Housing associations and the Right to Buy Contents

8Pay to Stay

Thresholds

101.When it was introduced the Housing and Planning Bill contained provisions for the Secretary of State to make regulations requiring registered providers, including both housing associations and local authorities, to charge higher rents (at market rate, or a proportion of market rate) for those tenants who had a high income, a policy known as ‘pay to stay’.99 The Summer Budget 2015 defined high income as £30,000 household income, or £40,000 in London.100 Many of our witnesses believed that this threshold was too low and that it would act as a disincentive to hard work and career progression. Jenny Osbourne cited an example:

“I will try to give you an example from a lady who I have just been talking to in London. Her daughter is a teacher earning £29,000 a year. She is retired and on benefits, so they will go over the £40,000 threshold. That is going to mean that the majority of their money would go straight out into rent if they were moved to full market rent, not leaving them anything around bills, etc.”101

102.We were also concerned that the complexities and costs of administration would be onerous for many housing associations, who would find it difficult to collect income data from their residents. Tony Stacey told us that it would cost South Yorkshire Housing Association far more to administer pay to stay than the additional income it would generate.102 Hugh Owen from the Riverside Group of housing associations pointed out regional disparities:

“In Liverpool, for someone earning £30,000 and a penny, their rent will go up by about £38 a week. In Bromley, it would go up by £257 a week. It is hugely inequitable if that is the final scheme… for people who have done the right thing and who have got on but are not in a position to buy all of a sudden to be affected by what feels like punitive increases just strikes us as wholly wrong.”103

Voluntary pay to stay

103.We welcome the news from the Minister that pay to stay has been revised as part of a package of deregulation so that it would be voluntary for housing associations. He told us:

“Housing associations will also be able to operate policy that sets higher levels of rents for those high-income tenants, and they will be able to set the level of rent for these households. We expect that the majority of housing associations will consider operating a policy, and we will continue to engage with the sector and the National Housing Federation on this. As far as possible, we will encourage parity between the housing and local authority sectors to ensure fairness for tenants but, as I say, it will be voluntary for housing associations.”104

104.The measure was introduced to help facilitate a reclassification of housing associations as non-public bodies by the Office for National Statistics (discussed further at para 106). The Government is committed to securing the reclassification and is therefore giving increased freedoms to housing associations. When we asked if the Government would take steps to reduce rents in the private sector, the Minister said that they would not but added that “We are treating everybody who is on social rent the same.”105

105.We asked whether housing associations would have the flexibility to adjust the thresholds, introduce tapers or make other changes to the policy. Mr Lewis said that he did not want to prejudge what housing associations might choose to do, but implied that this was possible.106 The version of the Bill agreed by the Commons states only that “A private registered provider of social housing that has a policy about levels of rent for high income social tenants in England must publish that policy.”107 We believe that housing associations which choose to adopt pay to stay should have the discretion to set thresholds and taper mechanisms at levels which reflect local circumstances. However, we note that while it is clear that without some form of taper pay to stay may act as a disincentive to hard work, a graduated scheme would be difficult and costly for local authorities and housing associations to manage. In particular, the fact that information provided by HMRC will never be up to date means that there will always be over- or under-payments of rent. We note the serious concerns that have been raised about the household income thresholds, and ask the Government to keep them under review.

99 Housing and Planning Bill, HC 75, as introduced, Part 4, Chapter 4

100 Summer Budget 2015, para 1.154

101 Q41

102 Q119 [Tony Stacey]

103 Q137 [Hugh Owen]

104 Q350

105 Q369

106 Q358

107 Housing and Planning Bill, clause 87(1)




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Prepared 8 February 2016