The government has abandoned plans to force councils to charge higher-earning social housing tenants more rent.
Housing and planning minister Gavin Barwell said the government had “listened carefully” to councils and tenants and had “decided not to proceed with a compulsory approach” to implementing the policy.
Under pay to stay, households with incomes of £40,000 in London and £31,000 in the rest of England would have seen their rent increase by 15p for every pound extra they earn.
Under provisions in the Housing and Planning Act 2016 housing associations would have been able to choose whether to adopt the policy and would have been able to retain any extra revenue to invest in new homes.
Councils would not have been afforded the same flexibilities and would have been required to send any extra rent straight to the Treasury. The Local Government Association has repeatedly called for the government to scrap the scheme, arguing it would be impossible to implement.
In a written ministerial statement Mr Barwell said the government remained committed to ”ensuring social housing is occupied by those who need it most”.
He added: “But we need to do so in a way that supports those ordinary working class families who can struggle to get by, and in a way which delivers real savings to the taxpayer. The policy as previously envisaged did not meet those aims.”
Responding to the announcement the LGA’s chair Lord Porter (Con) said: “Councils would have needed to invest millions in new IT systems, hire new staff and write to over a million social housing tenants to try and understand household income and approve individual tenant bills.
“Pay to stay risked becoming an expensive distraction from our effort to build homes. A renaissance of council housebuilding is needed now more than ever if we are to stand any chance of solving our housing crisis.”
Meanwhile, Mr Barwell confirmed the government was continuing with plans to introduce mandatory fixed term tenancies for new council tenants, another policy that was legislated for in the Act.
He said: “This will better enable councils to give priority to people with the greatest housing need.”
Tenancies will be reviewed by councils at the end of each fixed term “to ensure that tenants still need a socially rented home”, said Mr Barwell.
He added the government was considering whether “high income tenants” should pay more.
The housing white paper will be published “shortly”, said Mr Barwell.