UK's new social housing rule won't meet aims: report

London

BRITAIN'S "pay to stay" rule requiring social housing tenants to pay higher rents may leave local councils worse off, cause stress for families and fail to generate expected revenues for central government, according to a report published on Monday.

The plans will force higher rents on an estimated 70,000 households, said the report by estate agent Savills for the Local Government Association (LGA), which represents councils in England and Wales.

Councils in England housing tenants with a household income of £31,000 (S$55,200) outside London and £40,000 in the capital will be required to raise their rents closer to market rates, under the new policy to be implemented in April 2017.

"For families this will cause anxiety, uncertainty and costs. For councils it will generate bureaucracy and new administrative costs and complexities. And at the end of it, for government, it will generate nowhere near the financial return it had originally expected," said the LGA's senior vice-chair, Nick Forbes.

He said that despite increased revenues, many councils would end up out of pocket as assessing tenants' incomes would incur extra information technology and staff costs.

A spokesman for the Department for Communities and Local Government said that the current system is unfair on taxpayers. "It's simply not fair that hard-working people are subsidising the lifestyles of those on higher than average incomes," he said.

The new rule better reflects tenants' ability to pay, the spokesman said, and more than 90 per cent of tenants would be unaffected.

But social housing campaign groups say the new housing laws will price many tenants out of London, dramatically altering the social fabric of a city renowned for its diverse communities. Rising income inequality has led to poorer residents being squeezed out as wealthier inhabitants and investors snap up real estate in central areas, say property rights campaigners. Londoners who have lived in social housing for decades have complained they would be forced to leave the city centre under "pay to stay".

A spokesman for London Mayor Sadiq Khan said that the mayor is concerned about the effect "pay to stay" would have on many working families and is committed to working with the city's boroughs to help protect them.

The report predicted that the new rules would raise rents by an average of more than £1,000 per year for those affected. It said that the increased rents would generate around £75 million annually in government revenues, just a fifth of the government's original forecast of £365 million. THOMSON REUTERS FOUNDATION