social housing turnover, and the rates of Right to Buy sales in each of the areas in the 'significant net need' grouping. The relet rate in most significant net need areas is below the Scottish average, although in both Argyll & Bute and Dumfries & Galloway it is slightly higher than the Scottish average, and in Edinburgh it is notably higher. Most have lower rates of Right to Buy sales in 2005 than was the case for Scotland as a whole.

Table 4.3: Letting rates, Right to Buy sales and house prices in areas estimated to have a significant net need for affordable housing

4.5.2 In planning to address affordable housing need, it is important to note that suspending Right to Buy does not have a significant immediate impact on the availability of social lets. For example, in an area such as East Lothian or Midlothian with a relet rate of just over 5%, for every 100 houses sold to sitting tenants, it is likely that no more than five would have become available for let in each year following the sale, had the Right to Buy been suspended.

4.5.3 The cumulative impact of sales on lettings over time is of more relevance to local authorities than sales in a particular year. Table 4.4 sets out the impact of sales on lettings for the local authorities with the greatest net need for affordable housing. The numbers of lets lost cumulatively (columns 4 and 5) show the new build which would be required as a direct result of the Right to Buy, over one-year and five-year periods, in addition to any new build taking place or planned to meet existing need.

Table 4.4: Summary of lets lost as a result of Right to Buy sales and replacement new build required in areas estimated to have a significant net need for affordable housing

4.5.4 The numbers of lets in table 4.4 are derived as follows. For a local authority which has a social stock of around 10,000 houses, a relet rate of 5% and annual sales of 2% of the stock, at the end of a five-year planning period the stock will have reduced by about 1,000, and the annual number of lets by around 50. Thus, in order to meet affordable need, the new building required in year five would have to be 50 houses per year more as a direct consequence of the Right to Buy. These calculations are for illustrative purposes. Decisions on new social house building are not made on the basis of replacing lets lost through the Right to Buy. In addition to the number of lets available, the requirement for new social house building is affected by a range of factors including changes in the number of households and the number who can afford to buy or rent privately. As part of their Local Housing Strategies authorities will take account of all factors in assessing affordable housing need. Lets lost through Right to Buy may also be lower than implied by the average relet rate of the whole local authority stock. If the household buying at a discount under the Right to Buy has an income which means that they could not afford to buy a house at the lower quartile price, then the house which they are occupying post Right to Buy meets their housing need affordably. For a range of reasons, including the desirability of the stock and changing nature of new tenants, the underlying relet rate of retained stock is likely to be higher than stock sold under Right to Buy.

4.5.5 The figures in the final column show the annual rate at which stock sold through Right to Buy would need to be replaced to reprovide the lets lost. Thus, on average, these local authorities would need to build one new property for every 14 sold under the Right to Buy to replace the number of lets lost in this period and ensure that Right to Buy sales did not adversely affect affordable housing supply. There are, however, some notable variations between local areas. In Edinburgh, with its relatively high relet rate, one new property would be required for every 9 sold. In Midlothian, however, with a very low relet rate of 3.1%, one new property would be required for every 33 sold. Whilst it would not be appropriate to aim for one for one replacement of properties sold, it is evident that levels of replacement new build required vary significantly even within areas of relatively high affordable housing need.

4.6 Impact of Right to Buy on lets - urban and rural communities

4.6.1 For the purposes of this analysis, rural local authority areas are defined as having an average of less than 50 persons per square kilometre. These have been grouped according to an estimate of the level of affordable housing need based on Bramley (2004) adjusted to reflect the effect of more recent house price increases in these areas. For this analysis the 12 rural local authority areas are considered to fall into the following categories:

• Six are estimated to have a significant net affordable housing need;
• Four are estimated to have some net affordable housing need and;
• Two are estimated to have a net surplus.

4.6.2 Analysis of the six rural areas estimated to have significant net affordable housing need is set out in table 4.5 below. For comparison Table 4.6 shows examples of the non-rural areas which might be experiencing similar levels of need. There appears to be a bigger contrast in Right to Buy sales rates in the non-rural areas, with some (such as Edinburgh, East Lothian and Midlothian) being very low. The Right to Buy sales rates in the rural areas which have a significant net need tend to be slightly higher than the Scottish average of 1.8% of the total social stock. There also appears to be less divergence in relet rates in rural areas than in non-rural areas. Although relet rates for Argyll & Bute and Dumfries & Galloway are above the Scottish average of 8.2%, most fall below it. There are, however, urban settlements within each of these rural areas, which means the results do not reflect characteristics of purely rural settlements.

