We’ve got a file on you
Pay to stay proposals need to be ironed out before they will work, says Lynn James, partner at Cobbetts
Under the pay to stay model, the government has proposed that social housing tenants on high incomes should pay a higher rent. At this stage, there are more questions than answers about how this could work.
The suggested income threshold is £60,000 per year. However, the consultation raises questions as to what is defined as ‘income’. For instance, would long-term savings, an unexpected financial windfall, or rent from a lodger be included? This will need to be clarified in the legislative process as well as how to deal with changes in the tenants’ circumstances.
While a tenant may have a high income, will this be the only test? If outgoings are not taken into account, tenants supporting second families or paying off debts may be unfairly penalised by paying the higher rent.
There would need to be a mechanism in place to allow rent to adjust downwards as well as up. If a tenant loses their job, the consultation anticipates that the system would need to be sufficiently ‘sensitive’ to respond, yet fails to suggest how this would work. If a tenant’s income was to drop dramatically, one would expect the rent level to fall back - but how quickly could this be implemented?
A bureaucratic burden
There is also the administrative burden on the landlord to be considered. To implement a higher rent, social landlords will need to means test all housing applicants, plus all existing tenants, and then review incomes annually - as well as taking into account sudden changes. The consultation also talks of existing tenancies having to be ‘renegotiated’, however a social landlord will, in practice, not be able to change tenancy terms unilaterally. If terms have to be changed by agreement then why would tenants agree? And if they do not agree, what sanction will the landlord have? Unless there is to be legislation to deal with this as well, the landlord will have no power against un-cooperative tenants and it is difficult to see how a landlord could seek to end a tenancy on this basis.
There are also practical issues surrounding the disclosure of income. The consultation proposes that new legislation would need to be introduced to ‘enable landlords to access tenant income data’. Would a tenant be forced to produce pay slips and bank statements? What would be the penalty for non-disclosure? The information obtained will be subject to Data Protection Act principles so landlords and third parties will need to be aware of their legal obligations.
Finally, there is the question of what organisations do with the extra income. The government is obviously expecting a reinvestment, but would the social housing provider be obliged to reinvest and would this be monitored?
Many people believe that higher earners should pay higher rent, but will the financial benefits for social landlords be worth the effort and the cost of implementing the scheme?