Posted: 04/11/2024
The Right to Buy (RTB) was introduced in 1980 to enable social housing tenants to buy their home with the benefit of a discount. The new Labour government made a manifesto pledge to review the level of discounts (most recently reviewed in 2012), and as a result Labour’s first Budget on 30 October 2024 announced significant changes to the Right to Buy, which are identified below.
The changes also apply to Preserved Right to Buy (unless stated otherwise), but do not affect the Right to Acquire.
Currently RTB buyers can benefit from a discount of up to £102,400 across England, and £136,400 in London boroughs.
From 21 November 2024, when the government’s secondary legislation (laid in Parliament on 30 October) is intended to come into force, RTB discounts will reduce from their current levels to pre-2012 levels. The pre-2012 levels were subject to regional variations, and therefore from 21 November 2024, the level of discount will depend on the location of the property. The maximum discounts allowed will be as follows:
| Region | Maximum discount |
| North East | £22,000 |
| North West | £26,000 |
| Yorkshire and the Humber | £24,000 |
| East Midlands | £24,000 |
| West Midlands | £26,000 |
| Eastern | £34,000 (except the district of Watford, where it is £16,000) |
| South East | £38,000 (except Chiltern, Epsom & Ewell, Hart, Oxford, Reading, Reigate & Banstead, Tonbridge & Malling, Vale of the White Horse and West Berkshire, where it is £16,000) |
| South West | £30,000 |
| London | £16,000 (except the London boroughs of Barking and Dagenham and Havering, where it is £38,000) |
Please note these are maximum discounts, and are still subject to other factors such as eligibility, previous discounts, and cost floor rules.
Applications for the RTB received by social landlords before 21 November 2024 from eligible tenants will still be eligible for the current discounts, ie a discount of up to £102,400 across England and £136,400 in London boroughs.
Currently the maximum discounts have increased annually by the Consumer Prices Index (CPI). The government has considered three options on whether to (a) continue this, (b) amend this to increase by the house price inflation or (c) not to uprate the maximum discount, but consider changes on an ad hoc basis.
They have concluded that uprating the discounts annually by CPI or house price inflation would impact a council’s ability to replace sold stock, and therefore for now there will be no uprating – but the maximum discounts will be kept under review.
Cost floor is the amount of money spent on an individual property for things such as the cost of acquisition, construction, repairs and maintenance etc. Where the cost floor exceeds the sale price or market value the discount is limited accordingly.
The cost floor rule currently allows social housing providers to take into account a 10-year period prior to receipt of an RTB1, or 15 years if the property was built or acquired after 1 April 2012 (the cost floor period).
From 21 November 2024 the cost floor period will increase to 30 years for property that was built or acquired after 1 April 2012.
For Preserved Right to Buy it appears the cost floor period remains 15 years, regardless of when the property was built or acquired.
To minimise a rush of RTB applications resulting in a higher than usual level of RTB sales (as has occurred historically when changes are made), the government has provided a very small three-week window, with the new maximum discount and other changes applying immediately from 21 November 2024.
Applications received before 21 November 2024 from eligible tenants will still be eligible for the current higher discounts.
With such a substantial change to the maximum discount, social housing providers should brace themselves for a significant increase in RTB applications prior to 21 November 2024.
The government’s policy paper can be viewed here. It has additionally already updated both its guidance to tenants, and its guidance to local authorities.
The government has also indicated that it will consult on wider ranging reforms to the current RTB scheme, and the discount change appears to just be the beginning.
We will advise further on wider reforms to the RTB scheme once more information is made available. If you would like to discuss any element of this alert or how Penningtons Manches Cooper can assist you, please contact Adam Crawford or Graham Phillips.
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