Call made to rethink pay to stay policy

A national body which supports local government is urging new government ministers to rethink the ‘Pay to Stay’ policy which will require councils to charge some of their tenants higher rents from April 2017.

New research reveals that more than 70,000 social housing tenants could face rent rise bills of an average £1,000 a year from next year under government plans to increase rents for those deemed to be earning high incomes.

The policy would create a bureaucracy causing stress to families, further costs to councils, and financial returns to the government far lower than it originally forecast. Administrative complexities now make implementation from April 2017 impossible, it is argued.

Councils across the country need to invest millions in new IT systems, hire new staff and write to more than a million social housing tenants to try and understand household income and approve individual tenant bills by January. This is expected to be a difficult, lengthy and costly process for councils, and is likely to be unpopular with tenants and result in high levels of costly appeals and challenges.

Under Pay to Stay, high income social tenants are defined as households with incomes above £31,000 – a higher threshold will exist in London. That means a working couple each earning above £15,500 would be defined as having a high income and will be forced to pay closer to market rents from next year.

Tenants on housing benefit and universal credit will be exempt. For eligible tenants above the high income thresholds rent increases will be tapered with every £1 they earn above will mean a 15p increase.

The Government will take additional rents taken from tenants minus a proportion that councils will retain to help administer the policy, an amount to be determined by the Government.

The research has also found that:

  • 70,255 households will earn above the £31,000 income threshold outside London and £40,000 inside the capital.
  • 3 per cent of households living in council housing in the south east will see their rent increase along with 7.7 per cent in the east of England and 5.3 per cent in the north east.
  • Average monthly rent uplifts would be £72 for households outside of London and £132 a month inside. Affected households will see their rent increase by an average of £1,065 a year.
  • Increased rents are expected to generate just £75 million annually, before making deductions for significant administrative costs. Originally the Government had forecast returns of £365 million in 2017/18.

Cllr Stephen Morgan, Labour’s housing spokesperson said:

“This helpful research by the Local Government Association shows what we already feared – the pay to stay policy will affect thousands of families, with the average affected household seeing their rent rise by £1,065 a year. This will cause anxiety, uncertainty and cost, and I am concerned for its impact on communities across Portsmouth.

The policy has unseen complexities and could generate large numbers of costly legal appeals and challenges from tenants. It is an expensive distraction from efforts to build much-needed homes.

I welcome the LGA’s intervention calling the new government to think again about this policy and allow councils to decide whether or not they will introduce Pay to Stay for their tenants”.