Council houses have been sold off at valuations up to seven years out of date and at discounts bigger than those ever envisaged by Margaret Thatcher, a Guardian investigation has found.



Despite a deepening shortage of affordable housing, town halls have sold off more than 130,000 homes in the last decade at discounts of up to 70% of their market value. The price cuts have amounted to almost £4bn.

Between 2012 and 2014, the London Borough of Tower Hamlets sold off more than 50 homes using valuations two or more years out of date, costing the public purse thousands of pounds on each transaction, according to data released under the Freedom of Information Act.

The east London borough sold one two-bedroom flat in 2012 based on a valuation made seven years earlier, missing out on a 30% price rise in the area over that period. Including discount, the borough sold a one-bedroom flat for £42,000 when it was valued at £142,000. A two-bedroom maisonette was sold for £40,000 when it was worth at least £125,000.

Tower Hamlets blamed the out-of-date valuations on “a backlog of applications due to resourcing issues” which it said had now been cleared.

“Accordingly the time lag between valuations and completions has reduced,” a spokesperson said.

Tom Copley, Labour’s housing spokesman at the London Assembly, has estimated that every other property sold under right-to-buy in Tower Hamlets is now being let out rather than used by the owner who bought it. According to a survey by Inside Housing magazine last month, 38% of council homes sold off under right to buy across 91 local authorities are being let out in the private rented sector.

David Cameron is currently preparing to extend the controversial right-to-buy policy to 1.3 million housing association residents. The prime minister said he wants to “turn tenants into homeowners and reduce housing benefit bills”. But critics complain the existing scheme has been mishandled and allows some tenants to make huge windfalls and deprive the country of low-cost housing.

Emma Reynolds, the shadow communities secretary, said the use of out-of-date valuations was “deeply concerning” and warned the government’s plan to extend the right to buy to residents of housing association properties would make the affordable housing crisis even worse.

A two-bedroom former council flat this summer sold for 22 times the sum it fetched when it was first taken into private ownership in 1997 under the right-to-buy programme.

The home in Keppel House on the Fulham Road in west London fetched £1m but was sold off by the London borough of Kensington and Chelsea for just £45,600, including a 50% discount. Four years later its former tenants sold it for a £200,000 profit, and it was sold again in 2007 for £418,000, according to Land Registry records.

There is also evidence that more than a third of council houses and flats sold off under the scheme are now in the private rented sector rather than occupied by their former council tenants.

The Department for Communities and Local Government spokesman defended the policy but said councils must sell properties based on their current value.

“We want to ensure that anyone who works hard and aspires to own their own home, has the opportunity to do so,” a spokesperson said. “We expect councils and housing associations to abide by the clear and detailed rules set out in legislation and sell their properties based on open market value.”

Housing associations have called on ministers to rethink a plan to extend right to buy, claiming that 60% of people believe it is unfair that social housing tenants will get discounts to buy their home while private renters will not.

The south London borough of Sutton also revealed in a Freedom of Information Act response that it had sold off several flats at a 70% discount, allowing one tenant to buy a £173,000 home for just £70,000.

Discounts of 70% are allowed under the policy for tenants who have lived in their homes for many years, but opponents insist they are too high. The government has said it will cap discounts in the new right to buy at £75,000 “to prevent excessive windfalls to social tenants”.

“It’s absurd,” said James Murray, executive member of housing at Islington council. “The system has given away huge sums of public assets and replacement homes have not been built. In many cases it has effectively led to social landlords being replaced by private ones.”

When Thatcher launched the policy in the 1979 Conservative election manifesto she said the maximum discount should be 50%, but in 2013-14 the average was 47%.

In 2012, the government increased the amount of discount councils could offer in order to make the right-to-buy scheme affordable for tenants in a period of rapidly rising house prices, particularly in London and the south-east.

Critics also complain of a lack of replacement affordable house building. The Department for Communities said it has received £3.58bn in receipts from the sell-off over the last decade, but admitted it was “not possible to set out specifically how the proceeds from the receipts per se are used” because they are placed into the general government “pot”.

In 2013-14 councils sold off more council houses (11,261) than they built homes for “social rent” (10,840) - which are at the equivalent rent levels.

The government says every additional home sold under the extended right-to-buy scheme will be replaced on a one-for-one basis.