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.

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