Local councils have welcomed a government U-turn on the controversial Pay to Stay policy which would have forced local authorities to charge higher rents for social tenants on higher incomes.
The measure would have made social housing tenants in London pay higher rents if their household income is over £40,000 a year, but widespread opposition from local government has caused the policy to be scrapped.
For an estimated 28,000 London households, every £1 earned above the threshold would have meant a 15p increase, which becomes an average rent increase of £132 a month in the capital – considerably higher than the rest of the country.
The policy, initially proposed by George Osborne in 2015, was passed in Parliament in May this year, and was due to come into effect in April 2017.
Lewisham Mayor Sir Steve Bullock, who is also London Councils’ executive member for housing, said: “London Councils welcome the scrapping of the Pay To Stay proposals, which would have penalised many lower earners.
“Pay To Stay would have impacted heavily on boroughs’ ability to maintain mixed communities if people were forced to move as a result of the increase in their rent.
“Scrapping these proposals mean boroughs will be able to direct resources towards meeting housing need rather than implementing an admin-heavy new scheme.”
Croydon Central MP Gavin Barwell, the newly appointed Housing and Planning Minister announced the scrapping of the policy. He said: “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.”
Before becoming housing minister in July, Barwell consistently voted for high earning social tenants to pay market rents. In May he voted for the compulsory approach the government is now dropping.
Allison Butler, a Croydon Council cabinet member for housing, thanked Barwell for the government’s decision, describing it as “very good news”.
Philip Glanville, mayor of Hackney, also welcomed the U-turn, saying:“This is a victory for the low-paid working families who would have been penalised by this unworkable policy, so I’m pleased the Government has finally listened to Hackney, campaigning local residents and others, and scrapped it.”
“We’ve been working hard behind the scenes to demonstrate to ministerial officials the damage this tenant tax would have on families in Hackney and the bureaucratic nightmare it would place on tenants and local authorities,” he added.
Others also criticised the plans in light of the extra layer of bureaucracy required to implement the changes. The move was expected to generate just £75 million annually, before deductions for significant administrative costs.
Nick Forbes, LGA Senior Vice Chair, said: “In many local areas, these [administrative] costs will outweigh the additional rent collected leaving little or no extra income for the Treasury to keep, and leave the councils out of pocket.”
Forbes praised the government’s decision to scrap the policy:
— Nick Forbes (@nick_forbes) November 21, 2016
The Chartered Institute of Housing also approved of the government’s climbdown.
Chief executive Terrie Alafat said: “It is particularly welcome that the housing minister said the measure would have clashed with the government’s commitment to help families who are struggling to get by in his reasoning for dropping the policy.
“We would now urge the government to apply this same test to other policies which might put such families at similar risk.”
Thousands of poorer social tenants in the Eastlondonlines area will be worse off after a new benefit cap came into effect in October. The cap will reduce the total amount that a London household can claim in benefits from £26,000 to £23,000 a year.