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Major U-turn as controversial Pay to Stay scheme scrapped by government

The government has scrapped a controversial plan to hike rents for better-off social housing tenants after it admitted that the policy would adversely affect working class families.

Pay to Stay, the scheme which would have forced social housing tenants to pay more rent if their income was more than £30,000 per year outside London or £40,000 in the capital, was one of the keystones of the government’s Housing and Planning Bill, now Act.

Ministers fought vigorously against the House of Lords’ attempt to scrap the policy in May, yet have now decided to abandon the plan of their own volition. Local authorities can still implement the increase voluntarily under their current powers, although none have done so thus far.

In a written statement to Parliament, housing minister Gavin Barwell said: “Since the summer, the government has been reviewing this policy. We have listened carefully to the views of tenants, local authorities and others and as a result, we have decided not to proceed with a compulsory approach. Local authorities and housing associations will continue to have local discretion.

“The government remains committed to delivering its objective of ensuring social housing is occupied by those who need it most. But we need to do so in a way that supports those ordinary working class families who can struggle to get by, and in a way which delivers real savings to the taxpayer. The policy as previously envisaged did not meet those aims.”

Labour’s shadow housing minister, John Healey, welcomed the reversal after he led the party’s campaign to amend the contentious legislation.

However, Healey urged the government to reflect on the other “failed housing decisions” made over their six years in power.

“This welcome U-turn is a victory for Labour’s year-long campaign against the ‘tenant tax’ which was set to hike rents for thousands of middle income households,” Healey argued. “Having recognised this move was a big mistake ministers must now re-think the rest of their failed housing decisions over the last six years.

After disastrous figures last week showing that the number of new affordable homes for social rent has fallen to the lowest level since records began, top of the list must be reversing the forced sale of vital council homes and the huge cuts to investment in new genuinely affordable homes.”

Back in August, research by Savills for the LGA found that raising rent for high-income social housing residents could affect 70,000 households and generate new costs for councils because of administration, the need for new IT systems and staff, and a likely increase in appeals from tenants. The LGA said that the Pay to Stay policy was an “expensive distraction” from housebuilding efforts.

After the government’s U-turn yesterday, the LGA’s chairman, Lord Porter, said the association was pleased the chancellor and housing minister had “listened to and accepted” calls for the scheme to be voluntary.

“We have been working hard with the government to make sure it was aware of the difficult, lengthy and costly process in seeking to implement the policy – which was likely to cause anxiety for families and be hugely unpopular with tenants,” he added.

“Pay to Stay risked becoming an expensive distraction from our effort to build homes. A renaissance of council housebuilding is needed now more than ever if we are to stand any chance of solving our housing crisis.”

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