London council launches ‘right-to-invest’ for low-income tenants

“An east London council has launched its own version of right-to-buy in a bid to help those on low incomes have a stake in the property market while holding onto much-needed social housing.

The new right to invest scheme launched by Barking and Dagenham council will let tenants buy a share in their property using their right to buy discount.

Tenants can buy between 25% and 70% of their property, and will pay rent to the council on the remaining share.

If they want to sell, they will have to give the council first refusal before they can offer their share on the open market, and the council will keep its interest in the property.

Since right to buy was introduced in the early 1980s, allowing council tenants to buy the property they were renting, more than 2 million homes have been soldf. The Conservative government relaunched the policy in 2012, increasing the discount and extending it to housing association tenants.

The council said it had launched right to invest to allow tenants to buy a stake in their property, “while ensuring the council retains its housing stock”.

The price tenants pay will be based on the open market value, less the right to buy discount at the time, and when they sell they will receive the market value for their stake. During ownership, they will pay the council rent on the share it owns.

The council said it had spoken to high street mortgage lenders and leases on the properties had been drawn up so that they would be willing to offer loans on them.

Using the scheme a tenant in a home valued at £270,000 and entitled to the minimum discount of £94,500 could buy a 50% stake for £87,750, while using right to buy would mean raising a large enough mortgage to finance a purchase costing £175,500. The council said the tenant currently paying rent of £440 would see their monthly cost increase to around £750.

The council owns 17,525 homes and currently has 7,494 people waiting for homes on its housing register.

The leader of Barking and Dagenham council, Darren Rodwell, said: “London’s ridiculously expensive property market has meant the idea of home ownership for most ordinary people is just a pipe-dream.

“Barking and Dagenham has the lowest level of owner-occupation in London, so it is important that we help those on low incomes to get a foot on the housing ladder. This will also help create a stable community where no-one is left behind.”

The scheme means right-to-buy properties will not end up being owned by investors. Around 40% of former council flats are thought to be being rented out by private landlords.

Councillor Dominic Twomey, cabinet member for finance, growth and investment, said: “At the moment we need to offer a shield to protect our residents from the continued effects of austerity, welfare reform and the damaging housing and planning bill’s ‘pay to stay’ which will hit many local families.”