Housing and Planning Bill

Written evidence submitted by a secure housing association tenant in London (HPB 99)

Dear Chair of the Bill Committee,

H ousing & Planning Bill 2015

I am grateful for your invitation to submit evidence to the Housing and Planning Bill committee. A secure tenant in Westminster, elderly and disabled, I have many reservations about Pay to Stay (P2S). On a personal level, my income will be about £40K by 2017 but I am severely disabled. I pay my 24/7 carers more than half my gross wage, leaving me impoverished – but Pay to Stay takes no account of personal circumstances. Also, see 1.10 – my flat is not subsidised: I am subsidising others. I should be exempt on two grounds, at least.

1 THE MONEY ARGUMENT

1.1 I do not believe that HAs should be used as an extra arm of HMRC. When we pay for TV licences or Post Office services, we expect to receive relevant services - not for the BBC or the Post Office to be generating revenue for new build homes or for the Treasury coffers. The same with our rents. We expect to live unhindered in the accommodation – nothing else. If the government wants to build more houses, the money should come from general taxation. They should not be using HAs, and by implication, paying tenants, as cash cows to fund responsibilities governments have disregarded for years.

1.2 Many tenants in London affected by P2S, as currently drafted, are already paying higher rate tax. P2S is, in all but name, a tax. An aspiration tax. What will tenants’ effective rate of tax be when they pay 40% higher rate tax PLUS the P2S tax?

1.3 When I signed my secure tenancy agreement 46 years ago, there was no mention of any income level qualification. My flat is owned by Grosvenor Estate but leased to a HA. When the lease comes to an end, the property reverts to Grosvenor Estate. What happens then? Grosvenor are not subject to P2S. Nor will they be subject to the new RTB – so the RTB quid pro quo for P2S does not apply here – and I would not get a mortgage.

1.4 An agreement is normally made between two or more people. P2S seems to want to change this to a one-way street. It is interesting that the Bill contains a section on Rogue Landlords. It may be questioned whether P2S might make rogues of all those landlords who may be forced, in effect, to breach agreements they have with their current tenants.

1.5 The Chancellor said in his 2015 budget ‘It’s not fair that families earning over £40,000 in London, or £30,000 elsewhere, should have their rents subsidised by other working people.’

1.6 HELEN HAYES MP said in the second reading debate on 2.11.15. – "I find it astonishing that this Bill defines a household comprising two adults earning £20,000 each a year as "high earners". This was backed up by Alison Thewliss MP – "that is not a high income by anyone’s standards, and £40,000 in London does not seem high either. FOI tells us 500+ council CEOs earn £150K+ - they are high earners.

1.7 In 2012, about a third of respondents thought that the threshold of £60,000 was appropriate. More respondents chose this threshold than either of the other two. This is hardly surprising. HAs, about which the P.M. was recently so critical, their productivity and VFM castigated by Channel 4 and CEO pay so vilified in the press, are not going to look a gift horse in the mouth. But giving the extra rent to HAs does nothing to reduce the £12bn welfare bill and gives no guarantee of rapid extra house building – HAs have form in this respect, after all. Increased salaries, inefficiency and waste are all possible, paid for by tenants on low to moderate incomes, paying massively more for a product that has not changed. They will suffer unnecessarily from the setting of the threshold at too low a level.

1.8 Further, a £40K gross salary in London will mean different outcomes for different households. A single person household on £40k will incur tax and NI deductions of £9713, leaving a net salary of £30287. A family with two people earning £40k will incur tax and NI deductions of £6626, leaving a net salary of £33374. This is because each earner has an untaxed personal allowance. But it gets worse. As incomes rise, the single earner will pay higher rate tax at £43300 in 2017-8. At £60K, a single person has deductions of £17874, leaving a net salary of £42126, two earners at £30k each are left with a net salary of £46974, a difference of £4848. In addition, the family may have more earners whose wages are not taken into account for P2S.

1.9 It is also necessary to consider the Chancellor’s phrase "rents subsidised by other working people". Social housing is only subsidised in the cost of its creation: it then pays for itself in two or three decades of rents. It may look cheap in comparison with private rents, which have been driven by decades of governments subsidising landlords with housing benefit, more so than true market forces. In the 2015 budget, the Chancellor said "Mr Deputy Speaker, we are also going to end the ratchet of ever higher housing benefit chasing up ever higher rents in the social housing sector. These rents have increased by a staggering 20% since 2010." If social rents have increased by 20% in 5 years, when inflation has been stuck at 0.5% since March 2009, in the longest peacetime period of constant low interest rates since before the First World War, and we see Housing Associations declare record surpluses year after year, what is the justification for the P2S rent increases? And the spiralling rent increases in the private rented sector remain untouched.

