Pay to stay

The main reasons for opposing the Government’s proposals to charge more rent to social tenants with high incomes – the so-called ‘pay to stay’ policy – are practical, and the CLG Consultation Paper is seriously deficient in its consideration of the bureaucracy and cost involved in managing such a system.

In short, the plan is to allow social landlords to put rents up if a tenant (or the two highest paid individuals in a household) earns above a threshold of income, which might be £60k, £80k or £100k or even some other figure.  Although there is, they say, ‘a strong case’ for rents to be increased to full market levels, the plan is to increase them initially to 80% of market rents whilst they investigate the complications caused by the charitable status of housing associations.

To implement the policy, landlords would have to means-test all of their tenants regularly to identify those that are above the threshold.  This is not something that landlords have done before.  Means-testing is notoriously complex, one of the reasons why so many benefits and tax policies are so difficult to implement.  The Consultation Paper fails to address any of the complexities.  Is the assessment pre or post-tax?  Is the relevant assessment period last year or this year?  How frequently should changes in circumstances lead to a reassessment?  Does it take account of unearned income as well as earned income?  How will it take account of variable incomes, which are common these days?  How will it take account of high-earning family members coming and going?  What about earnings overseas?  How will pensions and universal benefits like child benefit be treated?  Do lodgers count?  Will there be offsets and allowable deductions, like whether children are at school or college or there are high costs associated with care?  There are so many unanswered – indeed, unaddressed – questions.

Primary legislation would be required to empower landlords to collect the information and to require tenants to provide it – a waste of Parliamentary time if ever I heard it.  Would the legislation allow data from other agencies to be used?  Use of housing benefit or HMRC information will raise fundamental issues of use of Government data.

Who will collect, verify, update and analyse all the data, set revised rents, and deal with appeals?  Housing officers are not trained for this task and it would be a huge diversion from their many other essential tasks.  To borrow from the Daily Mail for a moment, it would take an army of bureaucrats and state snoopers.  Would it be fraud to fail to declare all of your income?  As Bob Dylan once sand: Dear landlord, please don’t put a price on my soul.

The Consultation Paper at least recognises one snag: that a housing association might have to repay any grant they received to build the home in the first place if the property is let at market rates.  And would they be able to reclaim the grant again if the property is let in future to a non-high earning household?

Nor can there be much hope that the money raised will be of much use once we have paid for the cost of collecting it.  The Consultation Paper includes some ‘estimates’ of the number of households involved, with a range of between 1,000 and 6,000 for a threshold of £100k and between 12,000 and 34,000 for a threshold of over £60k.  It is unclear how these figures are calculated – the link provided to HMRC income tables does not answer the question.  The HMRC data concerns the overall income distribution in the population and is not tenure specific.  I think it would be more accurate to say that they don’t know.  And remember, this all started with some dodgy statistics about high earners in council housing in Westminster.

There are points of principle involved too.  It is arguable that rents should be linked to incomes, as they are in some countries (normally by restricting them to a proportion of the household income).  But in those cases the information collected from everyone is used to calculate everyone’s rent, not just a small number.  The tradition in Britain has been to link rents to properties and there should be a wider discussion if the basis of the system is to be changed significantly to take account of incomes.

There is also an enormous contradiction in the Government’s position.  If you are a high income tenant you will be penalised by a higher rent, but if you exercise the right to buy you will be rewarded with a nice cash gift.  The right to buy escape clause contradicts the Government’s foremost argument in the Consultation Paper: ‘In times of economic hardship it is more important than ever that social housing helps the most vulnerable in society.

And the man with no shame, Grant Shapps, the Arthur Daley of council house sales, had the cheek to say: “we want to call time on this blatant unfairness and these handouts to the very rich.”   I can think of a few other policy areas where such fine principles could be better applied.

The Consultation Paper contains no estimate of the likely extra income from the options, no estimate of how many RTB applications might be triggered, no estimate of how many high earners might leave their home to release it for another household (the supposed objective of the exercise), and no estimate of the costs involved.

The evidence on which this policy proposal is based is so flimsy that it is hard to escape the conclusion that its entire purpose is to enable the Government to attack Bob Crow.

The consultation runs until mid September.

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7 Responses to Pay to stay

  1. Pingback: Call off the pay-to-stay catastrophe | Red Brick

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  7. Lesley Healey says:

    Just thought I’d share a link to my own briefing, published 24th July by HQN, on this subject. I’d have liked to be more sarcastic but not all HQNetwork members would have appreciated it.
    http://www.mailm.co.uk/13/admin/temp/newsletters/2588/0026_Briefing_-_Pay_to_stay_-_L_Healey.pdf

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