It is estimated that there are over 6,000 households renting in the social housing sector where the household income is over £100,000. Given the housing shortage it is wrong for the wealthy to effectively be subsidised by paying rent below market levels. Sometimes the wealthy live elsewhere and (illegally) sublet, making a tidy profit on the deal.
There are many others who could afford to pay a higher rent than they do at present. There are 350,000 socially-renting tenants with household incomes over £30,000 per annum, including over 40,000 with incomes in excess of £50,000 per year. It is right that there should be a “taper” – that the rent gradually increases towards the full market rent as income increases. That is because it is important to balance the need for an incentive to work and to have the aspiration to achieve higher pay. But there is also the issue of fairness. Plenty of people earning less than £30,000 are having to pay full market rent to a private landlord.
So from next year there will be a “Pay to Stay” requirement for local councils to charge higher rents to tenants on high income. The extra revenue will go to The Treasury. It is projected that it will amount to half a billion pounds a year by 2020. Those who oppose this measure should make clear what their alternative to obtaining that revenue is. Would they favour those on low and average incomes paying higher tax to allow the subsidy to the rich being maintained?
For housing associations applying the Pay to Stay policy is voluntary and they will keep the proceeds. But I was pleased to see a report in Inside Housing indicating that many will choose to proceed:
“Brian Johnson, chief executive of Metropolitan, confirmed that the 38,000-home landlord is in favour of introducing Pay to Stay, despite concerns about the income threshold.
The government made the policy voluntary for associations as part of its drive to deregulate the sector and undo the reclassification of debt as public.
Responding to an Inside Housing survey, nine of the 20 largest associations said they are actively considering or will consider implementing the policy.
Three said they had not yet considered it, with none ruling it out entirely. Eight others declined to respond…
One other medium-sized association which preferred not to be named said it plans to introduce Pay to Stay at an income threshold of initially £60,000. It may then reduce the thresholds towards the government’s suggested level depending on this pilot.
Another top 20 association that did not want to be named said it was “in favour in principle”, but wanted to see “income thresholds tailored to reflect local market conditions”.
Some of those facing the higher rent may move out. That would free up properties for those on the housing waiting list – families that might in severe overcrowding, or in hostels, or other temporary accommodation. They may be prompted to stay by exercising their right to buy thus allowing their landlord to use the capital receipts to finance the building of new homes. Or they may decide to stay paying the higher rent and thus also helping to finance the building of additional housing.
Any of these outcomes offers hope to those in housing need and all housing association should get on with applying it.