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Cat Smith welcomes government u-turn on "Tenant Tax"

John Freeman
 Cat Smith MP: pleased "disastrous" rent proposal has been ditched

Lancaster's MP Cat Smith has welcomed a government u-turn on a ‘pay to stay’ policy that would have hiked local rents by an average of £2,213 a year

The Government last night abandoned its controversial ‘pay to stay’ policy, which would have imposed crippling rent hikes on working council tenants.

In the Lancaster City Council area the proposal – dubbed the ‘Tenant Tax’ – would have seen the rents of those affected rise by an average of £2,213 a year.

The proposed changes were fiercely opposed by Axe the Tenant Tax, an umbrella coalition of individuals and organisations who represent more than 150,000 landlords and who in turn provide housing for in excess of one million tenants.

The group pointed to how the changes, which were implemented in Ireland, saw rents increased 50% in three years and was scrapped by the Government as a result. The group argued it Increase rents substantially for tenants in the UK, make the UK housing crisis worse and have devastating consequences for some of the most vulnerable people in society.

In a statement released yesterday evening, Housing  Minister Gavin Barwell said an income based rents policy would no longer be compulsory. 

“Social housing has a crucial role to play in supporting those in most housing need. To that end, powers were provided for in the Housing and Planning Act 2016 to introduce an income based rents policy, requiring local authorities to set higher rents for higher income council tenants.

“Since the summer, the Government has been reviewing this policy. We have listened carefully to the views of tenants, local authorities and others and as a result, we have decided not to proceed with a compulsory approach. Local authorities and housing associations will continue to have local discretion.”

Mr Barwell said local councils would be allowed to impose the policy voluntarily. Local councils have however been among those calling for the policy to be scrapped or rethought.

Additionally, local councils already have the power to implement pay-to-stay voluntarily and none have yet done so.

Under the policy, tenant households with an income higher than £31,000 or £40,000 in London would be forced to pay rents that were close to the market rent.

This means a working couple on £15,500 each in Lancaster or Morecambe would be defined as high-income, and it was estimated about 70,000 social tenants were set to lose about £1,000 a year from the policy.

"Disastrous Proposal"

“I am pleased that this disastrous proposal has been ditched, as it would have had a devastating impact on the people of Lancaster and Morecambe," commented Cat Smith.

“Lancaster and Morecambe residents would have been subject to the rent hikes, putting a strain on their finances and in all likelihood forcing many out of their homes.

“That is why Labour has opposed this plan from the outset and I strongly welcome this change of heart from the Government.”

Shadow Housing Secretary John Healey added:

“This welcome u-turn is a victory for Labour’s year-long campaign against the ‘tenant tax’ which was set to hike rents for thousands of middle income households.

“Having recognised this move was a big mistake, Ministers must now re-think the rest of their failed housing decisions over the last six years.

“After disastrous figures last week showing that the number of new affordable homes for social rent has fallen to the lowest level since records began, top of the list must be reversing the forced sale of vital council homes and the huge cuts to investment in new genuinely affordable homes.”

Letting Agents "Administration Fees" to be Banned?

In other news for those renting property which will be welcome by consumer groups, the Financial Times (subscription required) reports Chancellor Philip Hammond will announce a ban on letting agents charging fees to tenants.

In his first Autumn Statement, the chancellor will take aim at the charges letting agents can levy on tenants which can include administrative services such as checking references, preparing a tenancy agreement, renewing a tenancy or ending a contract.

The government believes the ban would help millions of households in private rented housing by sparing them what can amount to hundreds of pounds in fees.

Some landlords may try to absorb fee rises by raising rents. But in places where the rental market is highly competitive, others may have to shoulder more of the costs, putting further strain on their balance sheets.

The FT reports consumer and tenant groups have attacked the level of charges to tenants and have called for the government to shift more of the burden on to landlords. Research from consumer group Citizens Advice found letting agents charged average fees as high as £337, and in some instances up to £700.