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Pay to Stay: ARCH response 30/10/2015

We're preparing our response to The DCLG consultation paper on the introduction of mandatory higher rents for so called "high income" tenants.


We're asking our members for their views and comments to feed into our response.


The government published a consultation paper 'Pay to Stay: Fairer Rents in Social Housing' on the introduction of a mandatory 'pay to stay' scheme for tenants with household incomes of over £30,000pa (£40,000 in London).   


The government has now published their Impact Assessment of the proposals set out in the Housing and Planning Bill including the proposal to introduce a mandatory 'pay to stay' scheme. The Impact Assessment estimates that:


  • There are currently 350,000 council and housing association tenants with household earnings above £30,000 who would be required to pay a market or near market rent
  • The number of tenants affected is expected to rise further by April 2017 (the date of the planned introduction) because of rises in the National Minimum Wage/National Living Wage and wage rises generally. The caseload (number of tenants affected) by 2017/18 is estimated to be:
    • 200,000 council tenants; and
    • 240,000 housing association tenants  
  • By 2020/21 the cost of administering a mandatory 'pay to stay' scheme will be around £28million per year with a further £45million in transitional costs; and
  • Council and housing association tenants affected will be paying an additional £1.05billion per year in rent:
    • Council tenants will be paying an extra £510million in rent which will be paid over to central government
    • Housing association tenants will be paying an extra £540million to their landlord which associations will be able to keep to reinvest in new housing.


The government's consultation paper is seeking views on whether some form of taper system should be introduced under which the amount of rent paid will increase as tenants incomes increase above the "high income threshold". The Impact Assessment is modelled on tenants paying:


  • 80% of the market rent of the property for those earning between £30,000 to £40,000 (£40,000 to £50,000 in London); and
  • 100% of the market rent of the property for those earning over £40,000 (£50,000 in London)


The initial ARCH response to these proposals is that:


  • The government should rethink its plans to introduce a mandatory 'pay to stay' scheme and continue to allow local authorities to exercise local discretion as to whether such a scheme is necessary within their local area.
  • If the government do proceed with the introduction of a mandatory 'pay to stay' scheme, then to avoid work disincentives the income thresholds should be substantially increased and either:
    • be raised to the level prescribed in the current discretionary scheme (£60,000) as set out in the Guidance on Rents for Social Housing (May 2014) in order to avoid penalising hard working low to middle income earners; or  
    • Be set locally, with the threshold linked to the earnings levels that would enable to access the local owner-occupied market through incentives such as the Starter Homes Initiative and Help to Buy Schemes etc.
    • If the government refuse to consider a higher national threshold or allowing local authorities to set local thresholds then, as a minimum, the thresholds as proposed (£30,000/£40,000 in London) should be index linked to rises in the National Minimum Wage and National Living Wage from April 2016 onwards
    • Furthermore, if the government do proceed with the proposal, local authorities, like housing associations, should be allowed to retain any additional income to re-invest locally in the housing service.


However we're seeking the views of our members to help inform both the ARCH response to the current DCLG consultation paper and the formal ARCH representations on the Housing and Planning Bill.


The ARCH Board will be considering its formal response to the consultation paper at its meeting on 16 November 2015.


If you have any views and comments on the government's proposals for introduction of a mandatory 'pay to stay' scheme please forward your comments to ARCH Policy Adviser, Matthew Warburton, ( by Wednesday 11 November 2015. 


In any event, ARCH members are encouraged to submit their own responses to the Consultation Paper and copy in Matthew Warburton.

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