Table 4.5 Letting rates, Right to Buy sales and house prices in rural areas considered to have a significant net need for affordable housing

Table 4.6: Letting rates, Right to Buy sales and house prices in non-rural areas considered to have a significant net need for affordable housing

4.6.3 Table 4.7 shows illustrative areas with an estimated net surplus of affordable housing, and column 2 indicates whether the local authorities are rural or non-rural. The majority of authorities in this category are non-rural areas, with only Shetland Islands and Scottish Borders being rural. Right to Buy sales are above the Scottish average of 2.6% in East Ayrshire, but are below the average elsewhere. The relet rates for these areas are above the Scottish average of 8.2% in all cases. The lower quartile house prices and median Right to Buy valuations are generally low.

Table 4.7 Letting rates, Right to Buy sales and house prices in areas with an estimated net surplus of affordable housing

4.6.4 In summary, whilst rural areas with significant net need for affordable housing do appear to have slightly higher Right to Buy sales than non-rural areas, the relet rates in rural areas vary from 6.2% in Moray to 9.3% in Dumfries & Galloway. Most rural areas with significant net need have relet rates which are below the Scottish average, but there are exceptions and it is not possible to determine the effects that larger urban settlements might be having within rural local areas. The effects on housing availability - in terms of the numbers of new build properties needed to replace those sold - also vary greatly. This again suggests that there are no clear national patterns which can be identified.

4.6.5 Local authorities can apply to the Scottish Ministers to have all or part of their areas designated as 'pressured areas'. Chapter 6 reports on the use of the mechanism in more detail. The pressured area applications from local authorities have highlighted the effects of Right to Buy sales on housing availability at the community level. It is at this 'micro' level that the effects of sales are often felt most acutely. In those rural communities which have a small number of properties available for social rent, it may be in the interests of rural sustainability and mixed communities to retain social lets. In rural areas where stock levels are low, the level of need for social rented housing may be exacerbated disproportionately by the potential sale of any of that stock.

4.6.6 This has been borne out by the evidence contained in some pressured area applications, particularly for the rural areas within South Ayrshire, Dumfries & Galloway, Moray and large parts of Highland. In some villages within these local authorities, very small numbers of social rented properties remained. The local ratio of waiting list applicants in housing need to the number of relets actually taking place can be used as a proxy for measuring the ability to meet housing need with the current stock. In all cases, such ratios were high, with substantially more applicants than the lets which might be anticipated. In some cases, these ratios were exceptionally high, reaching 55 waiting list applicants for every relet in one community in rural Lochaber.

4.6.7 Evidence from pressured area applications also confirmed that acute supply constraints can be felt in urban areas, for example St Andrews, Inverness and East Renfrewshire. Inverness itself was found to have at least 20 waiting list applicants in housing need for each relet taking place, and some parts of East Renfrewshire had up to 25 applicants for every property becoming available. Whilst the effects of Right to Buy sales can be felt disproportionately in small rural communities, stock shortages can also be exacerbated by sales to a high degree in some urban communities. In both urban and rural areas, stock shortages can present difficulties for prospective tenants who are unable to travel between communities, for example to their place of work, and who wish to remain within their own local areas, for example to be closer to family and support networks. The effects of sales on constraining housing supply are therefore best considered at the level of the community.

4.6.8 Within each of the designated pressured areas, however, it is clear that Right to Buy sales have inhibited social landlords' ability to meet housing need with the stock available, and that the continuation of sales in these areas would have made this more difficult. In all six areas, more than 40% of the 1980 local authority stock has been sold. There are variations in the availability of housing accommodation across each of the local authorities which now have designated pressured areas, and some parts of the areas feel the effects of Right to Buy sales more intensely than others. Evidence from the pressured area applications has shown that acute pressure can be felt at the community level, irrespective of whether the area is urban or rural.

4.7 Effect of Right to Buy on lets by housing type

4.7.1 Right to Buy has been taken up more readily by households in larger properties, and by tenants in houses rather than flats, leaving proportionately less of this type of housing behind in the social housing stock. Pawson et al. (2002) found that the significant decline in the overall volume of lettings during the 1990s in more pressured areas varied substantially according to property size. Relets involving larger dwellings, particularly those with four or more apartments (three or more bedrooms) had been reducing much more quickly than relets of smaller homes. This has a direct impact on the social landlord's ability to meet housing need for larger families.

