The Local Government Association, a national body which supports local government, is urging new government ministers to rethink the ‘Pay to Stay’ policy which will require councils to charge some of their tenants higher rents from April 2017.
New research reveals that more than 70,000 social housing tenants could face rent rise bills of an average of £1,000 a year from next year under government plans to increase rents for those deemed to be earning ‘high incomes’.
Cllr Stephen Morgan, Labour’s housing spokesperson, is concerned about the effect the policy would have locally. He very much welcomes the LGA call for a government rethink:
“It is clear that the impact of this policy would cause stress to families, further administrative costs to councils and far lower financial returns to government than originally forecast. The LGA also argues that the complexities of setting up the new system make it impossible to implement the change from April 2017. The policy has not been thought through properly.“
Councils across the country would need to invest £millions in new IT systems, hire new staff and write to more than a million social housing tenants to obtain information on household income and approve individual tenant bills by January. This is expected to be a difficult, lengthy and costly process for councils and is likely to be unpopular with tenants and result in a high level of costly appeals and challenges.
Under Pay to Stay, high income social tenants are defined as households with incomes above £31,000 – a higher threshold will exist in London. This would mean a working couple each earning above £15,500 would be defined as having a high income and will be forced to pay an amount closer to a market rent from next year. Tenants on housing benefit and universal credit would be exempt. For eligible tenants above the high income threshold the rent increase will be tapered with every £1 they earn above this level meaning a 15p increase.
The Government will take the additional rent raised from tenants less a proportion that the council will retain to help administer the policy. This amount will be determined by the Government. The research has also found that:
- 70,255 households will earn above the £31,000 income threshold outside London
- 3 per cent of households living in council housing in the south east will see their rent increase Average monthly rent uplifts would be £72 for households outside of London. Affected households will see their rent increase by an average of £1,065 a year.
- Increased rents are expected to generate just £75 million annually, before deductions for significant administrative costs. Originally the Government had forecast returns of £365 million in 2017/18.
Cllr Stephen Morgan, Labour’s housing spokesperson said:
“This helpful research by the Local Government Association shows what we already feared – the pay to stay policy will affect thousands of families, with the average affected household seeing their rent rise by £1,065 a year. This will cause anxiety, uncertainty and cost, and I am concerned for its impact on communities across Portsmouth.
“The policy has unseen complexities and could generate large numbers of costly legal appeals and challenges from tenants. It is an expensive distraction from efforts to build much-needed homes. There is already a significant shortage of social housing and this change could well add to the pressures as many people are unlikely to be able to afford the increased rent.
“I welcome the LGA’s intervention in calling the new government leadership to think again about this policy and allow councils to decide whether or not they will introduce Pay to Stay for their tenants.”