Pay to Stay: What Does It Mean

29 March 2016

As the government tries to control the ever imploding housing market crisis, another scheme has been proposed by the Chancellor George Osborne to focus on giving social housing to the poorest. This new scheme, called Pay-To-Stay, will come in to force next year, and the controversial scheme could potentially force thousands of hard-working families out of the capital, an article from the Guardian has reported last month.

The article went on to mention that, according to figures commissioned by the Local Government Association (LGA), almost 60,000 households in England will be unable to afford to stay in their council homes from April 2017 when the reform hits. The reform, which was announced in last year’s budget, indicates that households need to earn below £40,000 in order to stay in London, and £30,000 elsewhere. Anyone who earns more than those thresholds will be told to pay the local market rate in the private sector, instead of the lower social rent. This scheme is noted as being a ploy to end what ministers say are effective subsidies for better-off council tenants. This could mean that for these tenants who just exceed the threshold will be put in a difficult situation. The report from the LGA continued to state that in England around 214,000 households will be affected by the reform, and within the capital, most of the 27,000 households hit will be unable to afford the rent privately or purchase in the same area.

The article mentions that the LGA’s research showed that approximately 50% of tenants who will be classed as high earners in the south-east, east of England and in the capital would not be able to pay market rents or choose to the Right-To-Buy scheme, and so will have to move out. A spokesman from the LGA, Peter Box, was quoted saying: ”A couple with three children earning £15,000 each a year cannot be defined as high income. Pay to stay needs to be voluntary for councils, as it will be for housing associations.” He went on say: ”This flexibility is essential to allow us to protect social housing tenants and avoid the unintended consequence of hard-working families being penalised, people being disincentivised to work and earn more and key workers, such as nurses, teachers or social workers, having to move out of their local area.” There are calls for the need for the reform to be balanced for poorer households as well as those categorised as high earners.

Another spokesman from the Department for Communities and Local Government stated: ”It’s not fair that hard-working people are subsidising the lifestyles of those on higher than average incomes, to the tune of £3,500 per year. We have been clear that our intention is that social rents would increase gradually as tenants’ incomes rise above this threshold. Pay to stay better reflects tenants’ ability to pay, while those who genuinely need support will continue to receive it.”

The predictions forecast for the effects of the policy are legitimate, as the Chancellor has seemed to have changed his tune, now rolling out a scheme to favour the poorer households of London. When the reform comes in to force, then we will see whether this will have helped the housing market or not.