Fears 'pay-to-stay' scheme will drive thousands out of housing association and council properties

The government is introducing measures that could drive thousands of families out of social housing by removing any subsidy for their rent.

In what is being billed as a "pay to stay" scheme, Downing Street has swung behind plans to introduce a new household income threshold above which social tenants must pay full market rent. The government is expected to say that rent subsidy will be capped at a household income of £60,000, meaning, for example, a couple on £30,000 each could see their rent rise by about £70 a week.

The scheme, applicable to all housing association and council properties, is explicitly designed to make social housing primarily available to the poor.

The housing minister, Grant Shapps, has referred to the idea before, but Downing Street's embrace of the proposal means it will now go ahead with a consultation paper next month.

The government says it is necessary to remove an unfairness in the system and to allocate scarce housing resources more efficiently. Critics will say the scheme will give wealthier families an incentive to buy their property at discounted rates, removing social housing from the market.

The government has been accused of driving some poor tenants from properties in wealthier inner-city areas by introducing a higher rent, set at 80% of the market rent. It has also introduced a so-called spare room tax, so that under-occupying social tenants of working age are docked £14 a week for one spare bedroom and £25 a week for two. No tenant will receive more than £500 a week in welfare payments, a measure that will affect larger families on housing benefit.

The welfare cap is, in polling terms, one of the most popular policies the government has introduced, and the new £60,000 household income cap for social housing tenants is likely to win equally wide support.

A No 10 source linked the two measures, saying: "It's not right that high earners benefit from taxpayer-funded housing subsidy. Just as we have introduced a cap on housing benefit and welfare payments to make the system fairer, now we're acting on social housing too."

Government sources added that social housing should be regarded as a precious asset to be devoted to those most in need, not a cheap option for those who can afford competitive rents or their own property.

The government consultation, due to be launched next month by Shapps, will suggest a range of options for the threshold, with the lowest at £60,000.

Ministers have been looking at a range of proposals to make social housing more flexible, including the removal of so-called lifetime tenancies, replacing them with fixed-term tenancies. Social housing tenants can also no longer pass their homes to their children.

Government research shows that as many as 6,000 social rented homes in England are lived in by people who earn a combined income of more than £100,000, including Bob Crow, leader of the RMT union. At the proposed £60,000 threshold, ministers estimate as many as 34,000 social rented homes in England alone would be affected.

It is being stressed that no one would be evicted from their home, simply that they would have to pay higher rents.

The government claims the economic subsidy provided by sub-market rents for social housing is worth £3,600 a year on average, or £69 a week.

The total cost of this annual subsidy for those above the £60,000 threshold is £122.4m, and the annual subsidy for a £100,000 threshold is £21.6m.

Social rents are set on the basis of a formula linked to size of the property, its value and local earnings.

Labour has always argued that social housing should be for a mix of tenants and not seen as the preserve of the poor. The Liberal Democrats have curbed some government housing reforms, but could arguably support the measure as a legitimate restriction on middle-class welfare.

However, social housing has been increasingly taken up as an option by young professionals unable to afford to own their own home. The cost of the cheapest quarter of homes is now more than six times average household income and eight times in London.

The overall social housing budget was cut by more than 50% in the 2010 spending review, to £4.4bn, and the number of people on council waiting lists is now 1.8m, an 80% increase in the last decade.

In a report this week, Shelter, the Chartered Institute of Housing and the National Housing Federation said the government was failing on five of its 10 key indicators: affordability of the private rented sector, help with housing costs, homelessness, housing supply and overcrowding.

Here is a question to the blog clinic from Colleen who is a tenant:

I am a working mum of 4 children living in a rented house since sept 2009.  I was issued with a section 21 notice on Friday 13th of this month, landlord is selling the house.

The council are saying I need to remain in property until an eviction notice – I am scared stiff regarding telling the landlord I can’t vacate property, unable to raise money for bonds, deposits etc whilst living here (currently pay £695 pm) plus I am struggling to find a homeowner guarantor which is a requirement with a lot of agencies.

I have been advised not to pay my rent after the section 21 expires in June, is this the correct course of action? I don’t feel comfortable with tht advice.

Please advise, Many thanks

Colleen, if you want to be re-housed by the Local Authority you MUST stay in the property or you will lose your right to be re-housed.  Landlords are (quite rightly) infuriated by this, but there is nothing you can do about it.

So far as the bond is concerned, have a word with the homelessness officer at your Local Authority as there are often special schemes for people who cannot afford to pay deposits.  Or your local CAB may be able to help.

