Higher earning tenants that live in social housing, will find themselves paying a ‘fairer’ rent due to consultation proposals published by Housing Minister Brandon Lewis.
Currently, higher income social tenants benefit from tax payer-funded subsidies of up to £3,500 per year, but the new ‘pay to stay’ proposal will see households with a total annual income of over £40,000 in London, and £30,000 elsewhere, pay a rent at market or near market levels.
Under the proposal, social rents would increase as the tenant’s income increases above the threshold meaning that those in real need of the help continue to pay a subsidised rent, whilst those currently taking advantage of the subsidies are no longer able to.
Housing Minister, Brandon Lewis, explains:
“It’s not fair that other hard-working people are subsidising the lifestyles of higher-earners to the tune of £3,500 per year, when the money could be used to build more affordable homes.
’Pay to stay’ will ensure that those tenants on higher incomes who are living in social housing have a rent that reflects their ability to pay, while those who genuinely need support continue to receive it.”
The money saved from the removal of the subsidy will enable councils to contribute towards the government’s £12 billion of welfare savings. Housing associations will also be able to retain the additional income and use it to support their role in providing new housing.
The scheme, which is intended to come into effect as of April 2017, proposes that local authorities will be able to recover any reasonable administrative costs before they are required to return the additional income from increased rents to The Exchequer. Alternatively, as housing associations are expected to retain income they receive from higher rent payments, the policy sets out that they are expected to absorb the administrative costs.
At present more than 40,000 social rented tenants have a total annual income of over £50,000 and will therefore be affected by the new policy. A further 300,000 social tenants have incomes over £30,000.