It would be easy to imagine that all of Government is focused on the possible implications of leaving the EU. But behind the scenes, civil servants are developing the regulations necessary to actually implement the Housing and Planning Act 2016.
We set out our initial concerns about ‘Pay to Stay’ (also known as policy on ‘high income social tenants’) back in February – that it could increase the housing benefit bill, weaken incentives to work, price out teachers, nurses and paramedics, create a costly bureaucratic nightmare, and catch ‘higher income’ social tenants between a rock and a hard place – unable either to afford their rent or buy their own home.
During some robust debate in the House of Lords, the Government did address some of these concerns, at least in part. They have committed to:
- Increasing the income threshold, outside of London, from £30,000 to £31,000. Income thresholds will be reviewed annually and uprated in line with CPI.
- Tenants with incomes above £40,000 in London, and £31,000 in the rest of the country, will have to pay more rent, subject to a taper. *This has been updated, see below.
- Introducing a taper of 15% above the minimum thresholds, meaning that the additional rent asked from tenants will be limited to 15p of every £1 of (taxable) income they have over the threshold.
- Exempting households on housing benefit and Universal Credit.
- Defining income as ‘taxable income’ – the Government is minded to design the policy so that income from certain benefits (e.g. DLA, PIP, Carer’s Allowance) will not be included. So some disabled people and carers may be protected, to a degree, but people over 65 will be included in Pay to Stay.
- Defining a household as the tenant, any joint tenants and their spouses, partners or civil partners.
- Only the two highest incomes will count. Income of non-dependent children will count only if they are named on the tenancy and they are one of the two highest earners.
But many questions and concerns remain about how the new policy will work in practice. Will social tenants face a sudden, steep rise in rent when they reach the top of the income thresholds? Will Pay to Stay bring people into eligibility for housing benefit, who wouldn’t have been before? Will local councils have to charge tenants full market rent if tenants have not been able to prove their (or their partner’s) incomes?
Perhaps the most pressing of them all is how councils (and housing associations, should they also choose to adopt Pay to Stay) can possibly be ready in time for an April 2017 start.
We expect draft regulations this month, to come into force in the autumn. This means that from around Christmas time, councils will have to start sending people letters to inform them that their rents will rise the following April.
By the Government’s own reckoning, the number of households affected by Pay to Stay, at least at first, will be small, at about 290,000 (7.4% of all households in the social rented sector). These figures pre-date the concessions made during the passage of the Bill and are likely to be even lower now.
But to implement the policy, councils will need to verify the income details of many thousands more of their tenants – or charge them the full market rent. International experience shows that this is both intrusive and difficult. And overstretched councils have little time to get the necessary new IT systems off the ground.
As a main provider of housing advice, Shelter anticipates queries from worried tenants once Pay to Stay letters go out. In order to give accurate advice, it’s vital that the technicalities of the policy are fully developed before tenants are asked to disclose income. The Government has been keen to stress the importance of getting IT systems right before going live (as we have seen with Universal Credit). So why the hurry?
We have been encouraged by the admittedly small, but important, changes that were made to Pay to Stay as the Bill went through Parliament. But much remains unknown. To rush this policy through risks creating significant, and unnecessary uncertainty. Some social tenants may struggle to prove their income and face rent increases that they can’t afford, risking eviction and homelessness as a result.
We will work closely with officials, local government and other stakeholders to ensure that tenants and local authorities are properly prepared for the significant changes, and challenges, ahead.
But time is needed to get this right.
*Since publishing this blog we have learnt that the Government does not intend to impose upper income thresholds, as originally proposed in the 2015 consultation on Pay to Stay. We have edited this blog to make the correct position clear.