4.8 Views on the effect of Right to Buy on supply of social housing

4.8.1 Research carried out by the Chartered Institute of Housing in Scotland looked at the views of social landlords, and found that most respondents said that the Right to Buy had led to supply constraints in the social rented sector in one form or another. While only eight local authority respondents, and nearly half of all RSLs, stated that the Right to Buy had led directly to general supply constraints across their area, almost all respondents pointed to the concentration of Right to Buy sales in the more sought-after properties. There was also general agreement among landlords that the Right to Buy had had an adverse effect on the range of property types and sizes available for households seeking social rented housing (Newhaven Research, 2005).

4.8.2 Social tenants are increasingly aware of the impact of Right to Buy on housing choice. Holt Brook et al. (2006) found that many tenants commented on the role of the Right to Buy in restricting their ability to transfer to a more suitable property. This was particularly the case for families, who often find it difficult to rent a property with enough bedrooms. The research found evidence of tenants choosing to buy unsuitable properties, as they considered this would provide them with their best opportunity of eventually securing appropriate accommodation. These respondents often had mixed views about buying, feeling that they had been 'forced' into home ownership, rather than making a choice.

4.9 Revenue raised and replacement new build

4.9.1 Some commentators have pointed out that if revenues raised from Right to Buy resales had been reinvested in new housing then the decline in numbers of social housing units could have been prevented. Many tenants also hold this view; Holt Brook et al. (2006) found that respondents were often concerned that stock was being reduced because councils were not building replacements for properties that had been sold. Many respondents felt that councils should be building new properties. A few explained that when they initially heard about the Right to Buy they had assumed that the council would replace houses that were sold, and had been surprised to discover that this was not necessarily the case.

4.9.2 While it is true that £4.5 billion has been raised in capital receipts since 1979/80, largely from council house sales, capital expenditure over the same period has been £8.7 billion. It also needs to be borne in mind that councils' ability to spend receipts from council house sales has also varied substantially over the last 26 years. During the 1980s, capital expenditure controls meant that it was likely to be more cost effective for available resources, including Right to Buy receipts, to be used to maintain and improve the existing housing stock, rather than to build new council houses.

4.9.3 From 1996/97, rules requiring a proportion of capital receipts from the sale of council assets to be used to redeem debt were introduced; 25% of both General Fund and the HRA receipts had to be 'set aside' for this purpose. In the following year, HRA set-aside was increased to 75% for house sales and 50% for sales of land and other assets. 54,000 new council houses have been built since 1979/80, but the rates of building reduced substantially from 1996/97 onwards. No new dwellings were completed by local authorities in 2004 or 2005, with RSLs providing all the new build affordable housing in these years. Since 2004/05, however, the introduction of the prudential borrowing regime (which was also accompanied by a full relaxation of the 'set-aside' rules) has allowed councils much greater flexibility, including the freedom to borrow and invest in new housing stock and improve existing stock. Anecdotal evidence also suggests that some councils are now thinking about resuming a house-building programme.

4.10 Residualisation of social housing

4.10.1 As well as there being variations by property type, Right to Buy take-up has varied substantially by area type, and some have argued that this has led to residualisation in the social rented sector. The term 'residualisation' in this context refers to the process of increasing inequalities, resulting in properties left in the social housing sector which are in the areas experiencing lowest demand, whether as a result of poor quality housing or simply due to reputation, and occupied by the most socio-economically deprived. Jones and Murie (2006) argue that the social rented sector has become 'stigmatised' over time. The Right to Buy had far less impact on estates which were 'less popular' around the time the policy began. This less popular housing now represents a higher proportion of social housing stock, leading, at least in part, to higher turnover within this stock. This section begins by examining the correlation between Right to Buy sales and deprivation, and then considers whether tenants currently living in the social rented sector experience relative socio-economic disadvantage.

4.10.2 National and local authority level figures on Right to Buy sales hide the variation in sales rates which can help us understand how Right to Buy operates at a neighbourhood level. Research carried out by East Lothian Council demonstrated that even by assessing the impact of the Right to Buy at the level of administrative division (based on housing management areas within the local authority), the variation in sales at neighbourhood level is not evident (Brown & Rosenburg, 2003). At the level of administrative division, Right to Buy sales varied from 42.9% to 51.2% of the 1980 stock. In terms of individual settlements, however, sales varied from 43.1% to 64.2% for intermediate towns (population 1000-5999); in smaller settlements (population of less than 1000) sales varied from no sales to all the stock being sold. If settlements with less than 30 local authority properties in 1980 are excluded, then the variation is from 31.3% to 61.5%.

