Wednesday, 07 October 2015

Data shows four London boroughs where scheme won’t work

Major flaws revealed in pay-to-stay policy

The government’s pay-to-stay policy will not work in parts of 16 local authority areas across London because tenants will have to earn more than the £60,000 cap to be able to pay affordable rents.

Under pay-to-stay proposals outlined last month, social landlords will be able to force tenants who have a household income of more than £60,000 a year to pay full market rent or move into the private rented sector.

However, exclusive data from consultancy Hometrack reveals that in four boroughs this will not be possible for tenants paying affordable rents.

This is because tenants would need an income of up to £82,226 to pay the rent even if it is set at 63 per cent of the market rate - the average proportion charged under the scheme - rather than the 80 per cent maximum allowed.

The research, labelled ‘horrifying’ by one landlord, also lays bare the extent to which the affordable rent product is unaffordable for many social tenants.

Hometrack also found there were 88 wards across 16 boroughs with a total of 131,000 social homes that could only be afforded by households earning more than £60,000 a year - if rents were set at 63 per cent of the market rate.

Although these homes will mostly be for social rent, landlords are increasingly converting re-lets to affordable rent.

Housing minister Mark Prisk has said that landlords taking part in the next £2.8 billion round of affordable rent will be expected to consider all re-lets for conversions.

In Kensington and Chelsea, which is the most expensive borough, the research suggests that a household would need to earn £82,226 a year to be able to pay affordable rent.

Similarly, in Westminster, households would need to earn £82,197. In City of London households would need to earn £68,609, and in Camden, households would need an income of £66,405.

Julian Fulbrook, cabinet member for housing at Camden Council, described the research as ‘horrifying’ and said the authority would not be implementing pay-to-stay.

‘These are staggering figures, and back up our own research. This [pay-to-stay] is not something we want to spend time and effort on,’ he added.

Westminster Council said it supports the principle of the [pay-to-stay] policy but may increase the £60,000 cap.

Brendan Sarsfield, chief executive of Family Mosaic and leader of the G15 group of the largest developing London associations said: ‘These figures show that the affordable rent regime is not working. Affordable rent is an intermediate product, not a social housing product.’

Richard Donnell, director at Hometrack, explained: ‘We took [median] rental values for two-bed homes across all wards in London. We took 63 per cent of open market rental value as the affordable rent and assumed 35 per cent of net income was spent on housing costs. Using these assumptions… we then weighted the analysis to where social rented stock is most prevalent [in each ward].’

Top 10 income requirements

London boroughIncome needed to pay affordable rent
Kensington and Chelsea£82,226
City of Westminster£82,197
City of London£68,609
Hammersmith & Fulham£53,766
Tower Hamlets£51,869

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