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PlaceShapers Response to DCLG Consultation on Pay to Stay

PlaceShapers is a network of over 100 community-based housing associations formed in 2008. Between us we own around 800,000 homes and provide services to more than two million residents and the wider communities in which we work. As an alliance, our views represent those responsible for around a quarter of registered housing associations’ stock. Details of our members and more about what we do can be found on our website: www.placeshapers.org.

We welcome the opportunity to respond to formal consultation on the Government’s proposed “Pay to Stay” scheme for “High Income Social Housing Tenants”; particularly as the Housing and Planning Bill as currently drafted leaves the detail of how such a scheme will operate to be decided by separate regulation. Whilst we do not object in principle to the idea of high earners in the social rented sector making a higher rental contribution than lower income social tenants, we have serious concerns about this proposal both in principle and in practice. We hope therefore that the consultation feedback will lead to a fundamental re-think. In the absence of this, we fear that the scheme will prove unworkable and will cause financial hardship to many hardworking tenants.

This submission represents the collective response from PlaceShapers to the questions posed in your consultation paper. As the proposals will impact on our members to a varying extent, we have limited our response here to general comments. Individually, some of our members may submit their own response and in so doing may set out in more detail their views on how the proposed “Pay to Stay” scheme would impact on them locally.

Our concerns about the proposed statutory “Pay to Stay” scheme are in summary as follows:

Concern that the Government feels it appropriate to mandate independent housing associations to charge specific rents, counter to its stated deregulation objectives.

Concern that the proposed legislation will not support a desire to “Make work pay” and will penalise rather than incentivise hard-working social housing tenants thus discouraging them from taking on extra work. It will also reduce their ability to save for deposits to enable them to become homeowners.

Concern that linking rents to “market” levels will not reflect affordability, particularly in high cost areas such as London and the South. The suggested threshold of £30 / £40k is not a “high” income for tax purposes so why should it be in this context? And nor is it a high income for housing benefit purposes in some high rent areas. We have argued consistently that social landlords should have flexibility to charge rent levels linked to average earnings and living costs, both of which vary hugely around the country.

Concern that the policy will impose arbitrary assumptions regarding affordability based on income but will ignore household need that varies depending on household circumstances. How will vulnerable customers be supported to avoid hardship?

Concern that the proposed legislation does not reflect current working patterns with self-employment and variable contracts now commonplace. Adjusting rents based on income in the previous year will be problematic for those who do not have a steady income stream or whose income is at risk of varying substantially due to changes in circumstances and work conditions. This will cause financial hardship for families unless the income assessment process is responsive enough to enable landlords to react quickly to changes in financial circumstances.

Concern that social landlords will be expected to charge market rate rents to tenants who have been unable to declare their incomes. This has the potential to cause significant hardship for those unable to supply the required proof, including many vulnerable tenants, and could potentially result in increased homelessness.

A range of technical and administrative issues that will make implementation of the policy difficult.

Our response to the consultation questions follows:

Question 1: Supporting Work Incentives

How income thresholds should operate beyond the minimum threshold set at Budget, for example through the use of a simple taper / multiple thresholds that increase the amount of rent as income increases.

Income thresholds should be set by housing associations locally in consultation with their local authorities and taking into account average market rents. Ability to pay market or near-market rents will vary hugely around the country and it will be critical to ensure that the removal of tapers as incomes rise does not penalise those whose hard work leads to a moderate improvement in living standards. We are disappointed that the Government considers a minimum threshold of £30k / £40K to be an appropriate measure of high household income and expect that those exceeding this threshold with two earners earning little more than the minimum wage will feel let down by a Government they thought wanted to “make work pay”. We know that tenants will be discouraged from taking on extra work if rent increases would offset any financial gains. The taxation system is the appropriate mechanism for high-income earners to contribute more.

Whether the starting threshold should be set in relation to eligibility for Housing Benefit. Yes. It would be crazy for income thresholds to be set at levels that would entitle the tenant to Housing Benefit and surely an unintended cost? Eligibility for Housing Benefit varies around the country and a national “Pay to Stay” scheme that takes no account of varying market rent levels and their relationship to varying incomes and household composition would be inherently flawed.

Question 2: Evidence of administration costs

Based on the current systems and powers that Local Authorities have, what is your estimate of the administrative costs and what are the factors that drive these costs?

We cannot make an estimate of the costs associated with “Pay to Stay” as these will vary between organisations. We do however have the following concerns:

Only those named on tenancy agreements have a legal responsibility for paying rent. On what basis will landlords be able to track and verify the income of other household members where they have no legal obligation for the rent?

Tenancy agreements currently only allow for annual changes in rent levels and will need to be varied to allow for rents to drop within a year if household income reduces. Without this, tenants with variable income levels could face considerable hardship.

Tenants currently are under no obligation to declare their income and landlords have no legal right to request earnings data or to require tenants to keep them informed as income changes. Generally this only becomes known as part of income support work where tenants need help to pay rent. Consequently, there is no clear data available on the number of tenants who may be affected by “Pay to Stay” or therefore the extent to which additional income may be raised. In many areas this could be very low.

We note that Government is proposing that HMRC will share income data with social landlords. This would remove some of the burden of establishing income levels but brings with it a range of issues, not least being the likelihood that HMRC data will be at least 15 months out of date and thus will not reflect tenants’ circumstances at the time.

A significant number of new housing association tenants are sourced via local authority nominations. There is no clarity in the document as to whether there will be a requirement for local authorities to gather income information at the point of nomination to determine the level of rent to be charged on the property.

There are some hidden costs for both housing association and local authorities in the proposal. At present, rents are often advertised to all at the same level via choice based lettings systems. In future, systems would need to reflect the circumstances of customers who potentially could be paying differing rents, with a consequent lack of transparency on the comparative cost of new homes.

Implementation costs will arise from calculating varying rent levels, staff training and guidance, amendments to IT systems, rent accounts and management processes, sending out rent statement letters, dealing with appeals, non-compliance, rent arrears and potential fraud investigations.

Our view is that the costs of administering the scheme could well outweigh the benefit of any additional rental income received, particularly if landlords are required to assess all tenants including those who will not be subject to any increase. This would be reduced if those in receipt of housing benefit (or Universal Credit) and / or known by their landlord to be vulnerable can be exempt from providing additional evidence of their circumstances in order to be charged the social rent.

 

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