Economic history · Thatcher's Economic Policy
Six steps, about nine minutes, a question at each. You need no economics and no preparation, only a willingness to guess before you are told.
Selling state-owned industries to private shareholders was already under way. Councils and housing associations let about a third of England's homes, and their tenants had no right to buy them.
In 1979 nearly a third of the homes in England were rented from a council or a housing association, at low rents that could last a lifetime.
In 1980 Margaret Thatcher's government gave those tenants the legal right to buy their homes, at a discount that grew with every year they had rented. More than 2.2 million homes had been sold by the end of 1996, and councils were not allowed to spend most of the money on building replacements.
Six steps cover the offer, the choice at the kitchen table, why the sold homes were never replaced, and who came out ahead.
What this module covers
Written for every level. Tap any underlined word for what it means, and open the boxes below for the economics behind each decision. If you already know the theory, skip both and the history reads straight through.
Step 1 of 6
Most people rent from somebody or buy from somebody. For a long time the biggest landlord in the country was the council.
In 1979 councils and housing associations let 5.5 million homes in England. A housing association is a body that rents out homes at low cost without making a profit.
Councils let these homes at low rents, and the law was written so that the council could almost never make a tenant leave. Nothing in the law of 1979 gave a tenant any right to buy the home they rented.
Most other homes were owned by the people living in them: 55 per cent of all homes in 1979, and rising.
Take a guess. You are not expected to know the answers, and being wrong is what makes a number stick.
Out of every 100 homes in England in 1979, how many were rented from a council or a housing association?
For scale. 55 in every 100 homes were owned by the people who lived in them.
Certainly no single piece of legislation has enabled the transfer of so much capital wealth from the State to the people.
The Housing Act 1980 gave most council tenants the legal right to buy their home, at a discount, after three years of renting it.
The council could not refuse, because the right was written into the law. Michael Heseltine, the minister in charge of housing, called it the biggest transfer of wealth from the state to the people any law had made.
A tenant who could afford the full market price could usually have bought a house already. The discount put buying within reach of people who had rented all their lives, and it rewarded the years of rent they had already paid. It also made the offer hard to refuse, which is what the government wanted. Every sale created a homeowner, and the government expected homeowners to vote for the party that had made them one.
The discount grew with the years you had rented. After three years it took 33 per cent off the price.
The discount kept growing with your years as a tenant. After twenty years, how much of the price was taken off?
For scale. The starting discount, after three years as a tenant, was 33 per cent.
It is 1983, and the house you have rented from the council for twelve years is for sale, to you, at 42 per cent off.
Your rent is low and the council can almost never make you leave, so you could stay as you are. A mortgage on a house worth 20,000 to 30,000 pounds would replace that rent, and every repair would become yours.
Your neighbours are buying: sales reached 214,882 homes across England, Scotland and Wales in 1982, more than in any year before.
You are the tenant. The discount is worth years of wages, but if you stay, your rent stays low and your home stays safe. What do you do?
Millions of tenants chose to buy. Sales peaked at 214,882 homes in 1982, stayed in the hundreds of thousands a year through the decade, and passed 2.2 million by 1996.
What followedThe Right to Buy brought the Treasury more money than any other part of the programme in the 1980s. The offer kept improving, and by 1986 the top discount on a flat was 70 per cent.
By 2006 around 2.8 million council and housing association homes had been sold, almost half of all the homes they had to let.
The homes that were sold were not replaced. The law made councils use three quarters of every sale's money to pay down their debts, and only the last quarter was left for new building.
The law did not let them. Three quarters of the money from every sale had to go to paying down the council's debts. The last quarter could pay for new building and other long-term projects, and councils asking to be allowed to spend the whole of a sale's money were refused. A home sold was a home gone from the stock: no rule required a replacement, and three quarters of the money it raised was locked away.
Councils asked repeatedly to be allowed to spend the whole of a sale's money, not just the last quarter. The government refused every time.
The stock shrank sale by sale: councils and housing associations let 31 per cent of England's homes in 1979 and 16 per cent by 2022.
Renting from a council or a housing association stopped being ordinary, and by 2022 only 16 per cent of England's homes were let that way.
What did the law let a council do with the money from each sale?
For scale. Social housing's share of England's homes: 31 per cent in 1979, 16 per cent in 2022.
The state also gave buyers a tax break on mortgage payments, called mortgage interest relief. By 1989-90 it was costing 6.9 billion pounds a year.