4.10.3 The Right to Buy pressured area application from Highland Council described a similar position, with over half of the Council's 1981 stock in the pressured areas having been sold, compared with sales of 26% and 35% in some less pressured areas (Highland Council, 2005). Stirling Council's Housing Needs and Market Study also found wide levels of variation; within urban Stirling (42% sales overall) levels of sales ranged from 13% to around 60%, while rural Stirling had a greater proportion of sales overall (51%), with levels ranging from 43% to 57% (Craigforth, 2003).

4.10.4 Pawson et al. (2002) undertook four case studies of potentially pressured areas. Data on sales was available for three of the areas. While variation in sales at settlement level was evident in each of the areas, sales rates were found to vary considerably more in Edinburgh than in the other areas. The research suggested that this variation probably reflected the greater polarisation between 'desirable' and 'undesirable' localities in a predominantly urban area. In Edinburgh, the top five areas for Right to Buy sales had seen sales of between 68.1% and 83.3% of 1980 stock, while the bottom five areas had all seen sales of less than 3% of 1980 stock. A tendency to greater polarisation in urban areas would also explain the greater variation in sales in urban Stirling. Pawson et al. (2002) also found correlation between resales and original Right to Buy sales.

4.10.5 Figure 4.4 illustrates the impact Right to Buy has had on neighbourhoods with different levels of deprivation. Analysis was carried out using information from the Scottish Neighbourhood Statistics ( SNS) system on tenure and levels of deprivation within each neighbourhood. ²⁷ Unsurprisingly, for Scotland as a whole, the percentage of households in the social rented sector falls sharply as deprivation decreases. Over two-thirds of households in the most deprived areas or neighbourhoods live in social rented housing. Concentration of social housing in the most deprived areas is not a result of the Right to Buy - this was already the case when the policy was introduced.

Figure 4.4: Tenure by Scottish Index of multiple deprivation Decile from 2001 Census Data

4.10.6 Figure 4.5 shows the number of households in socially rented accommodation, ranging from most deprived ('decile' 1) to least deprived ('decile' 10), along with the estimated percentage of social housing stock retained since the Right to Buy was introduced. Generally, it can be seen that 50-60% of social housing has been retained since 1979. However, the marked exception is in the most deprived areas (decile 1), where 81% of social housing has been retained. As a result, there has been a marked increase, from 21% to 27%, in the concentration of social households in the most deprived areas between 1979 and 2001.

4.10.7 This is perhaps unsurprising; the most deprived areas had the largest proportions of social housing stock before Right to Buy, and therefore the largest number of potential sales, whilst levels of private sector housing were (and remain) relatively small. In the most deprived areas, a greater number of households lack the resources to buy their properties.

Figure 4.5: Percentage of social housing retained by Scottish Index of Multiple Deprivation decile from 2001 census data

Figure 4.6: Percentage of Social Rented Households which are in each scottish index of multiple deprivation Decile, and % of all right to buy sales which occuRred in each decile

4.10.8 Nevertheless, while social rented housing has become increasingly concentrated in the most deprived areas, Figure 4.7 shows that, despite the volume of Right to Buy sales being relatively low, it has still had the effect of more than doubling home ownership in the most deprived areas, albeit from a very low baseline.

Figure 4.7: Estimated Effect of right to buy on Tenure Mix by scottish index of multiple deprivation Deciles

4.10.9 In the second most deprived decile, whilst social housing remains the predominant tenure, this is only just the case (53% compared to 42% owner-occupation). In the third to fifth most deprived deciles, Right to Buy has shifted the balance of tenure from predominantly social rented households to predominantly owner-occupied households. Figure 4.8 estimates the percentage of owner-occupation within each decile which can be attributed to the Right to Buy.

Figure 4.8: Estimated percentage of owner-occupation which is a result of Right to Buy by Scottish Index of Multiple Deprivation decile

4.10.10 As a whole, these statistics confirm an increasing residualisation of social housing, with a greater proportion of social housing now present in the most deprived areas. However, it also demonstrates that Right to Buy has had a significant impact on access to owner-occupation in the most deprived areas, although overall levels of home ownership remain low.

4.11 The characteristics of social housing tenants

4.11.1 Data from the 2002 SHCS provides evidence of the extent to which tenants currently living in the social rented sector may experience relative socio-economic disadvantage. The characteristics of social rented sector tenants, private rented sector tenants and owner-occupiers are illustrated in Figure 4.9.

Figure 4.9: Household type by tenure

4.11.2 Social rented tenants were disproportionately likely to be single adults, single parents or single pensioners, compared to owner-occupiers. Half of all single parents were in social rented housing, compared to 22% of small families and 26% of large families. Social rented tenants were less likely to be economically active than owner-occupiers, and more likely to be unemployed, long or short-term sick or disabled, or looking after the home and family.

