Under the consultation proposals published by Housing
Minister, Brandon Lewis, on Friday 9 October 2015, the
government will require council and housing association tenants to
pay higher rents to continue living in their
Read The DCLG Consultation Paper.
Households in social housing with a total income of more than
£30,000pa (£40,000 in London) will have to pay a rent at market or
near market levels.
The accompanying press release issued by the DCLG says:
"...this will put an end to the situation where higher-income
social tenants benefit from taxpayer-funded subsidies of up to
£3,500 per year". Although it is unclear where this figure of
£3,500 comes from as, since the end of the Housing Revenue Account
Subsidy System in 2012, taxpayers and council taxpayers make no
direct contribution to the cost of managing and maintaining council
housing which is entirely self-financed from the rents paid by
Under the proposed compulsory 'pay to stay' scheme, social rents
would increase as tenants' incomes rise above the £30,000 (£40,000
in London) threshold.
Councils and housing association landlords will be responsible
for administering the scheme and collecting any additional rent due
from their tenants. However, while housing associations will be
able to retain the additional income raised to reinvest in their
housing, council landlords will be required to pay over the extra
money collected to the government to contribute to the £12billion
savings in the welfare budget.
Council landlords will be allowed to recover any reasonable
administrative costs before they are required to return additional
income from increased rents to the exchequer. As housing
associations will be retaining the income they receive from higher
rent payments, they will be expected to absorb the administrative
According to the press release, the government say these
changes will affect over 1/3 million hard working tenants who will
be expected to pay much higher market or near market rents (which
are often 20% to 40% higher than council house rents). The
government's press release says there are currently more than
40,000 tenants living in council and housing association rented
accommodation with household incomes in excess of £50,000 per year;
and a further 300,000 with incomes over £30,000. The government's
Impact Assessment on the one percent social rent reduction
estimates "that hundreds of millions of pounds per year of
additional rental income will be available (to housing
associations) to support their business plans".
The Scheme will come into effect in April
So while some working tenants will see their rents reduced over
the next four years, those in work with household earnings of over
£30,000 could face significant rent increases from April 2017.
The proposed "high earnings" thresholds are significantly lower
than the £60,000 per year threshold recommended by the previous
Conservative led Coalition Government in the current discretionary
'pay to stay' scheme which few, if any, landlords have chosen to
Coming on top of planned cuts to Working Tax Credits this will
come as a further blow to the household budgets of those
hardworking families living in council and housing association
Increases in the National Minimum Wage and introduction of the
National Living Wage will soon put many more households outside the
"high earning threshold" of £30,000.
The consultation paper hints that the government may be
considering some form of taper with rents increasing incrementally
depending by how much the household's income exceeds the £30,000
(£40,000 in London) threshold.
The consultation paper asks two specific questions:
- How income thresholds should operate beyond the minimum
thresholds for example by use of a simple taper or multiple
thresholds that increase the amount of rent as income increases and
whether the starting threshold should be set in relation to
eligibility for Housing Benefit; and
- Based on the current systems and powers that local authorities
have, what is the estimate of the administrative costs and what are
the factors that drive these costs?
The consultation period ends on Friday 20 November
Read The DCLG Consultation Paper.