Our response to the government’s Pay to Stay: Fairer Rents in Social Housing consultation
In October the government asked for organisations to share their views of their “Pay to Stay” proposals, and how the scheme might be run. Catalyst responded to the consultation. Our full response can be downloaded (PDF).
What is Pay to Stay?
The Government has decided that social housing tenants with household incomes of £40,000 and above in London (£30,000 and above in the rest of England) should have to pay the market rent – or very close to it – to their housing association or local authority landlord. Typically, these households currently pay between 30% and 60% of the market rent for their area.
How would Pay to Stay affect our customers?
We estimate around 1,100 Catalyst households (10% of all Catalyst households) would be affected. In addition however, a household that isn’t currently affected could suddenly find they are earning more than the £30,000/ £40,000 threshold, if, for example, a non-working partner got a job.
Where the difference between social rents and market rents is large – as it is in many parts of London and the south east – the “jump” can be huge. An extreme example from our properties is in a 4-bed home in Kensington & Chelsea (we have 38 of these), where the rent increase would be over £800 per week (or £41,600 per year – potentially more than the entire household income).
We looked at different approaches to applying higher rents to affected households:
- Jump up to market rent for all households earning over the threshold (£40,000 in London, or £30,000 elsewhere).
- Stepped increases to market rent, so that households earning, say between £40,000 and £45,000 in London would pay a bit more rent. As a household’s income rose higher, they would pay more rent until, when they earned over £71,000 in London and £60,000 elsewhere, they would be paying full market rent.
- Tapered – a similar principle to the “Stepped” option, but with a much smoother increase up to market rent.
- We also considered if raising the household earning threshold to £50,000 in London and £40,000 elsewhere would be a useful option.
Each of these options has a different impact on a household’s rent. However, the effects on customers’ incomes and the high costs to us of administering the arguably ‘fairer’ options, means that none of these options is attractive to both our customers and to us.
We believe that there is a better way
- Give housing associations the power to set our own rents and abolish the Rent Standard set by the Regulator of Social Housing.
- Set-up a voluntary agreement between the sector and the government to set rents in accordance with residents’ ability to pay. This agreement could also help control housing benefit costs.
- Catalyst would introduce “Living Rents” – determined by market rent levels and household incomes. We would produce a range of rental and home ownership products at different price points for household groups with different levels of income. Households with the lowest incomes would pay the least rent and as household earnings rose, those households would pay more, until those on the highest incomes would be able to afford to purchase their home through Right to Buy, if they wanted to.
We believe that this model of tying rental products to incomes is much more efficient and would act as a work incentive.