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Government issues 'pay to stay' consultation 16/10/2015

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 homes.


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 council tenants.


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 costs.


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 2017.


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 implement. 


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 accommodation.


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:


  1. 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
  2. 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 2015.


Read The DCLG Consultation Paper.

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