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The right to buy public housing in the United Kingdom: a welfare analysis

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journal contribution
posted on 2023-06-09, 05:01 authored by Richard Disney, Guannan Luo
We investigate the impact on social welfare of the United Kingdom (UK) policy introduced in 1980 by which public housing tenants (council housing in UK parlance) had the right to purchase their houses at heavily discounted prices. This was known as the Right to Buy (RTB) policy. Although this internationally-unique policy was the largest source of public privatization revenue in the UK and raised home ownership as a share of housing tenure by around 15%, the policy has been little analyzed by economists. We investigate the equilibrium housing policy of the public authority in terms of quality and quantity of publicly-provided housing both in the absence and presence of a RTB policy. We find that RTB can improve the aggregate welfare of low-income households only if the council housing quality is sufficiently low such that middle-wealth households have no incentive to exercise RTB. We also explore the welfare effects of various adjustments to the policy, in particular (i) to reduce discounts on RTB sales; (ii) to loosen restrictions on resale; (iii) to return the proceeds from RTB sales to local authorities to construct new public properties; and (iv) to replace RTB with rent subsidies in cash.

History

Publication status

  • Published

File Version

  • Published version

Journal

Journal of Housing Economics

ISSN

1051-1377

Publisher

Elsevier

Volume

35

Page range

51-68

Department affiliated with

  • Economics Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2017-02-02

First Open Access (FOA) Date

2017-02-02

First Compliant Deposit (FCD) Date

2017-02-02

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