4.11.3 An examination of the characteristics of social rented sector tenants who had moved into their current property in the previous two years, using data from the 2003/04 Scottish Household Survey, confirms these patterns. These new tenants ²⁸ were more likely to be single parents and single pensioners, and less likely to be households with two adults and no children. Over 70% had incomes of £15,000 or less, compared with 21% of owner-occupiers who had moved into their current accommodation in the previous two years.

4.11.4 A striking indication of the change in role of social housing since 1981 is illustrated in table 4.5. In 1981 the proportion of households by type in social housing was broadly the same as the proportion of all households. In particular, 33% of all households were families with dependent children and 31% of all households in social housing were families with dependent children. By contrast, while 21% of all households were families with dependent children in 2003/04, only 15% of households in social housing were families with dependent children.

Table 4.5: Percentage of households by household type

Sources: 1981 Census Family Composition, Table 16 (10% sample); 2003/04 Scottish Household Survey.
Notes: 1981 Census analysis is a best match to 2003/04 household-type definitions.

4.11.5 While the evidence does suggest that there has been a residualisation of social rented housing, Stephens (2005) argues that this process is not solely attributable to Right to Buy. Other social and economic factors have been significant in contributing to this trend, including the growing polarisation of income distribution and 'work rich' and 'work poor' households. Jones & Murie (2006) suggest that, whilst Right to Buy did not create residualisation, it has speeded up and deepened the process.

4.11.6 The qualitative research by Holt Brook et al. (2006) supports the finding that properties left in the social rented sector are often located in the least popular areas, because buying tenants place such high importance on location. Whilst affordability was a necessary aspect of decision-making, this was somewhat taken for granted, and other factors exerted a much more overt influence on respondents' decisions about buying. Location of the property appeared to be the overriding criteria for respondents considering whether or not to buy their home. Respondents' priority was a home in a good location, which was seen in terms of 'good social order' with decent neighbours. Good social order was associated with the absence of anti-social behaviour, including vandalism, drug dealing and drug taking, public drunkenness or alcoholism, littering, noise, theft, joy riding, violence and street gangs. This was particularly important for parents of school age children, who were often looking for a good school as well. While a good location could sometimes override the unsuitability of a property in terms of size or condition, no respondents referred to the suitability of a property overriding the unsuitability of a location.

4.11.7 The research suggests that tenants' motivations for buying their home under the Right to Buy and their approach to home buying are very different from typical first time buyers. Tenants tended to wait until their 'ideal' property was available to purchase, whereas first time buyers were more inclined to purchase a compromise property with a view to 'trading-up' to more suitable properties in time. Tenants were also aware of the wider implications of Right to Buy; some pointing out that the 'best' houses in the 'best' areas had already been bought, leaving a lack of opportunity both for those who wished to rent and for those who might want to exercise their Right to Buy in the future.

4.12 Right to Buy resales

4.12.1 Chapter 3 explored the impact of the policy on those exercising the Right to Buy, and addressed the transfer of assets and wealth realised by buyers who have gone on to sell their properties. This section considers the role of Right to Buy resales in the housing market.

4.12.2 Essentially, if a Right to Buy property is resold on the open market, to someone from the local area, who might otherwise be on a waiting list for social housing, there is no net reduction in the availability of accommodation. The property is still meeting the same need, albeit in a different tenure. Though the real picture is clearly more complex than this, an understanding of the role of Right to Buy resales in the housing market, who buys them and how affordable they are, allows us to gain some appreciation of the impact of Right to Buy on the availability of owner-occupied housing.

4.12.3 The SHCS asks owner-occupiers whether they bought their house from the council or a housing association, which allows Right to Buy owners to be identified. It also asks all owners and private renters if their house had ever been owned by the council or a housing association, allowing the identification of Right to Buy resale owners and of properties that had since moved into the private rented sector.

4.13 Levels of Right to Buy resales

4.13.1 The most comprehensive and representative national study of Right to Buy resales in Scotland (Pawson et al. 1997) ²⁹ estimated that around 67,000 properties sold under the Right to Buy between 1980 and 1994 in Scotland had been resold by the end of 1995. This represents about 21.6% of the total number of Right to Buy purchases. This total included a small number of properties which had been rented out privately, as well as those which had been resold, and an estimated 4,000 former public sector homes were being privately rented in 1996, which is 6% of all resales. Some more recent work undertaken on resales at the local level, since Pawson's work in 1997, is referred to later in this section.

