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The Right to Buy public housing in Britain: A welfare analysis

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  • Disney, Richard
  • Luo, Guannan

Abstract

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.

Suggested Citation

  • Disney, Richard & Luo, Guannan, 2017. "The Right to Buy public housing in Britain: A welfare analysis," Journal of Housing Economics, Elsevier, vol. 35(C), pages 51-68.
  • Handle: RePEc:eee:jhouse:v:35:y:2017:i:c:p:51-68
    DOI: 10.1016/j.jhe.2017.01.005
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    Cited by:

    1. Charles Ka Yui Leung & Joe Cho Yiu Ng, 2018. "Macro Aspects of Housing," GRU Working Paper Series GRU_2018_016, City University of Hong Kong, Department of Economics and Finance, Global Research Unit.
    2. Christian A. L. Hilber & Olivier Schoni, 2022. "Housing policy and affordable housing," CEP Occasional Papers 56, Centre for Economic Performance, LSE.
    3. Grazia Napoli & Salvatore Giuffrida & Maria Rosa Trovato, 2019. "Efficiency versus Fairness in the Management of Public Housing Assets in Palermo (Italy)," Sustainability, MDPI, vol. 11(4), pages 1-21, February.
    4. Munford, Luke A. & Fichera, Eleonora & Sutton, Matt, 2020. "Is owning your home good for your health? Evidence from exogenous variations in subsidies in England," Economics & Human Biology, Elsevier, vol. 39(C).
    5. Grazia Napoli & Maria Rosa Trovato & Simona Barbaro, 2022. "Social Housing and Affordable Rent: The Effectiveness of Legal Thresholds of Rents in Two Italian Metropolitan Cities," Sustainability, MDPI, vol. 14(12), pages 1-32, June.
    6. De Bromhead, Alan & Lyons, Ronan C., 2021. "Rooted to the soil: The impact of social housing on population in Ireland since 1911," QUCEH Working Paper Series 21-08, Queen's University Belfast, Queen's University Centre for Economic History.
    7. Richard Disney & John Gathergood & Stephen Machin & Matteo Sandi, 2020. "Does homeownership reduce crime? A radical housing reform in Britain," CEP Discussion Papers dp1685, Centre for Economic Performance, LSE.
    8. Dai Yuan Li & Cong Wei Xie & Shu Hao Chen & Xiu Xiang Zou, 2019. "Research on the Pricing of Shared Ownership Housing," Applied Economics and Finance, Redfame publishing, vol. 6(1), pages 30-44, January.
    9. Richard Disney & John Gathergood & Stephen Machin & Matteo Sandi, 2023. "Does Homeownership Reduce Crime? A Radical Housing Reform from the UK," The Economic Journal, Royal Economic Society, vol. 133(655), pages 2640-2675.
    10. Tamar Ramot-Nyska, 2023. "Changing Residential Mobility Considerations: The Case of Public Housing in Israel," Bank of Israel Working Papers 2023.15, Bank of Israel.
    11. Coma Bassas, Ester & Patterson, Joanne & Jones, Phillip, 2020. "A review of the evolution of green residential architecture," Renewable and Sustainable Energy Reviews, Elsevier, vol. 125(C).
    12. Sonja Avlijas & Anke Hassel & Bruno Palier, 2021. "Growth Strategies and Welfare Reforms in Europe," Post-Print hal-03380958, HAL.
    13. de Bromhead, Alan & Lyons, Ronan C., 2023. "Social housing and the spread of population: Evidence from twentieth century Ireland," Journal of Urban Economics, Elsevier, vol. 138(C).

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    More about this item

    Keywords

    Housing policy; Right to Buy; Social welfare;
    All these keywords.

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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