So far as the rent is concerned you SHOULD pay rent after the section 21 notice has expired.  The fact that the landlord has asked you to leave does NOT mean you are then entitled to live in the property rent free.  I am very surprised that you were advised to do this.

Also if you don’t pay rent this puts you in the wrong.  If, for example, your landlord then decided to evict you for non payment of rent this could prejudice your right to be re-housed.

The main thing for someone in your position to remember is that you mustn’t move out and that you should follow the advice of your homelessness officer (unless they tell you not to pay the rent because you have had a s21 notice served on you!).

See also the post here which has some advice which may help you.

If you're trying to cut your housing register you risk abandoning a rich source of information about residents

A smaller housing waiting list conveniently looks like there is less housing need to meet. That is why so many areas are doing the best they can to reduce that list. But the data it provides us about people's housing needs and aspirations could have a much greater value to both the public and private sectors.

Before we write the list off in the name of saving money, we should consider whether we're doing enough with the data it holds and what else we could use it for. Here are some ideas:

Informing plans for new housing of all tenures

Local authorities need to understand local housing markets far better, for many reasons. Periodic strategic housing market assessments cost a lot of money and nobody really understands them. A more up-to-date mechanism is needed.

Making much better use of the homes we already have

Contrary to popular belief, the waiting list doesn't just tell us what we need to build. We have empty homes, property that could be converted, homes in a poor condition that need improvement. We're looking to private sector investment to meet housing demand, so we need to be clear about where investment is required.

Diversifying the affordable housing sector

Faced with economic restrictions on new build and reform of the welfare system, housing providers are diversifying their income streams. Information about prospective customers and local markets is of increasing value, and we need to ask new questions to obtain this information. For example, do we know enough about people's employment and prospects?

A single evidence base

Local decision makers need robust local intelligence to do their job. Let's strengthen the information we already have, linking the waiting list to registered providers' own waiting, transfer and mutual exchange lists. We should be comparing this data to under-occupation scheme applications, requests for adaptations, housing advice enquiries and homelessness applications. Managing all of this data separately can't possibly be cost effective or encourage informed decisions.

Reducing health inequalities

People frequently need to move home because of changes in their health. We could connect waiting list data with health data to inform a cost-effective and co-ordinated approach.

Sell it

Data has a value. I'd like to quantify it here for you but I can't – it depends on who does what with it. But, beyond basic housing requirements, we already ask prospective tenants about medical problems and mobility, children and pets. Don't immediately get hung up on the questions this raises about the use of personal information; my point is that we must not restrict our thinking.

I'm not arguing that we can do all of these things with the data we hold right now – it might be out of date and we probably aren't asking the right questions at this stage – but I don't think it would require much thought to achieve more, particularly if authorities engage local providers and customers in the discussion. And I'm not blind to the cost problem, but I am also yet to see a local authority that has considered outsourcing the management of the list to a data specialist.

Housing is a talking point today, but not for the right reasons. This will continue if we base our decisions on urgent housing needs only. It's not enough to encourage people to support new homes; they need to see the bigger picture. We have that data, so don't throw it away – be better at processing and refining it.

Gill Leng is director of GLHS

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While £30m has been found to help people build their own homes, the project diverts attention from the most acute need

Undeterred by the embarrassments of Gordon Brown's celebrity appointments, the coalition government has continued to link policy to famous figures in the hope their ideas will gain traction through their popularity.

First, so-called "restoration man" George Clarke, television presenter and figurehead of Channel 4's documentary series on empty homes, was appointed as an independent empty homes adviser. Now it is the turn of designer and Grand Designs presenter Kevin McCloud, who has been given the job of supporting the self-build industry as housing minister Grant Shapps unveiled a £30m fund to help prop up independent development projects.

Shapps explained the fund would provide short-term finance to allow small developers to provide groups of homes, for themselves and for local sale. The minister believes that self-build is "riding the crest of a wave": the number of self-build mortgages is reportedly set to rise by 141% and more than 100,000 people are on a quest to find suitable self-build plots in the UK.

When it comes to self-build, Britain lags behind the rest of Europe; only one in 10 homes is built by self-builders. The government has pledged to double the size of that industry.

McCloud accompanied the housing minister to Almere, in the Netherlands, to announce his new job and the pair attempted to share the lessons of the Dutch self-build industry. Shapps says that projects like the large, low-cost development at Almere have been held back in the UK because banks are refusing to provide project finance – a problem a new government pot of money seeks to address. He has also launched a web portal to give self-builders advice.

Those measures can't do much to address two other important issues: land values, and the appetite for independent development.