1.10 The reality is that my HA wrote to me on 19.10.15. in response to specific questions APPENDIX 1 [1] . It said it "does not receive any subsidy for secure tenancies." It "does not have any other subsidies or sources to help manage its secure tenancies" It goes on "No taxpayer funded subsidies are currently being received." It follows, therefore, that far from renting a flat that is subsidised by other working people, after 46 years of paying rent on my flat, I am in fact subsidising other parts of the HA’s business i.e. "community programmes" and "to subsidise the shortfall in rent from new social homes built", as the letter also indicates. Other HAs give the same information. It further follows that those secure tenants, who are not subsidised by other working people, but have paid rents since before secure tenancies ceased in 1989, should be exempt from P2S. I must have bought my flat at least once after 46 years of rent.

1.11 David Orr is critical of government interference in rent setting. As part of the 2013 Spending Round the Coalition Government announced that "from 2015-16 social rents will rise by CPI plus 1 per cent each year for 10 years." The certainty delivered by a 10 year rent settlement was welcomed by landlords. Tenants who had been subject for years to varying inflation-plus rent increases at least knew where they stood. Then, from the same senior partners in the Coalition, P2S threw everything up in the air again. Constant intervention has caused this mess.

2 TIMING AND INCENTIVISATION

2.1 If the relevant rent year is 2017-8, the appropriate financial year is the financial year prior i.e. 2016-7, according to DCLG. Self employed and people whose affairs are remotely complex do not have to file a return with HMRC until January 2018 for the 2016-7 tax year. HMRC then spends time processing the return. So that will not work. In addition, it is not fair to introduce retrospective legislation. If people wish to take legitimate measures to reduce their income in the "assessment" year, they are free to do so, however much the authorities prefer them not to do so. It follows that the very earliest date for implementation must be 2018-9 – and, even then, concessions will have to be made for any tenant who has not by then finalised with HMRC his/her 2016-7 tax affairs.

2.2 In designing a system which supports work incentives, it is necessary to accept that any system, which takes money away from people without supplying a "better" product, is not likely to incentivise them. If a celebrity chef can report a decline in sales because of the imposition of a 7p sugar tax, and, if it is correct, as Dr Alison Tedstone, director of diet and obesity, told MPs that "Broadly, the evidence shows the higher the tax increase, the greater the [disincentive] effect," the prospect of an increase in rent having a positive incentive effect is non-existent. The evidence of P2S having a disincentive effect is overwhelming and it may be appropriate at this point to consider savings. It would seem that, to support the scheme, HMRC will provide details of taxable pay. Taxable pay includes interest on savings, which means the policy will discourage saving – including saving by people who want to buy their own home. Another unintended consequence?

2.3 In respect of the SPARE ROOM SUBSIDY - Mr Alan Rogers, MD of Cobalt Homes, a social provider, is knocking down walls in 3 bed houses to make 2 and avoid the subsidy. He said the tax was unfair, adding: "The problem with the bedroom tax is that it is retrospective, it isn’t fair as it affects people who didn’t expect it when they signed a tenancy."

Ditto Pay to Stay, And respectable business people like Alan Rogers are already finding it necessary to circumvent similar legislation.

3 SOLUTIONS

3.1 I touch on four possible solutions as much to show that this policy needs a major rethink, if not total abandonment. Figures are shown in Appendices.

3.2 OPTION 1 would be applied to new tenants only. They will have to demonstrate that they can afford to pay the rent specified by the landlord, working to strict guidelines set down by DCLG. Increases in rent will be similarly determined, as will the collection and verification of income data. Data Protection Act must be followed. All this means more administration problems for providers. But, at least, tenants who apply will understand the commitment they are making.

3.3 OPTION 2 will make compulsory the 2012 scheme. DCLG will determine, from the experience of HAs that have already adopted the voluntary scheme, the best elements to be incorporated. This will include the thresholds, at or above £60K (£70k in London), and the level of rent in specific areas. Option 2 will apply to new tenants and to those already on the scheme which was voluntary from the 2012 consultations. The specified rent will be determined by the landlord, working to strict guidelines set down by DCLG. Increases in rent will be similarly determined, as will the collection and verification of income data. This means more administration problems for providers. Adherence to the Data Protection Act will be essential.

