Paying to stay: Policy and legal dilemmas

DCLG’s consultation paper on High Income Social Tenants: Pay to Stay Consultation Paper has brought out the academic in me, in part because it is about the construction of a “problem” by policy-makers.  In sum, the proposal is to encourage landlords to charge high income tenants a higher rent set at 80%.

Constructing the “problem”

High income households are a “problem” because they occupy “precious social housing resources” which, therefore, requires a commitment from government to take action.  It becomes “an issue of principle and fairness” that high income social households pay a higher rent because, otherwise, social housing subsidy benefits those people and not “those who genuinely need and deserve it the most”.  It targets the richest for whom there is no case for subsidy: “as has been shown in the debate around Welfare Reform, people believe it is wrong for hard working taxpayers to subsidise those who are easily able to support themselves”.  The proposals are the comparator of the government’s “… action to restore fairness by limiting Housing Benefit so that claimants are faced with the same types of housing choices as ordinary working families”.  My strong suspicion is that a discourse analysis of this CP will (or should) appear in an academic journal soon (and, if it doesn’t, I’ll write it, although that is not a “commitment”).  Fairness and the avoidance of “perverse incentives” make the case and it appears almost compelling.

So, that is the policy issue and its justifications, or kind of, because actually what the CP is doing is manipulating two facets of housing policy as it has applied to the “social” sector: (a) that it should have a mixed tenure, which implies people on mixed incomes because otherwise the processes of residualisation (“an ugly word” as somebody said on Newsnight the other night, but a powerful one nevertheless) will be exaggerated – as those academics who studied the right to buy back in the 1980s noted, while many households entering the sector have low/no incomes, that is not static and so the earliest RTBers were the better-off who occupied the better quality accommodation leaving a residualised and marginalised population/stock; and (b) the linked point that the better-off are likely to have more choices so that there will be trade-offs between exit (leaving the sector or, in other words, tipping the financial equation towards exercising the right to buy/acquire etc in favour of acquisition, thus effectively giving the richer tenants further benefits) and loyalty (a belief in “the social” which may be tested by the exit incentives).

So, while I have limited truck with the wealthier “social” tenants as a result of a certain liberal ideology, there is no doubt that what appears to be (and is constructed as) a common sense solution is no less than an attack on the identity of “the social” in “social housing”, a regular theme of mine.  And the whole thing has made me rather angry (it doesn’t take much at the moment tbh).

The knowledge deficit

But it also goes beyond that and into the realm of knowledge, for we simply do not know who these households are.  First, we must define who these “high income social tenants” actually are – it is not just the tenant but the two highest earning individuals whose joint income is at or above the threshold.  There are estimates of the numbers of households (1,000-6,000 earn more than £100k; 2,000-11,000 earn more than £80k; and 12,000-34,000 more than £60k).  But we actually don’t know: the range of such households is indicative.  Nobody has ever conducted this sort of exercise before, so we just don’t know – and, in any event, given the fluctuating nature of households, it will require ongoing investigation.  Further, as the CP kind of hides away, over what period are we talking: the last or next “income” year (whatever that period actually means).  Who would be a housing officer when part of the job involves going round your patch asking people for their wage slips, annual earnings, P60s?  Ouch.

Then there is the question over what actually constitutes a “high income social tenant”, ie at what level is it to be constituted – and that conundrum is the subject of consultation.  The government is also concerned (and wonderfully so, because they are so concerned about this with the well-off) about the “disincentives to work, if people reduce hours worked in order to fall under a threshold”, which might lead to higher benefit costs.

Legal issues

So here we get into the nittygritty, because actually this is a policy problematic with considerable legal problems:

(a) Local authority housing management can easily be manipulated through rent setting supplementary guidance and the plan is to do this immediately after the consultation ends (of, of course, subject to the responses).  With PRPs, the government will need to amend the direction to the regulator regarding the rent standard and this will require consultations.  There is a wonderful moment in the CP when it says “The detail of how this will work is complex, and we are seeking your views on these issues …”

(b) So, we are going to give landlords the power to charge higher rents to higher income earners.  We recognise that this “breaks new ground” because we have never linked rent to income; we also recognise that no housing officer is going to relish asking tenants what they earn and, as importantly, there is no requirement on tenants to disclose what they earn; so we will have to legislate for that.  And there is here a truly wonderful Shappstastic moment: “we intend to explore what such legislation might look like, with the aim of introducing it at a suitable opportunity”.   Until that opportunity presents itself, landlords will have “greater flexibility” around implementation (not to mention the ethico-legal dilemmas over sensitive personal data collection).

(c) what level should the rent be charged at? Well, the policy case is clearly in favour of market rent – why should these households be better off than our constructed “ordinary working household”? – but there is a potential legal problem with some PRPs who have charitable  status and/or objectives which include letting property at below market rent.  So, we then get a further Shapstastic moment: “we propose to look at these issues further”.  In the meantime, let’s set the rent at 80%.

(d) Then, there’s the actual mechanism for rent variation and don’t let’s get started here with the potential level of complexity/challenge under the 1985 and 1988 Acts.

And what’s the benefit to the landlord (beyond equity): they will get more income from a small proportion of their tenants but at an increased administration/management cost as well as (more nebulously) pissing off your tenants and housing officers.

Conclusion

So, this has all the hallmarks of a significant policy change which may well end up to be more totemic than practical and may well end up not being implemented by landlords.  But, it may also be the start of a rent-setting regime that doesn’t necessarily stop with high income earners once the principle has become established.  All in the name of fairness …

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One Comment

  1. frednach
    Posted 15/06/2012 at 11:43 am | link to comment

    Sounds socilaistic in principal but there is some irony in that affluent people have taken advantage of the old Rent Act provisions and the like when it comes to paying little rent in some of the more distinctive parts of the capital.

    Leaving that aside the issue is simple people on high income do not in my experience receive help in the social sector, why would they need to do this as they can afford to buy choice in the private sector. The issue of high income social tenant’s have progressed through the life of a tenancy as the family have matured and advanced, so why should thee fork our more when they have endured years of misery on the waiting list only to be drained again when they have finally secured a good income.

    However, the issue of social tenancy needs to be looked at closely and examine as to why the sales under the right to buy have slumped even in high income families; is it do with the economic uncertainty, the high deposits. And how is ‘getting rid’ of well off tenant’s conducive to a mixed community?

    I would ask government to find measures that tackles the above issues through incentives to exercise the RTB such as utilising rent as a mortgage repayments freeing social housing and providing revenue to build new ones.

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