Discount for houses
If you are buying a house, you start with a 35% discount after three years as a public sector tenant. For each additional year of tenancy, the discount increases by 1% per year, up to a maximum of 70% or the regional cash cap, whichever is lower.
For example, if you have been a tenant for 10 years, your discount would be 35% plus 7% (one percent for each year beyond three), giving you a 42% discount on the market value of the property.
Discount for flats
Flats attract a higher starting discount of 50% after three years, rising by 2% for each additional year of tenancy, up to the same 70% or regional cash cap maximum. This means flat tenants can reach the maximum discount more quickly.
The higher discount for flats reflects the fact that flats typically have lower market values and come with additional costs such as service charges and ground rent that house owners do not face.
Regional cash caps
Regardless of the percentage discount you qualify for, the maximum discount is capped at a cash figure that changes each year. In London boroughs the cap is currently £136,400, and outside London it is £102,400. These figures are updated annually in line with the consumer price index.
The cap means that tenants of higher-value properties may receive a lower percentage discount than they would otherwise be entitled to. Your council’s Section 125 notice will confirm the exact discount and purchase price for your specific property.
Discount repayment rules
If you sell your home within five years of buying it through Right to Buy, you must repay some or all of the discount. In the first year you repay 100%, in the second year 80%, then 60%, 40%, and 20% in years three to five respectively.
After five years the discount is yours to keep in full. You must also offer the property back to your former landlord before selling on the open market during this period. These rules are designed to prevent people from profiting quickly at the expense of the social housing stock.