3.4 OPTION 3 would marry Local Housing Allowance data with varying and increasing income levels. The Option’s aim is to have the £40K earner(s) achieve the LHA level that was current three years earlier and for higher earners’ rent to rise proportionately. Income levels at £75K will achieve the LHA in year 2 and at £90K in year 1. APPENDIX 2. [2]

3.5 OPTION 4 will marry market rent data with widely accepted percentages of varying and increasing income levels. The model will not achieve, after three years, the year one Market Rent in London. Rent in year 3 will not exceed 35% of the net income calculated in year one. Official market rent data is not up-to-date.

APPENDIX 3.

3.6 Options 3 and 4 will present major implementation difficulties and will require updating every three years. They work in tandem with Government data on LHA or market rents. They will take longer to implement than OPTIONS 1 AND 2, they cannot come into play until 2018-9, have major additional administration costs, will be a disincentive to save or work, may produce savings over time but will meet with major resistance, set neighbour against neighbour and possibly spark legal and illegal avoidance measures. Many tenants will question their necessity and fairness.

4 CONCLUSIONS

4.1 http://moneyweek.com/merryns-blog/the-uk-doesnt-have-a-housing-shortage/ suggests that, judging from The English Housing Survey 2014, conducted for DCLG, "there is less a shortage of floor space in the UK than a misallocation of the floor space" i.e. we have a London housing problem, not a National one. So, there is no problem nationally for Pay to Stay to address and, obviously, P2S is not the solution for the London problem. That is not its purpose.

4.2 Housing Associations queue up, year after year, to declare surpluses. They have received 20% increase in rent since 2010, while inflation runs at an unchanging 0.5% pre First World War low.

4.3 The justification for P2S is, apparently, encapsulated in the Chancellor’s words at budget 2015 – "It’s not fair that families earning over £40,000 in London, or £30,000 elsewhere, should have their rents subsidised by other working people." I have shown in 1.9/10 that the Chancellor was not telling the whole truth about subsidies and many contributors to the consultation think that settling on £40K as a high income was ill-researched and wrong. It is not right to try to repair the broken London Housing rental market on the backs of those tenants, who do the right thing, pay their taxes and do not claim benefits, especially so if they pay rent at a level which allows a surplus to be declared, does not benefit from government subsidy and is not funded by other tax payers – as in my case.

4.4 P2S, in its draft form is riddled with anomalies and problems. It is, in all but name, another tax - An Aspiration Tax. And that from a government, already singed by the Working Tax Credits fiasco, still pushing its claim, in P2S, that it supports the working man. No other sector in society, not owner-occupiers, not RTB former tenants, not high earners paying the additional rate of tax – 45% over £150K – will suffer an imposition such as that threatened by P2S. The effective rate of ‘tax’ for those already on 40% income tax will be frightening. It is definitely NOT a high wage, low tax proposition, for which the PM keeps seeking credit.

4.5 There is only one mention of the word ‘rent’ in the Conservative Manifesto 2015. It says on page 52 "And we will offer 10,000 new homes to rent at below market rates to help people save for a deposit".

4.6 It is accepted that there are problems in the London housing market but the solutions are well known and have been disregarded by successive governments. P2S will do nothing to solve those problems, that is not its purpose. But it will hit the very people who do work hard, do the right things, pay their taxes etc.

4.7 Many will be harshly treated by P2S, especially after what they were told pre-election. They did not understand that "we will not raise ….. Income Tax but we will raise the 40p Income Tax threshold to £50,000 …..so you can keep more of your income and pass it on to future generations" actually means "we will introduce an Aspiration Tax – and it might clobber you".

4.8 It may be said, that pensioners can up-sticks, move to another area, leaving behind friends and family to escape the ravages of P2S in London. But the worry of the search and the stress of the move might kill them. Did the Manifesto really say "If you have worked hard during your life, saved, paid your taxes and done the right thing, you deserve dignity and security when you retire. We want Britain to be the best country in which to grow old"? 28% of social tenants are 65+. They will be unlikely to forget who forced up their rent.

4.9 The policy will be even more damaging for disabled people, who cannot, on their own, up-sticks and move. At this income level, they do not qualify for council help with e.g. carers, medications not available on NHS etc. How many, being unable to afford to pay for their own carer, will end up bed-blocking a vital hospital bed? The policy is a worrying nonsense for such people. Such disabled and elderly people should be exempt and left to enjoy what is left of their lives.

5 POSTSCRIPT

5.1 If the above does not contain sufficiently cogent arguments to prove P2S will not work, as presently drafted, it must be considered, from reference to http://ec.europa.eu/social/main.jsp?catId=1137 , whether it may be in breach of the spirit, if not the letter, of The  United Nations Convention on the Rights of Persons with Disabilities  and a number of its 50 Articles . I believe it is.

November 2015


[1] Not Published

[2] Not published

Prepared 3rd December 2015