Consultation response: Pay to Stay

The Government has decided that social housing tenants with household incomes of £40,000 and above in London, and £30,000 and above in the rest of England, will be required to pay an increased level of rent for their accommodation if their rent is currently set at below market rent levels.

Shelter understands the needs of social housing tenants and the sector as a whole. We advised 50,442 social tenants in 2014/15; almost 40% of all of our clients in this period lived in the social rented sector. More than 1.3 million households were on social housing waiting lists in England on the 1st April 2014. Almost 83,000 households were found to be homeless in England during 2014.

Summary

The Government argues that the potential advantages of a mandatory Pay to Stay scheme will be:

• An increase in local authority rent revenues, which will deliver additional income to the Exchequer.

• Housing associations will be able to use the additional income to reinvest in new social housing.

• In those cases where higher-income tenants choose to leave the sector, they will 'free up' social housing for those with greater need.

Shelter is not against the principle of some social housing tenants paying slightly higher rents depending on their income and we acknowledge the above advantages. However, we are concerned that these possible benefits could be vastly outweighed by the potential disadvantages of this policy:

• The proposed income thresholds at which higher rents would apply are too low and so crudely applied as to increase dependency on benefits and reduce incentives to work, in contradiction of government policy objectives.

• The scheme could be overly bureaucratic and costly to administer.

• Although it is only likely to affect a small number of tenants, the impact on them could be severe.

We are, therefore, pleased that the Government wants to ensure that the policy supports work incentives and is seeking views on how the policy can be designed to achieve this.

Shelter recommends that:

• To reduce administrative costs and ease bureaucracy, the Government should consider a model similar to that applied in Hong Kong, whereby income reviews are carried out every two years and only after ten years of tenancy.

• Income thresholds must take both income and household size (and needs) into account.

• Threshold-setting mechanisms must take into account the impact of fluctuating household incomes.

• Thresholds must be uprated each year by the higher of CPI or average earnings.

• The first income threshold must be set significantly above the level at which households lose housing benefit/universal credit entitlement. 

• Households on housing benefit and/or universal credit should be exempted from Pay to Stay altogether, to avoid the complexity of being caught up in two sets of tapers, and unintended consequences for work incentives and the benefit bill.

• Household income should be derived from the tenant and their spouse or partner. Using the incomes of adult children to determine rent levels risks seriously undermining aspiration and work incentives.

• Like housing associations, local authorities should also be able to keep the extra money generated from these changes to invest in affordable housing.