Local councils across England are facing a growing financial challenge brought about by a phenomenon known as ‘yo-yo homes.’
This term refers to council properties sold to tenants under the Right to Buy scheme, only to be sold back to the councils within a decade at significantly higher prices, resulting in sizeable losses for public authorities.
What are yo-yo homes?
The process begins with tenants leveraging the Right to Buy scheme, a government policy allowing council tenants who have lived in their homes for at least three years to purchase their properties at a discounted price.
However, if these owners decide to sell their property within 10 years, the council has the preferential right to buy it back.
Crucially, while sellers must repay part of their discount if they sell within five years, after this period, they can resell to the council without returning any discount amount.
Market values often increase substantially over these years, meaning sellers can secure significant profits from selling back to councils – hence the ‘yo-yo’ effect of properties swinging back to authorities at inflated prices.
How does the Right to Buy scheme work?
- Tenants must have lived in a council home for at least three years.
- Buyers receive a substantial discount based on how long they have lived in the property.
- Sellers who resell within 5 years must repay some or all of the discount.
- After 5 years but before 10 years, sellers can sell to anyone, but councils have ‘first refusal.’
- After 10 years, homeowners can sell freely without restriction.
Post-sale, councils have to decide whether to repurchase the home at full market value if the seller offers it back, which often exceeds the original discounted sale price by a wide margin.
Several councils have reported heavy financial losses due to yo-yo homes, according to an investigation by the Big Issue.
In Isleworth, Hounslow, a home bought for £272,662 in 2016 was repurchased by the council in 2023 for £575,000, amounting to a loss of over £300,000 on one property alone.
Other councils, including Ellesmere Port, Kingston-upon-Thames, and Swindon, have collectively lost approximately £15 million over the last five years through similar buy-back schemes according to the figures.
Councils are compelled to repurchase these homes primarily because ongoing sales under Right to Buy erode their housing stock — a problem exacerbated by rising homelessness, which requires urgent social housing solutions.
Government statistics show that 178,560 households were initially assessed as being homeless in 2023-24, a 12.3% increase from 2022-23.
Swindon Borough Council has been purchasing yo-yo homes specifically for families in urgent need of accommodation, while Kingston Council highlights efforts to expand social and temporary housing through these schemes.
How are councils funding buy-back programmes?
In London, Sadiq Khan’s Council Homes Acquisition Programme provides significant funding support.
But elsewhere, councils rely on a combination of their own resources and limited grants from bodies like Homes England, resulting in a patchwork of funding that can be insufficient for large-scale buybacks, especially as escalating costs are straining budgets.
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England-wide expenditure on temporary accommodation has risen 25% in just one year to £2.8 billion, with some London councils exceeding homelessness budgets by up to 60%, and bankruptcy risks looming, according to the Big Issue.
Yo-yo homes force councils to spend large amounts on repurchasing properties, further tightening finances that could otherwise go towards new builds or support services.
Criticism and solutions
Political and housing experts have widely criticised the current Right to Buy framework.
Labour MP Florence Eshalomi labelled the policy as a failure, given the financial strain and missed opportunities to retain existing council homes, while Chris Hayes, chief economist at think tank Common Wealth, criticised the inequity of individuals making large capital gains through resale, while many struggle to access social housing.
Manchester mayor Andy Burnham said last year that he wants to suspend the Right to Buy scheme, while Sadiq Khan previously indicated that borough councils should be able to decide for themselves whether to ‘pause, stop or continue’ with it.
The government has so far resisted these measures, but Labour plans to extend the discount repayment period to 10 years, blocking quick profits from resale.
As pressure mounts from councils, politicians, and housing advocates, more decisive reforms may be necessary to address the costly cycle of council homes bouncing back and forth through the yo-yo homes effect.
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