Discount for houses
Buying a house, you begin with a 35% discount once you have three years as a public sector tenant. Every further year of tenancy adds another 1%. That keeps climbing until it reaches 70%, or the cash cap for your region, whichever comes first.
Take a tenant of 10 years as an example. That is the starting 35% plus 7% (one point for each of the seven years past the first three), which works out at a 42% discount on the home’s market value.
Discount for flats
Flats open at a higher rate: 50% after three years, then 2% for every extra year, up to that same ceiling of 70% or the regional cash cap. Because the rate climbs faster, flat tenants tend to hit the maximum sooner.
The bigger discount is there because flats usually sell for less than houses and carry extra running costs, such as service charges and ground rent, that homeowners in houses do not deal with.
Regional cash caps
Whatever percentage you qualify for, there is a ceiling in pounds, and it shifts each year. In the London boroughs that cap currently sits at £136,400. Outside London it is £102,400. Both figures are revised every year in line with the consumer price index.
For tenants in higher-value homes, the cap can pull the discount below the percentage they would otherwise get. The exact discount and purchase price for your own property come through on the council’s Section 125 notice.
Discount repayment rules
Sell within five years of buying through Right to Buy and you have to hand back some or all of the discount. Sell in the first year and you repay all of it. After that the share drops: 80% in year two, then 60%, 40%, and 20% across years three, four, and five.
Once you pass the five-year mark, the discount is yours to keep with nothing to repay. During those first five years there is another condition, though. You have to offer the home back to your old landlord before you put it on the open market. The point of these rules is to stop people cashing in quickly at the expense of social housing.