Just found an article from this proposal by Labour in 2016 which suggests the discount wouldn’t be funded by the government, except for a reduction in CGT so the landlords lose out on the market value
How on earth can they make that work?
Right to buy in the private sector would be limited to tenants in properties which are at least 25 years old and which they had lived in for several years. This would ensure that investors were not deterred from buying new properties to rent out.
Saunders cites an example of a tenant in a private rented property outside London that had been bought by a private landlord 12 years ago for £200,000, and which had increased in value to £400,000. The tenant, under the plan, would be entitled to a 35% discount, worth £140,000, as long as he or she had occupied it for several years.
However, the maximum discount would be capped at £77,900 (the same maximum applies to sales of social housing) so the house would be sold to the tenant for £322,100. This would give the landlord a taxable capital gain of £122,100. But the capital gains tax (CGT) concession would reduce the sum liable to tax to £44,200. The landlord would therefore end up paying CGT of £9,268 – leaving a post-tax capital gain of £112,832 on the original investment of £200,000. Saunders adds: “Even if a tenant qualifies for a maximum discount of £77,900 (or £103,900 in London), these landlords will still enjoy handsome capital gains if they are obliged to sell. The discounts they would have to offer to their tenants would merely share out some of the windfall gains they have been making over the last decade or two.”