The maximum discount of £75,000 is being offered to Westminster council tenants locked out of home ownership because of the area’s high property prices. The council is taking advantage of new relaxed rules on Right to Buy discounts introduced by the Government.
Westminster expects to sell hundreds more homes during the next three years to working households earning at least £60,000 a year and who are able to pay a mortgage. People who have been tenants for at least five years will be entitled to the maximum discount.
The average value of a two-bedroom council property in Westminster borough is £290,000, according to the council, meaning a qualifying tenant could buy the property for £215,000.
Countrywide, about two million homes have been sold since the Right to Buy scheme was introduced in 1980. But numbers tailed off to less than 3,700 last year mainly because discounts were cut by Labour government against a backdrop of rising property prices.
The previous discount cap was £16,000. In London, the average discount fell from 53 per cent of the value of a property in 1998/90 to 10 per cent in 2008/09.
Of the 12,000 council tenants in Westminster borough, only 2.5 per cent are thought to have a household income of more than £60,000.
Some analysts question whether the increased discount is big enough to attract buyers. “In London the discount required to make Right to Buy affordable is as high as 58 per cent, or £128,000,” says Richard Donnell, research director at property website Hometrack.
Mortgage availability is another problem. Banks have tightened their lending criteria, partly in response to a Financial Services Authority report highlighting that Right to Buy customers are the most likely to experience arrears and repossession.
Yet the new higher discount appears to have revitalised interest in Right to Buy. Westminster council says it received 34 applications last month compared with 36 for the whole of 2011/12.
Councillor Paul Dimoldenburg, leader of the Labour group, questioned whether it made economic sense to give discounts, or “hand-outs”, to people earning more than £60,000 a year at a time of economic austerity.
“Why are those who already have a home and a job being given a huge financial subsidy when there are so many residents living in overcrowded conditions who would benefit from a larger home and who are currently not able to move?”
Westminster Council actively promotes home ownership in the borough. Visit homeownershipwestminster.co.uk or call 0845 437 9701. The council has links with housing charities and associations as well as private developers, and nominates people for homes at new housing schemes.