4.13.2 By 2002, an estimated 411,000 households were living in former local authority houses. Of these, some 235,000 (57%) were the former tenant who had bought the house, 152,000 (37%) were owner-occupiers of ex-Right to Buy houses and 25,000 (6%) were renting ex-Right to Buy houses privately (2002 SHCS, see Figure 4.10). The actual volume of resales is likely to be higher than 152,000, as some of these properties including some in the private rented sector, will have been resold more than once. ³⁰

Figure 4.10: Current position of former right to buy properties

4.13.3 Evidence at the local authority level suggests that the overall figures for resales conceal wide variations at a smaller area level. Research covering the East Lothian local authority area, for example, estimated that by the end of 2000, 29.5% of the properties purchased under the Right to Buy had been resold at least once on the open market, but that at the settlement level the rate of resale ranged from 15.7% to 44.4% (Rosenburg et al. 2001).

4.13.4 Right to Buy resales have played an increasingly significant role in the wider housing market. Pawson et al. (1997) estimated that Right to Buy resales accounted for between 11% and 15% of all second-hand transactions during the first half of the 1990s. More recently, research in East Lothian estimated that Right to Buy resales accounted for 35-40% of all second-hand transactions costing under £60,000 during 2000 (Rosenburg et al. 2001). In 2003 Right to Buy resales represented nearly 20% of all sales in the Falkirk housing area (Falkirk Council, 2003) and equated to approximately 18% of total open market sales in Glasgow in 2004 (Binns, 2005).

4.14 Resales buyers

4.14.1 SHCS data shows that the characteristics of resale purchasers differ significantly from social tenants. It also indicates that there are some substantial differences between resale purchasers and those who bought under the Right to Buy. Figure 4.11 shows that occupants of ex-Right to Buy properties have a significantly younger age profile than either tenants of social housing or those who bought under Right to Buy.

Figure 4.11: Age of highest earner in household by tenure

4.14.2 A much higher proportion of occupants of ex-Right to Buy properties are small families than is the case amongst either social rented or Right to Buy owners (Figure 4.12). This is consistent with the finding that occupants of ex-Right to Buy properties have a significantly younger age profile. A focus on household type also underlines the demographic differences between those in ex-Right to Buy properties and those who bought under the Right to Buy, with large proportions of Right to Buy owner-occupiers in older households.

Figure 4.12: Household type by tenure

4.14.3 The household member with the highest income in ex-Right to Buy properties is more likely to be economically active, and less likely to be retired, than in the population as a whole (Figure 4.13). The household member with the highest income in social rented housing is more likely to be unemployed or long-term sick or disabled.

Figure 4.13: Economic activity by tenure

4.14.4 The income distribution of households occupying ex-Right to Buy properties is weighted more towards the higher bands, with a third of households in this category having incomes of more than £400 per week in 2002 (Figure 4.14). As might be expected, the income distribution of social rented tenants is heavily weighted towards the lower income bands, with over 50% of social tenants having incomes of less than £200 per week in 2002. The income distribution of Right to Buy owner-occupiers is close to the income distribution of all households in Scotland, and therefore has higher proportions in lower incomes than in owner-occupied properties as a whole. The income distribution of Right to Buy owner-occupiers is likely to be strongly influenced by the high level of retired households in this category.

4.14.5 A 1999 study examining the impact of Right to Buy on the Wester Hailes estate on the edge of Edinburgh, cited by Jones & Murie (2006), found that 61% of Right to Buy purchasers who had subsequently moved had expected that buying their property would help them to move out of the area and 55% of resale purchasers expected to move in the next five years. While resale purchasers tended to have similar income levels to those who sold their Right to Buy property, resale purchasers tended to be younger households, often with children and with higher mortgage costs. As a result the effect was probably to reduce local disposable income and the expectations of moving on created an owner-occupied sector that was relatively unstable.

Figure 4.14: Weekly income distribution by tenure

4.14.6 The findings from the 2002 SHCS suggest that, in comparison with Right to Buy purchasers, resale purchasers were much more likely to be younger family households or childless couples. Compared with new and existing council tenants, resale purchasers were also much more likely to be childless couples or two-parent families and much less likely to be single parent households. Later work by Pawson et al. (2002), found that 70% of resale purchaser households did not have children, however, this research was not designed to be nationally representative.

4.14.7 Pawson et al. (1997) found that, nationally, 60% of all resale purchasers had been home owners either immediately before purchasing their current home or at some earlier time. There were, however, major contrasts within Scotland, with the proportion of first time buyers in Glasgow, for example, being much greater than in other parts of the country. Across Scotland, 62% of first time buyers moved directly from living with parents or relatives. 18% of resale purchasers formerly lived in the public sector, either with parents or as tenants in their own right. 24% of purchasers had been registered on housing waiting lists of local authorities or housing associations before buying their home. The proportion of first time buyers who had previously been registered on waiting lists was 32%. In addition 20% of purchasers said they would have applied to a council or housing association if they had not been able to buy their current property.

