This report proposes a new rental policy founded on the principle of affordability, which could become an essential part of the social housing offer – the Higher Earnings Rent concept. We set out the rationale behind the concept and suggest how it might work in practice.
London’s council and housing association homes provide secure and decent accommodation for almost a quarter of the city’s households at a heavily subsidised rate. Half of these 750,000 households are unwaged and another quarter are on very low incomes.
With housing supply under extreme pressure, and the public and politicians increasingly concerned to ensure that welfare goes to those who most deserve it, the coalition government set out proposals to ensure that high earning council and housing association tenants pay a market rent on their properties.
This report argues that the government’s proposals will raise relatively little extra money for housing, and could discourage aspiration.
House-Keeping sets out an alternative regime – one that would that increase rent gradually for the 115,000 households earning above the London average wage and raise at least £300 million for new housing in the capital, while ensuring that work always pays.
Summary of recommendations
- The government avoids a simple income threshold such as that suggested in the recent announcements about Pay to Stay.
- The government adopts graduated principles of affordability for additional rent paid by higher income households.
- The government requires that social landlords direct additional rent from higher earning households to an audited Higher Earnings Rent Fund.
- Social landlords apply resources from the Higher Earnings Rent Fund to invest primarily in social rented housing but that a proportion be allowed for other sub-market housing products and for regeneration activities.
- Higher Earnings Rent Fund revenues not applied within three years be returned to the original source of the subsidy or grant.
- The government redesigns the Pay to Stay proposal to enable a piloting of the Higher Earnings Rent concept by a few social landlords in London.
- The government maintains the current RPI + 0.5% guideline formula for another five years for annual increases in target rents and allows greater flexibility within a social landlord’s portfolio, and that a fundamental review is carried out with the sector and its funders for a longer-term regime post 2020.