Warning of £1,000 social housing rent rises under new rules

More than 70,000 social housing tenants could face average rent rises of £1,000 a year unless ministers back down on controversial new "pay to stay" rules, the Local Government Association has warned.

The LGA expressed concern at the changes being brought in next April, which will place households in the "high income" bracket if they have combined earnings of £31,000 outside London, and £40,000 in the capital.

Every £1 that such households earn above the threshold will result in a 15p hike in rents, with LGA calculating this will hit 70,255 dwellings, triggering an average annual rent rise of £1,065.

The LGA predicts the changes will impact on 9.3% of council homes in the South East, 7.7% in the east of England, and 5.3% in the North East.

Average monthly rents for households affected will go up by £132 in London, and £72 outside the capital.

The LGA, which represents more than 370 councils across England and Wales, also warns about the "significant" administration costs of the scheme which will generate revenues of £75 million a year, rather than the £365 million originally forecast by the Government.

Councillors warn the move will mean a couple earning above £15,500 a year each outside London will be classed as being in the "high income" bracket and forced to pay close to market rent rates.

The LGA said the complexities involved in writing to more than one million social housing tenants to check their incomes make implementation from next April "impossible".

Senior vice chairman of the LGA, councillor Nick Forbes, warned the pay to stay rules would cause anxiety and hardship for families.

"Pay to stay will affect thousands of social housing tenants across the country, with the average affected household seeing their rent rise by £1,065 a year.

"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.

"Pay to stay sounds straightforward but it is a policy with initially unseen complexities, and which could generate large numbers of costly legal appeals and challenges from tenants.

"The Government has committed that councils will be able to keep reasonable administrative costs. In many local areas, these costs will outweigh the additional rent collected leaving little or no extra income for the Treasury to keep, and leave the councils out of pocket.

"Pay to stay risks becoming an expensive distraction from our joint ambition to build more homes

"We urge new Government ministers to take this opportunity to allow councils to decide whether or not they will introduce pay to stay for their tenants and to keep the additional rent to invest in new and existing homes, as will be the case for housing association tenants.

"At the very least, it should delay implementation to allow for approaches to be tested and piloted, and to provide councils with the support to implement the policy with minimum disruption," Mr Forbes said.

Tenants on housing benefit and universal credit will be exempt from the increases.

A spokesman for the Department of Communities and Local Government said: "It's simply not fair that hard-working people are subsidising the lifestyles of those on higher-than-average incomes, including tens of thousands of households earning £50,000 or more.

"Pay to stay better reflects tenants' ability to pay while those who genuinely need support continue to receive it. It means households earning £32,000 would see rents rise by just a couple of pounds a week."