Councils will get none of the money raised by increasing rents for their better off tenants, the government has confirmed.
In a consultation on operating the so-called ‘pay to stay’ proposals, launched on Friday, housing minister Brandon Lewis said additional rents paid to councils would be kept by the Treasury to “help contribute to the government’s £12bn of welfare savings”, though they would be recompensed for “reasonable” extra administration costs. Housing associations would keep the additional income.
Social housing tenants with household incomes above £40,000 in London, and above £30,000 elsewhere in England, will have to pay more if their current rent is below market level.
The LGA last month said information on tenants’ pay should be generated from HM Revenue & Customs data with an additional national tax imposed on those affected.
This extra rental income would then be passed to councils and housing associations.
But the consultation made clear that councils will only be allowed to recover reasonable administrative costs before returning the rest of the money involved to the Treasury.
Mr Lewis said: “It’s not fair that other hard-working people are subsidising the lifestyles of higher-earners to the tune of £3,500 per year, when the money could be used to build more affordable homes.
“‘Pay to stay’ will ensure that those tenants on higher incomes who are living in social housing have a rent that reflects their ability to pay, while those who genuinely need support continue to receive it.”
He said there were more than 40,000 social rented tenants with household incomes in excess of £50,000 per year; and a further 300,000 with incomes of more than £30,000.
Chloe Fletcher, policy director of the National Association of Arm’s-Length Management Organisations, said: “It’s obviously an issue that councils will not see this extra income at a time when they are having to cut other rents by 1%, but I would expect the main concern to be around the bureaucracy of it.
“How councils collect information, and whether tenants are happy about giving them information on their income, pose practical difficulties. There would be some logic to it being done through HMRC.”
Chartered Institute of Housing deputy chief executive Gavin Smart said: “It’s important that the government is looking at how ‘pay to stay’ will work in practice – we’re concerned that it could prove to be quite complex and expensive for social landlords to administer.
“The policy will need to be designed very carefully to make sure it is not discouraging people from either finding work or securing a better paid job.”
The consultation runs until 20 November.