4.14.8 Pawson et al. (1997) found that most resale purchasers moved relatively short distances from their previous home, with 73% moving within the same neighbourhood or local authority area. Other evidence supports the general thrust of these findings. More recent research in Falkirk found that a higher proportion of purchasers of ex-Right to Buy homes came from within the local area, and slightly fewer from outwith the Council area, than was the case for purchasers of all homes (Falkirk Council, 2003). Demand was also predominantly local in East Lothian, with 60% of buyers already living in the area at the time of purchase and around one-third living in the same settlement (Brown & Rosenburg, 2003). ³¹

4.14.9 From the evidence, it appears that resale purchasers are generally quite distinct from social renters in terms of age, family type, employment status and income. However, a significant proportion of purchasers had either been on social housing waiting lists or would have applied for social housing had they not bought their property, suggesting that those resales are catering for potential social tenants. This may indicate that while resales are not meeting the housing needs of current social tenants, they may be meeting the needs of those who would have applied for social housing in the past. The evidence does suggest that, in terms of the location of previous homes, resales are primarily meeting local housing needs. Although a substantial proportion of resales are to buyers from outside the area, it should be remembered that by moving into the area this group will be easing housing demand pressures elsewhere.

4.15 Resales and affordability

4.15.1 The Glasgow research notes that Right to Buy resales make a substantial but variable contribution to affordability in the city (Binns, 2005). In every area of the city, Right to Buy resale prices are lower than those in the second hand market generally. As a percentage of the median price for all second-hand sales, the Right to Buy resale median ranged from 96.7% to 41.4%. In areas with higher house prices, Right to Buy resales tend to be relatively (although not absolutely) cheaper. Only in four areas was the median Right to Buy resale price above the citywide 'affordable' ³² price in 2003.

4.15.2 Right to Buy resales are cheaper than equivalent second-hand properties and clearly widen choice for purchasers currently buying at the lower end of the housing market. The injection of such a large stock through Right to Buy into the private housing market will also have lowered prices across the housing market over time. The extent to which resales widen access to owner-occupation for those remaining in social housing is less obvious. SHCS data suggests that some 80% of social housing tenants have an income of less than £300 per week, which makes it unlikely that the majority could afford to buy Right to Buy resales.

4.15.3 Evidence from local authority pressured area applications corroborates the view that resale prices tend to be lower than those in the broader second-hand market. However it also supports the argument that resales are inaccessible to social housing tenants who aspire to buy. In the rural villages designated as pressured areas in Dumfries & Galloway, for instance, resale prices ranged from around £65,000 to £100,000. 2004/05 SCORE³³ data shows that only 2% of new tenants could afford to buy at £65,000. In the East Neuk of Fife, the average resales price in 2004 was around £65,000, and in St Andrews it was just over £100,000. The view of local property agents was that resale prices for two-bedroom houses and three-bedroom flats were converging with second-hand private market prices.

4.15.4 Holt Brook et al. (2006) found that purchasers of ex-Right to Buy properties were likely to say that they would have bought a property anyway, even if they had not purchased an ex-Right to Buy property. Respondents said that ex-Right to Buy properties had been cheaper than similar private sector properties and it appears that this may have enabled them to buy a house that was bigger, in a better state of repair, or in a more suitable area.

4.16 Right to Buy resales in rural areas

4.16.1 There have been concerns that the Right to Buy might have particularly negative consequences for rural communities, as former Right to Buy properties could be bought by people from outside the local area which would push up prices beyond the reach of lower income local residents. Evidence suggests that the impact of resales may be different in rural areas than in urban areas in this respect.

4.16.2 Pawson & Watkins (1997) used national data covering resales in the period 1979 to 1996 to explore rural issues and compare resales in rural and urban areas. They found a clear contrast between rural and urban areas in terms of the social class composition of resale purchasers. In rural areas, nearly one in five purchasers was in social class A or B, compared with less than one in ten in urban areas. The proportion of resale purchasers who were first time buyers was somewhat lower in rural than in urban areas. In urban and suburban areas, people moving directly from the parental home accounted for between a quarter and a third of resale purchasers, but made up only a sixth of purchasers in rural area. The research also found that 68% moved within their neighbourhood or local authority area, and that rural areas contained a higher proportion of 'very long distance movers' (over 100 miles) than urban areas.

