Latest Public Sector News

09.10.15

Councils to miss out on extra cash from higher rent proposal

Social housing tenants with combined incomes of over £30,000 (or £40,000 in London) will be required to pay rent above market levels, but local authorities will not be able to retain any of the extra cash.

Under government proposals put forward today (9 October) by housing minister Brandon Lewis, social rents will increase if tenants’ incomes are above the designated threshold –ensuring that higher-income tenants no longer “benefit from taxpayer-funded subsidies of up to £3,500 per year”.

But the extra money collected under this reformed ‘pay to stay’ policy will go directly to Whitehall to “contribute to deficit reduction” related to welfare savings.

Councils will be allowed to recover “reasonable administrative costs” only.

But housing associations will be able to absorb this extra income to reinvest in new housing.

The government also expects that local authorities already have systems in place that could be changed in order to operate the new policy – which will carry with it extra staff time costs.

Lewis said: “It’s not fair that other hard-working people are subsidising the lifestyles of higher-earners to the tune of £3,500 per year, when the money could be used to build more affordable homes.

“’Pay to stay’ will ensure that those tenants on higher incomes who are living in social housing have a rent that reflects their ability to pay, while those who genuinely need support continue to serve it.”

The policy will operate “in broadly the same way” as the existing pay to stay scheme in terms of how household incomes are calculated and how they are taxed.

Whitehall is currently consulting on the proposal until 20 November, and the scheme is expected to be in place from April 2017.

The policy is the latest in a series of housing reforms put forward by central government. On Wednesday (7 October), prime minister David Cameron announced he would scrap existing planning rules that require property developers to build affordable homes for rent, in an effort to increase the amount of homes for first-time buyers.

And at the end of September, the National Housing Federation (NHF) secured a deal with communities secretary Greg Clark MP to extend Right to Buy to housing association tenants, which Cameron perceived as a “breakthrough policy”.

The proposal also comes on the same day as Lewis’s local planning panel, created in September, invited views from local government and developers to consider the issues raised during its first meeting.

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