The rules on who could lend money for houses were removed at the same time. Banks were allowed into the mortgage market from 1980. In 1983 the building societies, the savings banks that lent most mortgages, ended the agreement that had fixed their interest rates.
Anyone with steady wages could now borrow, from more lenders, with the tax break helping the payments.
With the state helping buyers and the lending rules gone, how far did house prices rise from 1981 to 1990?
For scale. The tax break applied to the first 30,000 pounds of a mortgage from 1983.
The buyers won twice. They bought at a discount, and the house then more than doubled in price in the boom of the late 1980s.
That is how the boom reached ordinary households: through their houses. Councils had fewer homes left to let by 2022, so the people still on a waiting list had fewer to be offered.
The share of England's homes let by councils and housing associations fell from 31 per cent in 1979 to 16 per cent in 2022. House prices rose 131 per cent from 1981 to 1990.
People still argue about whether the Right to Buy created a nation of homeowners or caused today's shortage of homes, and both sides use these same figures.
Home ownership stood at 55 per cent of homes in 1979. Where was it by 2001?
A tie counts as correct either way.
For scale. Around 2.8 million council and housing association homes had been sold by 2006, almost half of the stock.
Module 8 of 13 in Thatcher's Economic Policy
Homes rented from councils and housing associations, 1979
31 in every 100, 5.5 million homesThe discount, by years rented
33% after 3 years, 50% after 20The peak year of sales
214,882 homes, in 1982What councils could spend from each sale
a quarter; the rest paid down debtHouse prices, 1981 to 1990
up 131%Home ownership, 1979 and 2001
55%, then 72%Councils and housing associations let a third of England's homes in 1979, and a sixth today. Whether that is triumph or shortage is still argued.
[1] The right, the discounts and the sales: House of Commons Library, The Right to Buy, Research Paper 99/36. The Housing Act 1980 gave a statutory Right to Buy to most council tenants of three years' standing, at discounts running from 33% after 3 years to 50% after 20; the Housing and Planning Act 1986 took flat discounts to 44% after two years and up to 70% after 15. Sales peaked in 1982 at 214,882 dwellings across local authorities, new towns and housing associations, 196,430 of them under the Right to Buy, and over 2.2 million had been sold by the end of 1996. Councils had to set aside 75% of sale receipts for debt redemption; the remaining 25% could finance general capital spending, and repeated local authority demands for full reinvestment powers were refused.
[2] What the minister promised: Hansard, HC Deb 15 January 1980, Housing Bill (Second Reading). Michael Heseltine, Secretary of State for the Environment, moved the Bill (col 1443): 'Certainly no single piece of legislation has enabled the transfer of so much capital wealth from the State to the people.' He gave the discount range as 33 to 50 per cent by length of tenancy, the qualifying period as three years, and cited average house values of 20,000 to 30,000 pounds.
[3] What happened to the stock: House of Commons Library, Social rented housing in England, CBP-8963. In 1979 local authorities and housing associations let 5.5 million homes in England, 31% of all homes. The share fell to 16% by 2022.
[4] The tax break on mortgages: House of Commons Library, Mortgage Interest Relief, SN01536. Mortgage interest relief at source (MIRAS) operated from April 1983, with the qualifying loan limit raised to 30,000 pounds at that point. The cost table from Inland Revenue Statistics puts the relief at 6.9 billion pounds in 1989-90, the figure the content model carries.
[5] What house prices did: Bank of England Quarterly Bulletin 1998, The UK personal and corporate sectors during the 1980s and 1990s, Table A. House prices rose 131% on the Halifax measure and 149% on the Nationwide measure between 1981 Q1 and 1990 Q2.
[6] Who was allowed to lend: Bank of England Quarterly Bulletin 1990, The development of the building societies sector in the 1980s. The 'corset' control on bank lending was abolished in mid-1980 and banks entered the mortgage market from then; the building societies' agreement that had fixed their interest rates ended in 1983, the date the content model carries for mortgage lending being freed.
[7] What the Treasury got: Institute for Fiscal Studies, The right to buy public housing in Britain, BN162. The executive summary records the Right to Buy as the largest source of privatisation revenue to the Treasury, especially in the 1980s.
[8] Who owned homes, before and after: Resolution Foundation, The Thatcher legacy. Home ownership rose from 55 per cent of homes in 1979 to a peak of 72 per cent in 2001. Around 2.8 million council and socially rented homes had been sold by 2006, almost half of the stock.
Country data from the World Bank (CC BY 4.0) and the UNDP Human Development Report (CC BY 3.0 IGO)
Games · Learn · Atlas · Privacy