Following a consultation, the Department for Communities and Local Government today published details of how the right to buy will work and the new discount levels available.

The maximum discount is set to increase from the £50,000 originally proposed to £75,000. This more than quadruples the discount available in most parts of London, and trebles it for the rest of England. The new cap will come into effect on April 2.

The DCLG said this would reverse the effect of the discount caps imposed by the previous government, which had led to right to buy sales falling from 84,000 in 2003/04 to 4,000 in 2010/11.

Heralding the plans, Prime Minister David Cameron said the refreshed scheme would benefit 2 million social housing tenants in England.

‘It’s no good hoping people will climb the property ladder if the bottom rung is missing,’ he said.

Housing minister Grant Shapps said the government was ‘scrapping the misery’ of restricted right to buy discounts.

But he added: ‘We are determined to maintain the number of affordable homes for rent – so for the first time, homes that are sold will be replaced by new affordable homes, helping councils meet housing need and getting the nation building again.’

Councils will be able to enter into an agreement with central government allowing them to keep the sale receipts if they think this will cover 30% of the costs of building a replacement home.

Where councils do not wish to enter into such an agreement, sale receipts will be used to fund new housebuilding more generally through either the Homes and Communities Agency or the Greater London Authority.

The government has agreed to allow councils to retain a higher proportion of the sale proceeds to cover their administrative costs. London-based councils will be able to retain up to £2,850 for each right to buy sale, while councils in the rest of England can keep £1,300.

But Shelter’s chief executive Campbell Robb sounded a note of caution. He said: ‘We know that right to buy mortgage holders are three times more likely than other homeowners to be repossessed, so it’s vital that rigorous affordability checks are in place to make sure people who are tempted by these schemes can truly afford to buy their home.

‘We’re also very concerned that affordable homes sold under right to buy are not going to be replaced like-for-like, but with homes where landlords can charge up to 80% of market rents. At a time when we already have a critical shortage of affordable housing in this country, this amounts to little more than asset-stripping and will ultimately mean fewer genuinely affordable homes for families struggling on low incomes.’

The Chartered Institute of Housing raised doubts over the government’s assertions that it would be able to replace each house sold through right to buy.

Chief executive Grainia Long said: ‘This provision will be difficult to maintain given the fixed discount policy announced today.

‘We also share the concerns of many housing professionals that high levels of discount might not lead to good value for the public purse at a time when the government is encouraging local authorities to get the best out of their assets.’

Labour councillors lambasted the hike in the discount as a ‘cynical move’ that would result in a ‘fire sale of community assets’.

Tony Newman, lead housing spokesman for the Local Government Association’s Labour group, said the announcement would do nothing to address the shortage of social housing.

‘The centralising approach of the government means that social homes will be sold off at a discount decided in Whitehall with no regard for the local market. The one-for-one replacement proposals do not stack up,’ he said.

The government also announced that it would provide mortgage security for prospective housebuyers who lack sizeable deposits.

The NewBuy Guarantee has been backed by three high street mortgage lenders and seven construction firms. It will offer mortgages on newbuild properties for people who can only provide a 5% deposit. The government and housebuilders will provide security for the loan, so that if the property is sold for less than its outstanding mortgage, the lender will be able to recover the loss.

Shapps said the NewBuy Guarantee would ‘give thousands of prospective buyers the chance to buy a home with a fraction of the deposit normally required’.