“There are people on incomes of £60,000 or £70,000 living in council homes. I would look at that issue.”
George Osborne, 6 January 2013
A number of FactCheck’s Twitter followers have asked us to check out George Osborne’s threat to deal with rich council house tenants this week.
The chancellor claimed that some earn well above the national average income, but retain the right to pay rent lower than market value, subsidised by the taxpayer.
How many rich council tenants are there, and what is the government going to do about them?
The current rules allow people to live in social rented housing without ongoing income tests.
This is largely for historical reasons. Council housing was not conceived originally as a means-tested privilege for the poorest only.
The Labour minister for health and housing Aneurin Bevan famously said the new postwar housing estates would be places where “the working man, the doctor and the clergyman will live in close proximity to each other”.
Nowadays councils tend to allocate their dwindling stocks of houses on the basis of need, and ministers now say the disparity in average incomes among tenants is unfair.
Housing minister Kris Hopkins said: “For too long, those on council waiting lists have watched helplessly as very high-earning social tenants continue to live in taxpayer-subsidised homes meant to help the most vulnerable.
“These high-income tenants are not only blocking homes that could benefit those in greater housing need, they’re also relying on poorer taxpayers to subsidise their lifestyle.
“So we want to call time on this blatant unfairness. We intend to give landlords the option to charge very high-earning social tenants a fair level of rent – so if the tenants want to continue using this precious national resource, they will pay for the privilege.”
The government’s first consultation on this issue in June 2012 hinted that ministers were minded to set the maximum household income threshold at £80,000 or £100,000 – that’s the money earned by a single tenant or the top two earners combined.
Researchers at the Department of Communities and Local Government (DCLG) estimated that there were 1,000 to 6,000 households earning above £100,000 a year in England (including some famous names like the RMT rail union boss Bob Crow).
It was then decided that the income threshold should be £60,000 a year.
DCLG originally thought that between 12,000 and 34,000 social tenants were earning that much, but after some more research that estimate was rounded down substantially.
The upper limit is now thought to be 21,000:
DCLG says the average tenant renting from a social landlord in England is being subsidised by the taxpayer to the tune of £3,600 a year.
The latest government plans are still at the proposal stage. A consultation period ended in December last year.
As things stand, ministers propose changing the rules that govern how councils and housing associations set their rents. This will allow them to charge high earners rents up to market level, but it won’t force them to do so.
Some councils can decide not to bother, if there aren’t enough rich tenants to make it worth their while pursuing.
And it’s reasonable to assume that some local authorities may decide not to pursue high earners for political reasons. This piece from Conservative Home last year reports a lack of enthusiasm among Labour councils contacted via the freedom of information act.
Ministers also aim to change to the law so tenants are obliged to declare their income if it goes above the threshold “when parliamentary time allows”.
The chancellor is right. There is a significant number of households, although fewer than we thought originally, earning more than £60,000 while living in the social rented sector.
It remains to be seen how many social landlords will implement the government’s proposed reforms and force those people to pay more or encourage them to move.