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Many social housing tenants 'will be unable to afford market rents'

Published 06/02/2016

Social housing tenants will find it difficult to pay rents set at market levels, research suggests
Social housing tenants will find it difficult to pay rents set at market levels, research suggests

Thousands of families face being forced out of council homes and will be unable to afford an alternative property in the same region under Government plans to end subsidised rents for high-earners, according to new research.

The figures, from a study commissioned by the Local Government Association (LGA), indicate almost 60,000 households will not be able to afford to pay rents at the market rate or take advantage of the right to buy.

The figures, compiled by the estate agent Savills, show that almost 215,000 social housing tenants will be affected by the "pay to stay" policy.

Under the plans, households in social housing with a total income of more than £40,000 in London and over £30,000 elsewhere, will pay a rent at market or near market levels.

The policy, due to come into effect in April 2017, is expected to save £245 million a year by 2019-20, ending a situation where higher-income social tenants benefit from taxpayer-funded subsidies of up to £3,500 per year.

The LGA study indicates that if the policy comes into force, 1 2 % of all social tenants in the East of England region would be affected and 5% would not be able to afford market rent or to pursue right to buy. This would mean they would have to leave the area to find a similar property.

In the South East, 7% would be affected and 4% would have to leave the area to find a similar property, while in London 4% of social tenants would be hit and 2% would have to leave the capital in order to afford a similar home.

Councillor Peter Box, housing spokesman at the LGA, said: "Many social housing tenants across the country will be unable to afford market rents or take up the offer to buy their council home under this policy.

"A couple with three children, earning £15,000 each a year, cannot be defined as high income. Pay to stay needs to be voluntary for councils - as it will be for housing associations.

"This flexibility is essential to allow us to protect social housing tenants and avoid the unintended consequence of hard-working families being penalised, people being disincentivised to work and earn more and key workers, such as nurses, teachers or social workers, having to move out of their local area.

"With 68,000 people living in temporary accommodation and a million more on housing waiting lists, councils must also retain any additional income generated from rents to reinvest in new and existing homes. This would clearly have far greater benefits for local communities than if the money is kept by the Treasury."

Former civil service chief Lord Kerslake, now a crossbench peer, warned that the proposals were part of a package that could "threaten the future of social housing".

The former mandarin at the Department of Communities and Local Government, who is now the chairman of the Peabody housing association, said the plans had altered dramatically from when they were first proposed.

He told The Observer: "When this was originally discussed in the coalition government, it was intended to deal with the very small number of high earners on over £60,000. The current proposals will affect a lot more households with earnings of half that.

"Pay to stay needs to be seen alongside the forced sale of council housing to fund right to buy for housing associations, the ending of permanent tenancies and the almost total end of funding for new social housing after 2018. Together, they threaten the future of social housing as we have known it."

A Department for Communities and Local Government spokesman said: "It's not fair that hard-working people are subsidising the lifestyles of those on higher than average incomes, to the tune of £3,500 per year.

"We have been clear that our intention is that social rents would increase gradually as tenants' incomes rise above this threshold. Pay to stay better reflects tenants' ability to pay, while those who genuinely need support will continue to receive it."

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