Key Points
- Newham Council sold 130 properties for £10.6 million under Right to Buy, then repurchased them for £33.3 million, causing a £22 million loss.
- The resale-buyback cycle is called “Yo-yo Homes” by Big Issue, revealing a costly loophole in the Right to Buy scheme.
- Properties sold back to councils more than five years after the initial purchase are exempt from repaying discounts.
- Example: A home sold for £49,300 in 2015 was bought back for £320,000 in 2021, a sixfold price increase.
- Newham has England’s largest social housing waiting list and faces an £84 million funding shortfall largely due to homelessness costs.
- The council insists buybacks are cheaper than market purchases or new builds and help provide quick housing solutions.
- Green Party councillor Areeq Chowdhury criticises the strategy as financially and socially detrimental to the borough’s vulnerable residents.
Why has Newham Council lost £22m buying back homes it sold under Right to Buy?
Newham Council, overseeing one of the most socially pressured boroughs in east London, has suffered heavy financial losses by selling homes cheaply under the Right to Buy scheme only to purchase them back at much higher prices. Big Issue’s ongoing investigation into “Yo-yo Homes” reveals that within five years, 130 properties were dispossessed to private buyers for £10.6 million but reacquired by the council for £33.3 million — a sharp loss of approximately £22.7 million.
This striking case highlights the systemic impact of Right to Buy policies, which mandate that councils sell off social housing to tenants at discounted rates. However, when councils attempt to reverse these sales by buying the properties back, they face inflated market costs without the ability to reclaim the initial discounts due to a loophole in the legislation. This loophole allows private owners to keep discounts if they sell the property back to the council more than five years after their original purchase.
How does the Right to Buy scheme create “Yo-yo Homes”?
As reported by the Big Issue, the term “Yo-yo Homes” refers to properties cycling quickly between public and private ownership, dramatically increasing financial strain on local authorities. One detailed example involves a property located between West Ham and Plaistow in the E13 0 postcode. This home was sold by Newham Council in June 2015 for £49,300. Under Right to Buy rules, local authorities were compelled to sell at discounted prices. Less than six years later, in March 2021, Newham reacquired the same property for £320,000 — more than six times the original price. This yield translated into around £270,000 profit for the private owner, as none of the discount needed to be repaid because it was sold back after the five-year qualifying period.
Between 2015 and 2021, Big Issue’s investigation shows this pattern occurred 130 times where council-owned flats, mostly within blocks where the council retained freehold ownership, were sold off cheaply and bought back at drastically increased costs.
What are the social and economic consequences for Newham?
Newham is currently facing England’s largest social housing waiting list, reflecting a severe local housing crisis. The council estimates an £84 million funding deficit, heavily influenced by costs related to homelessness. Approximately 50 households are forced into temporary accommodation monthly, creating urgent demand for social housing.
Despite these pressures, Newham Council defends its strategy, stating that buying back homes is often less expensive than purchasing properties on the open market or building new homes from scratch. They argue re-buying flats provides a rapid way to supply housing, despite the financial losses identified.
Opposing this view, Green councillor Areeq Chowdhury told Big Issue:
“People will be astonished to find out that their money is being spent in this way in Newham, with such a massive waiting list, so many people homeless and living in temporary accommodation. It’s not good.”
Chowdhury emphasised the opportunity cost of these losses:
“If you think about £22m, that’s money in an ideal world which could be used on housing the homeless, but instead it’s used to create wealth. A choice has been made to buy back these properties at a loss, rather than fund these other public services that the council decided to cut.”
How does the Right to Buy discount loophole affect councils financially?
The Right to Buy policy allows tenants to buy their council homes at discounted prices, with editions of funding support tied to tenancy length. However, the legislation embeds a significant loophole: if a property is sold back to the council more than five years after the initial sale, the seller need not refund any discounts they received. This creates an environment where private owners can realise substantial profits by holding onto the property beyond five years and then selling it back to councils.
This loophole restricts council ability to recoup public money used in subsidising home purchases in the first place and intensifies financial pressures on councils struggling to maintain social housing stock.
What has been the broader impact of Right to Buy on social housing in the UK?
Right to Buy was introduced nationally in the 1980s, resulting in the large-scale transfer of social housing from public to private ownership. Over time, this policy has profoundly reduced the stock of affordable housing available to those in need, as properties sold off were often not replaced. Many councils now face acute shortages of social housing, forcing them to rely increasingly on temporary accommodation.
Big Issue’s investigation into “Yo-yo Homes” uncovers a new pattern where councils face significant financial strain trying to reacquire homes, exacerbating the existing housing crisis in highly pressured boroughs such as Newham.
How has Newham Council responded to the investigation?
Newham Council acknowledges the financial challenges but insists that buying back properties is a necessary, cost-effective approach despite the higher repurchase prices. They point out that most of the properties bought back are flats within blocks where the council holds freehold — a nuance implying long-term estate management control.
The council emphasises that alternatives such as brand new constructions or market purchases often cost more and take longer, thereby limiting immediate housing solutions to entrenched issues like homelessness.