4.16.3 There is therefore some evidence that the picture may be different in rural areas than in urban areas, and that local buyers might to some extent be 'priced out' of ex-Right to Buy properties in rural markets, although the evidence is rather dated.

4.17 Transfer of Right to Buy properties into the private rented sector

4.17.1 Considerable discussion has taken place concerning Right to Buy properties that are being rented out privately. This was one of the issues raised in comments by local authorities and RSLs in recent research carried out for the Chartered Institute of Housing in Scotland (Newhaven Research, 2005). A number of local authorities and one RSL suggested that former Right to Buy stock was being rented privately or turned into Houses in Multiple Occupation and this caused concern that some private landlords were neglecting repairs and ignoring the anti-social behaviour of some of their tenants.

4.17.2 The 2002 SHCS estimated that 6% of households living in a former local authority property were renting ex-Right to Buy houses privately. This is broadly in line with the overall proportion of households in the private rented sector, which the SHCS estimated at 8%. The 2002 SHCS also found that around 20% of private rented properties were former Right to Buy dwellings, compared with around 17% of all owner-occupied dwellings.

4.17.3 There has been some discussion about the role of private companies in exploiting the Right to Buy, by offering tenants a capital sum to allow them to exercise their Right to Buy and then lease the property to the company for use as a private let. The tenant in such circumstances usually also makes a commitment to sell the property to the company at below market price. Anecdotal evidence suggests that companies operating in Scotland tend to appeal to tenants who may be unable to raise sufficient finance to purchase the rented property of their own accord, who perceive such offers as their only opportunity to get onto the property ladder. Research by the Office of the Deputy Prime Minister (2003), covering England only, estimated that although approximately 6% of Right to Buy sales in London were acquired in such a way, these activities were primarily confined to London. To date, there has been no research into the extent of such practices in Scotland.

4.17.4 It is clear that the proportion of former Right to Buy properties transferring into the private rented sector is relatively small. However, these occupants of former Right to Buy properties appear to be unlikely to be able to afford to buy, and are sometimes paying much higher rents than they might in the social rented sector. It also appears likely that these tenants could otherwise be eligible for social housing. While the Right to Buy appears to have a negative impact in relation to housing availability and affordability where properties transfer into the private rented sector, it could nevertheless be argued that such properties do provide choice to tenants who desire more flexible living arrangements than those offered by the social rented sector.

Availability of housing accommodation - summary of key findings

• In the 1980s and 1990s, the number of lets to tenants did not seem to fall in line with Right to Buy sales, although lettings have fallen more recently.
• There is an increasing number of lets to homeless applicants. There are also fewer lets to transfer applicants, for whom the reduction in stock (larger houses in particular) has reduced available options.
• Relet rates in 10 of the 13 areas with an estimated significant net need for affordable housing each year are below the Scottish average, and are significantly lower than relet rates in areas with an estimated surplus of affordable housing.
• Right to Buy constrains the ability to meet housing need in those areas where there are particular pressures on affordable housing. The effects of sales can often be felt most acutely at the level of the community, and so it is at this level that effects on supply are therefore best considered.
• Analysis suggests that there may be slightly higher levels of Right to Buy sales in rural areas estimated to have a significant net need for affordable housing, and that relet rates may be slightly lower in these areas, as compared to non-rural areas with similar estimated significant net need, however, some areas do not follow this pattern. There are also some urban settlements within rural areas, and so it is difficult to draw firm conclusions about the differences between rural and non-rural areas.
• Although home ownership is not always accessible to those living in the most deprived areas of Scotland, Right to Buy has had a significant impact on levels of owner-occupation in these areas.
• Although Right to Buy has been responsible for the majority of owner-occupation in the most deprived areas, it has also contributed to the greater proportions of social rented stock remaining in these areas.
• Tenants are more likely to perceive Right to Buy as restricting their housing opportunities, in particular feeling that it makes it harder for them to transfer to a more suitable property.
• Location of property is the most important factor for tenants in deciding whether or not to buy once affordability is established. A suitable location can occasionally override the fact that a property is unsuitable, while the suitability of a property will rarely, if ever, override an unsuitable location.
• Resales are more affordable than other second hand homes and have contributed towards an increase in the supply of lower value private housing and reducing prices to a level lower than they would otherwise have been.
• Resales play a limited role in housing current social rented sector tenants. They are more likely to help meet the housing needs of those who might have applied for social rented housing in the past.
• The number of former Right to Buy properties transferring into the private rented sector is relatively small, but these properties do offer an alternative to those unable to afford owner-occupation and who are seeking more flexibility than that offered by the social rented sector.