World / Social Issues

U.K. plan to make social housing tenants ‘pay to stay’ won’t meet aim: report

Thomson Reuters Foundation

Britain’s “pay to stay” rule requiring social housing tenants to pay higher rents may leave local councils worse off, cause stress for families and fail to generate expected revenues for the central government, according to a report published Monday.

The plans will force higher rents on an estimated 70,000 households, said the report by estate agent Savills for the Local Government Association (LGA), which represents councils in England and Wales.

Under the new policy to be implemented in April 2017, councils in England housing tenants with a household income of £31,000 ($40,700) outside London and £40,000 ($52,500) in the capital will be required to raise their rents closer to market rates.

“For families this will cause anxiety, uncertainty and costs. For councils it will generate bureaucracy and new administrative costs and complexities. And at the end of it, for government, it will generate nowhere near the financial return it had originally expected,” the LGA’s senior vice chair, Nick Forbes, said in a statement.

He said despite increased revenues, many councils will end up out of pocket as assessing tenants’ incomes will incur extra information technology and staff costs.

A spokesman for the Department for Communities and Local Government said the current system is unfair on taxpayers.

“It’s simply not fair that hard-working people are subsidizing the lifestyles of those on higher-than-average incomes,” he said in a statement.

The new rule better reflects tenants’ ability to pay, the spokesman said, and more than 90 percent of tenants will be unaffected.

But social housing campaign groups say the new housing laws will price many tenants out of London, dramatically altering the social fabric of a city renowned for its diverse communities.

Rising income inequality has led to poorer residents being squeezed out as wealthier inhabitants and investors snap up real estate in central areas, say property rights campaigners.

Londoners who have lived in social housing for decades have complained they will be forced to leave the city center under the “pay to stay” plan.

A spokesperson for London Mayor Sadiq Khan said the mayor is concerned about the effect “pay to stay” will have on many working families and is committed to working with the city’s boroughs to help protect them.

The report predicted that the new rules will raise rents by an average of more than £1,000 ($1,300) per year for those affected.

It said the increased rents will generate around £75 million ($98 million) annually in government revenues, just a fifth of the government’s original forecast of £365 million ($479 million).

Forbes urged the government to allow councils to decide whether or not to introduce “pay to stay” for their tenants.

He said the policy is unlikely to result in local councils having more money to build new homes — a priority of the new government of Prime Minister Theresa May.

“Pay to stay risks becoming an expensive distraction from our joint ambition to build more homes,” Forbes said.