Whitehall announced yesterday it is scrapping controversial plans to make it compulsory for relatively high earners living in social housing to pay higher rents.
In his 2015 Budget, the then chancellor George Osborne said those earning £40,000 in London and £30,000 in the rest of England will be charged full market rates for local authority or housing association properties.
The move was expected to affect around 340,000 households, raising £250m a year for the Exchequer.
However, housing minister Gavin Barwell has announced the compulsory aspect of the policy would be dropped.
‘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,’ he said.
Local authorities and housing associations will instead have ‘local discretion’ in applying the policy, he added.
Responding to the housing minister’s announcement, Liberal Democrat housing spokesperson, Lord Shipley, said: ‘Finally the Government have realised their plans to charge people more for their homes were not only unfair but unworkable.
‘At a time when many people face huge financial pressures with costs increasing, yet wages failing to go up to compensate, the last thing people need is higher rents.’
He warned ‘Pay to Stay’ would have disadvantaged those ‘only just making ends meet’ and ‘disincentivized’ the taking on of extra work.
Lord Shipley also added there would have been a ‘significant administrative cost’ in assessing the incomes of individual households which councils would have struggled to recoup.
‘The government's job is to solve the housing crisis not make it worse - that's why we've repeatedly opposed these plans,’ he said.
The move has also been welcomed by the Local Government Association (LGA) who had called it 'an expensive distraction' from actually building new homes. Lord Porter, chairman of the LGA, said: 'Making Pay to Stay mandatory would have affected thousands of social housing tenants across the country, with the average affected households seeing their rents rise by £1,065 a year.
'Councils would have needed to invest millions in new IT systems, hire new staff and write to over a million social housing tenants to try and understand household income and approve individual tenant bills.'
Mr Barwell MP also reaffirmed the Government’s commitment to the mandatory use of fixed term tenancies for new tenants in local authority housing.
George Osborne last year introduced an amendment to the Housing and Planning Bill that would limit council house tenancies to a maximum of five years.
‘This will better enable councils to give priority to people with the greatest housing need,’ said Mr Barwell yesterday.
‘Councils will review tenancies at the end of each fixed term to ensure that tenants still need a socially rented home.'
Shadow housing secretary, John Healey, has called for a rethink on the rest of the Housing and Planning Act.