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Forward with Pay to Stay? Matthew Warburton - 07/11/2013

share_cash_300Last week I wrote about the parts of CLG's consultation paper Rents for Social Housing from 2015-16 which propose changes to the levels of annual rent increases from 2015. The paper also includes proposals intended to take forward the Government's plans to allow councils to charge higher rents to tenants on higher incomes - so-called "Pay to Stay" schemes.

As indicated back in July, the Government intends to implement Pay to Stay in two stages. First it proposes to remove the regulatory controls preventing landlords from charging market rents to higher-income tenants - and the consultation paper includes proposals intended to achieve this.

The second stage would involve legislation to require tenants on high incomes to declare this to their landlord. There is still no indication when the required legislation will be introduced.

Private registered providers are expected to adhere to rent regulation requiring them to set formula rents, except where a specific exemption is provided, such as for affordable rents. Councils are legally required to set reasonable rents and have regard to Government guidance, which currently contains no exemption on this issue.

However, Government guidance is non-statutory and it could be argued that there is no real obstacle to prevent a council adopting a local policy to charge higher rents to high income tenants. Amendment of the guidance, as CLG now propose, will simply put such a policy's legality beyond doubt.

The government has previously suggested that landlords should consider charging market, rather than social, rents to tenant households with incomes above £60,000 a year. The consultation paper offers an approach to defining "household" and "income" in this context.

Only the income of the tenant and any partner residing in the accommodation will be taken into account in determining household income. This means that a tenant earning £35,000 with a partner earning £26,000 would be expected to pay a higher rent, while a household including three adults each earning £29,000 would not. The proposed definition of income is total taxable income; capital is proposed to be excluded, although views are invited on this point.

Some councils are opposed to Pay to Stay schemes in principle; others regard them as unworkable until legislation requires relevant tenants to declare their income. Some may wish to go ahead despite the absence of clear powers to collect income information from tenants.

But because, for councils, the CLG's proposed scheme is set out in non-statutory guidance, councils are free to choose whether to go ahead with a scheme at all, and, if they do, whether to follow the details of the CLG scheme.

They are required to have regard to the Government's views on these matters, but they are not bound to adopt them if they believe a local policy would work better for them and their residents.

 

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