Could the 'Right to Buy' be right for you?

Following the Conservative's manifesto launch, we look at whether the Right to Buy scheme will prove beneficial for the working-class person.

The General Election campaigns for 2015 are in full swing, and today the Conservatives launched their party manifesto which had the expansion of the Right to Buy scheme at its heart, in the hope they can connect with low income families and be "the party of the working people".

Introduced in 1980 by the Conservatives, the Right to Buy scheme was the flagship of Margaret Thatcher's party campaign and became hugely popular with social tenants, who were given the legal right to purchase their rented council home at a discount of 33% to 55%, providing hundreds of thousands with the huge financial asset of owning their own home.

Since its launch, more than 2 million homes have been sold under the Right to Buy scheme, and now David Cameron is hoping to emulate Margaret Thatcher's success by pledging to extend this to tenants renting through housing associations. This could see up to 1.3 million tenants now have the opportunity to buy their rented home at a discount of between 35% to 70% ... which are hugely appealing figures.

Previously, homes owned by the housing associations were not eligible under the Right to Buy scheme, and with the bulk of all social housing in the UK now owned by these private not-for-profit bodies, it has meant that the vast majority of social tenants did not have the right to buy their rented home.  However, the Conservatives' new election pledge could see this change, giving 1.3 million secure social tenants the opportunity to become home owners and better their financial standing.

Financial sense for all the family?

The underlying aim of this scheme's relaunch is for this political party to connect with working class voters, however many working class tenants in social housing depend on benefits and are stuck in low-paid work with large debts, meaning that many are already unable to afford their current housing costs. So is offering a discount to buy your rented home really a realistic achievement for many people already struggling to pay the bills?

There is no denying however, that owning your own home has huge benefits for the entire family as it places a large financial asset in your grasp... an asset which can be passed down in many years to come.  And with a pledge to cut Inheritance Tax as well, more of those assets are set to stay firmly within your family's grasp.

With the younger generation of 24-35 year olds dubbed 'Generation Rent', unable to secure the money for a mortgage deposit, the prospects of having a family home which can be sold could allow this generation to breakaway and place its foot firmly on the property ladder.  It's a sad state of affairs, but unfortunately the reality is that most children in today's society will not be in a financially comfortable position until their parents pass away and leave behind their assets... and a family home is a huge financial asset.  Thus the expansion of the Right to Buy scheme and the cuts to Inheritance Tax could see ripples of financial benefits for generations to come.

Is Right to Buy right for you?

Eligibility criteria:

• Your public rented home must be your only or main home.
• This home must be self-contained.
• You must be a secure tenant, meaning that you are currently able to live in your existing public rented home for the rest of your life. (Introductory tenants on 'trial' periods or flexible tenants renting for a fixed period are not eligible.)
• You must have rented from the public sector, i.e. council, housing association or NHS Trust, for a period of 5 years. This does not have to be 5 years in a row.

To check to see if you are eligible, visit the Right To Buy website.

Right to Buy Discounts:

Discounts are applied to the market value of your rented home if you are eligible to buy it, with a £77,900 maximum discount across England, except London boroughs which are capped at £103,900, with both discounts set to increase each year in April.
The size of the discount will depend on a number of factors including:

• How long you have been a tenant with your public sector landlord
• The type of property you are purchasing, i.e. flat or house
• The market value of your rented home
• Whether you have used the Right to Buy scheme previously

Houses:

You will receive a 35% discount if you have been a public sector tenant for 5 years in a rented house, and a further 1% discount is added every extra year you are a tenant on top of those 5 years... with the maximum discount capped at 70%.

Flats:

You will receive a 50% discount if you have been a public sector tenant in a rented flat for 5 years, with a further 2% discount added every extra year you are a tenant on top of those 5 years, again capped at 70%.

Please note, if you sell your home within 5 years of purchasing it through the Right to Buy scheme, you will have to pay back all or some of the discount you initially received.

For more information on the Right to Buy scheme, visit the Government's website.

For additional advice, talk to the Money Advice Service who can offer you free, impartial advice about money, including buying a home and taking out a mortgage.
www.moneyadviceservice.org.uk
Tel: 0300 500 5000

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