There's a joke in journalism that if you want to write about a trend but can't actually quantify it with real statistics then you state that "more and more" people are doing it. (This is particularly prevalent in the magazine industry, where "more and more women" apparently choose plastic surgery/shorter haircuts/sex with a stranger each month).

Announcing the new fund Shapps said: "More people than ever [want] control over the design and build of their home ... I am determined to change this so anyone who wants to embark on a self-build project has the opportunity to do so."

A survey by the Building Societies Association found that 53% of 2,000 people asked said they would be interested in building their own home, with almost two-thirds of those claiming they would like to begin building within the next two years. This kind of survey tells us very little about the genuine appetite for a self-directed building project. When asked, many people would clearly say they like the idea of designing their own living quarters. In reality, the prospect of giving up work and living in temporary accommodation for year proves a major disincentive.

Shapps also claimed that the average cost of building a home, including the land, was £150,000. This estimate is over simplistic. Land values vary dramatically across the country, rising as high as £430,000 for a 0.067 hectare (0.165 acre) plot in London.

Much land is also tied up: in private ownership; within the public sector; and sitting in large developers' land banks. This needs to be addressed before a growing, buoyant self-build sector can become a reality. Ministers have it in their power to address the public sector stockpile, but radical thinking such as aggressive taxation or the introduction of land auctions is necessary to release the rest.

Yet the biggest concern about this policy is that is diverts attention from the real business of acute housing need, highlighted by this week's report from the housing sector which gave the government five red lights for its efforts on solving the UK housing crisis.

We need 240,000 new homes a year to help tackle the housing shortage. We're building fewer houses than at any point since the second world war and, according to the National Housing Federation, we have 4.5 million people in housing need.

Last year, 14,000 new homes were built by self-builders – more than the output of some major developers – and doubling the size of this sector is a laudable aim, helping to boost the sluggish economy. But it's only ever going to be a sticking plaster, mainly helping the comparatively affluent middle classes at the blunter end of the housing problem, while those at the sharp end will be left still falling through the gaps in policy and – and at its worst – without a home of their own.

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Luxury central London apartments as yet unbuilt are fetching vast prices in Hong Kong and Singapore

From Fitzrovia News:

While tenants in the City of Westminster are struggling to pay their rent in the face of rising property values and housing benefit caps, luxury apartments due to be built on a plot in Fitzrovia are being sold off-plan in Hong Kong and Singapore for up to £8,500,000 a piece.

They learned this from Channel News Asia, which reported the developer of the future Fitzroy Place finding ferocious demand for prime location London properties in Hong Kong and Singapore. Planning permission for the development in question was granted only in February.

Like the man said, these super rich investors are, "Buying for capital growth and as a safe haven." That's one way the London housing price bubble stays inflated. The other way is lack of supply. Not much sign of either changing. Fitzrovia News adds:

Permission was given for the development in February after [Westminster] City Hall's planning committee agreed to a contribution of affordable housing provision, amounting to 17.4 percent of the total residential floorspace on-site plus £5.94m towards the City Council's affordable housing fund.

Planning policy normally requires that 25 percent of the apartments should be affordable housing, but a larger contribution of affordable housing was rejected by Exemplar who argued that it was not viable to provide any more. Westminster's planning committee agreed...

The development...was given planning permission in the face of huge opposition from people living around the site.

More on that here. Meanwhile, Westminster's new leader Philippa Roe has strongly refuted the charge that government housing benefit caps are leading to the alleged "social cleansing" of poorer residents, despite its own research forecasting that these might oblige a fifth of the borough's primary school pupils to move to somewhere cheaper. As the Guardian reported in March:

Addressing the consequences from the cap in the private rented sector, she [Roe] retorts: "Even in that sector we have a 45% 'churn', so even if the worst predictions are realised and every single person living in a property with rents above the cap had to move – it's less than 10% additional 'churn' in one year."

"Furthermore, one-bedroom flats are readily available beneath the cap in Westminster," she says. "Two-bed flats you can get in some of the less expensive areas. It's only the larger properties [three and four bed homes] where people are going to have to move, and 50% of the people affected by the cap are in one-bed properties. We are seeing rents coming down. We've been negotiating with landlords, sometimes reducing rents from £800 to £400 a week."

And she insists other nearby London boroughs can take up the slack. "Even if people do have to move, they don't have to move very far - Camden, Brent, Southwark, Lambeth are on our doorstep and there are properties in those areas beneath the cap."

A Westminster council officer has explained to those affected: "To live in Westminster is a privilege, not a right." No-one suggests that these issues are straightforward. But is this the way we want our city to evolve?

This article was augmented on 18 May 2012 to reflect Westminster Council's position more fully.