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Local authorities and housing associations will now be required to understand their residents’ affordability

Credit Risk & Affordability

Local authorities and housing associations will now be required to understand their residents’ affordability

Affordability has moved on significantly since our last blog and the Queens Speech, and the emergency budget surprised many in housing with the announcement of earnings linked to rent.

Local authorities and housing associations will now be required to capture income details on households living in their housing stock. But how will this be undertaken?

  • Will HMRC provide income and if they do will it be convenient, efficient and delivered in a timely manner? The most likely option will be similar to the changes in child benefit, whereby the tenant will simply declare they are earning over £30 or £40k.
  • What will constitute household income? For example will it be couples and their adult children?

The easiest solution would be for local authorities and housing associations to;

  • get an indication of the likely household income bands which could be used as part of a model to prioritise households for review.

This could then be complimented with other datasets that could also identify those who would be better off looking to take advantage of right to buy.

Outside of London social tenant households earning over £30,000 will see rents rising to full market rent. In London the changes will impact those earning above £40,000. Whilst rent linked to earnings had already begun under the previous coalition government the scale of the new changes for ‘pay to stay’ is much broader than expected.  The English Housing Survey shows approximately 484,000 (approximately 13%) households living in social housing earning a gross income in excess of £31,200.

  • The challenge for many housing providers will be collecting and checking income data on a semi regular basis to ensure the correct rent is charged.

The changes in ‘pay to stay’ coupled with the reduction in social rent by 1% over the next four years will for many providers mean a negative impact on development plans with some commentators estimating a reduction of 18,000 units just in London. Speaking to a director at an ALMO recently I was told the changes would reduce HRA income by over £80m in the next 30 years.  Housing associations will be able to plug some of the shortfall through higher ‘pay to stay’ rents whilst others may need to consider curtailing development activity or merging.

If you are interested in receiving our forthcoming white paper on affordability within social housing or simply like to find out more about our work with housing providers and local authorities please let us know.

Authors: Kevin Gilhooly, Senior Business Development Manager – Housing – kevin.gilhooly@callcreditgroup.com

Paul Kennedy – Head of Consulting, paul.kennedy@callcreditgroup.com

Image: pcruciatti / Shutterstock.com

 

 

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