The government has confirmed it has rowed back on the decision to make the controversial Pay to Stay policy mandatory for local authorities.
The policy faced stiff opposition from many local authorities, especially in London, and also came under attack during the Housing and Planning Act.
The policy will now be voluntary for local authorities to implement.
It was hoped Pay to Stay would force higher earning social tenants to pay more rent. Although it was watered down somewhat in the Housing and Planning Act, there were still significant concerns about it.
Pay to Stay was part of the Housing and Planning Act and would have seen tenants pay an extra 15p rent for every pound earned over the £40,000 threshold.
For example, a family on £45,000 would have paid an additional £750 in rent per year, which would have gone directly to Government.
Housing minister, Gavin Barwell, said: “Social housing has a crucial role to play in supporting those in most housing need. To that end, powers were provided for in the Housing and Planning Act 2016 to introduce an income based rents policy, requiring local authorities to set higher rents for higher income council tenants.
“Since the summer, the government has been reviewing this policy. 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.
“This is why we are introducing the mandatory use of fixed term tenancies for new tenants in local authority housing. This will better enable councils to give priority to people with the greatest housing need. Councils will review tenancies at the end of each fixed term to ensure that tenants still need a socially rented home.
“The government’s guidance to councils will make clear that they should take into account a household’s financial circumstances when looking at this, and that, except in exceptional circumstances, tenancies should be targeted on those on lower incomes.
“We will also consider whether other options exist to ensure that high income tenants in social housing make a greater contribution to costs.
“We are keen to work with local authorities to tackle housing tenancy fraud. In 2013, the National Fraud Authority estimated the cost of such fraud – largely illegal sub-letting and lying about circumstances to obtain tenancies – to be in the region of £850m a year.
“For most existing tenants, social housing represents a home for life at a rent well below market levels. The government remains committed to ensuring it goes to those who need it most.
“We have already announced for this spending period we are putting £8bn into affordable housing delivery. Building more homes is central to this government’s vision of a country that works for everyone. We will publish a Housing White Paper shortly, setting out measures to help us deliver this ambition.”
We’ve listened to views of tenants, councils and others and won’t be proceeding with plans to charge higher income council tenants higher rents
— Gavin Barwell MP (@GavinBarwellMP) November 21, 2016
Reacting to the decision, John Healey, shadow housing minister, said: “This welcome u-turn is a victory for Labour’s year-long campaign against the ‘tenant tax’ which was set to hike rents for thousands of middle income households.
“Having recognised this move was a big mistake, ministers must now re-think the rest of their failed housing decisions over the last six years.
“After disastrous figures last week showing that the number of new affordable homes for social rent has fallen to the lowest level since records began, top of the list must be reversing the forced sale of vital council homes and the huge cuts to investment in new genuinely affordable homes.”
Terrie Alafat CBE, chief executive of the Chartered Institute of Housing, said: “We are pleased to see that the government has dropped the compulsory requirement for local authorities to introduce Pay to Stay, increasing rents for tenants with higher incomes; a policy which we had a number of very serious concerns about.
“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.”
Lord Porter, chairman of the Local Government Association, said: “Making Pay to Stay mandatory would have affected thousands of social housing tenants across the country, with the average affected households seeing their rents rise by £1,065 a year. Councils would have needed to invest millions in new IT systems, hire new staff and write to over a million social housing tenants to try and understand household income and approve individual tenant bills.
“Pay to Stay risked becoming an expensive distraction from our effort to build homes. A renaissance of council housebuilding is needed now more than ever if we are to stand any chance of solving our housing crisis.”
Delighted that the government have listened and kept Pay to Stay a voluntary scheme for Local Authorities.
— Bob Kerslake (@SirBobKerslake) November 21, 2016
Liberal Democrat housing spokesperson, Lord Shipley, said: “Finally the government have realised their plans to charge people more for their homes were not only unfair but unworkable.
“At a time when many people face huge financial pressures with costs are increasing, yet wages failing to go up to compensate, the last thing people need is higher rents.
“It would have disadvantaged those only just making ends meet and disincentivized taking on extra work or accepting a pay rise. Furthermore, there would have been an significant administrative cost in assessing incomes of individual households which would have been hard for councils to recoup.”