Latest Public Sector News

30.08.16

Pay to Stay an ‘expensive distraction’ from vital housebuilding efforts

Plans to increase rent for high-income social housing residents could affect 70,000 households and generate new costs for councils, according to the LGA.

The Pay to Stay policy, which is set to be introduced in April next year, requires high-income social tenants to pay rent closer to market rates.

However, new analysis by Savills for the LGA found that the DLCG’s definition of high income, which applies to households earning £40,000 and above in London and £31,000 and above outside the capital, will affect 70,255 households.

Rent will increase for 9.3% of council houses in the south east, 7.7% in the east and 5.3% in the north east.

The average monthly rent increase will be £132 for London households and £72 for households outside London. Overall, rent will increase by £1,065 a year.

In addition, the research raised concerns about the impact of the policy on national and local government.

It said that the policy will generate just £75m annually, below a forecast £365m, and will mean councils incur new costs because of administration, the need for new IT systems and staff, and a likely increase in appeals from tenants.

Cllr Nick Forbes, senior vice chair of the LGA, said the policy would cause “anxiety, uncertainty and costs” for residents and “new administrative costs and complexities” for councils.

“Pay to Stay risks becoming an expensive distraction from our joint ambition to build more homes,” he said.

Growth in house building but more needed to address crisis

The government also plans to expand ‘Right to Buy’ powers for social housing residents, which it has been estimated will cost councils £26m a year.

Last week, the government reported that 139,030 new houses were completed in June 2015-16 and more than 144,280 houses were started, a 6% increase from the previous year.

The new homes being completed in London grew by 24%, with completions increasing by 126% in Greenwich alone.

Last week, London mayor Sadiq Khan ordered up to 400 new homes to be built on Transport for London land located near Kidbrooke station in the borough.

Other areas with high increases in housing completions included Swindon (104%) and Wakefield (41%).

Housing starts by private companies in April-June 2016 were 6% higher than the previous quarter, and housing completions were 3% higher.

In contrast, starts by housing associations were 6% lower, although completions were 29% higher.

Sajid Javid, the new secretary of state for communities and local government, said the government had “got the country building again”, although he added that there was “much more to do”.

Cllr Martin Tett, the LGA’s housing spokesperson, said that the private sector could not address the shortage of affordable housing on its own, especially in light of the uncertainties caused by Brexit.

“Councils and the government both share the same ambition to build more homes,” he said.

“Bold new action is needed to solve our housing crisis and a renaissance in house building by councils must be at the heart of this. Councils want to get on with the job of building the new homes that people in their areas desperately need.

“If we are to stand any chance of solving our housing crisis, councils must be able to replace sold homes and reinvest in building more of the genuine affordable homes our communities desperately need now more than ever.”

The LGA has previously called for a ‘renaissance’ in house building to address the growing demand for affordable housing, with 250,000 new homes needed a year.

Pay to Stay should be optional 

Cllr Forbes urged the government to allow councils to choose whether to introduce Pay to Stay and whether to invest the money raised in new and existing housing. He added that if not, the initiative should be piloted before it is rolled out.

A spokesperson for the DCLG said: “It’s simply not fair that hard-working people are subsidising the lifestyles of those on higher than average incomes, including tens of thousands of households earning £50,000 or more.

“Pay to stay better reflects tenants’ ability to pay while those who genuinely need support continue to receive it. It means households earning £32,000 would see rents rise by just a couple of pounds a week.”

(Image c. Dominic Lipinski from PA Wire)

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