Material improvements by tenants to local authority social houses may be factored into the purchase price of properties under the Tenant (Incremental) Purchase Scheme.
It is generally a matter for local authorities to decide how the purchase price of such properties is determined. That said, it is typically the greater of –
- the ‘relevant market value’ (where appropriate, the market value of a house less the market value of material improvements); or
- half the estimated cost to a local authority of replacing the house.
A purchase price based on half the replacement cost, ensures a minimum financial contribution to replacing a house where its market value is too low to meaningfully compensate for its loss from the social housing stock. While the value of improvements would not be factored into this calculation, the purchase price would still be low because the discount, whether 40%, 50% or 60%, is applied to only half the replacement cost.