‘Higher rents for high earners’: be careful what you wish for

Should finance directors be exploring an opportunity to increase revenue?  

The Rent Standard doesn’t apply to high-income social tenants. This is the policy ‘Rents for Tenants with Higher Incomes’, previously known as ‘Higher Income Social Tenants’ (HIST). 

Originally introduced in the Housing and Planning Act 2016 and set out in detail in the government’s Policy Statement on Rents in Social Housing, this allows RPs to increase the rents they charge to tenants with high incomes. 

The policy statement says: “The government does not expect registered providers to adhere to its social rent and affordable rent policy requirements in relation to social tenants with high incomes.”

‘High incomes’ in this context means households with a combined gross income of more than £60,000 per annum.

These households are only regarded as ‘high income’ in situations where income tax is payable on the earnings of both the tenant and their spouse/partner.

It also only applies where both the tenant and their spouse/partner were living together in the same rented accommodation during the tax year prior to the rent increase.

There are many successful rent models linked to income in the wider affordable housing rental market, such as Dolphin Living.

RPs have had some concerns about this policy from the start, however. How would they know if the tenant and their spouse/partner were liable for income tax? Tenants are unlikely to give permission for them to request information from HMRC.  

The fact that the tenanted household’s gross income is calculated based on the year prior to the current tax year could also mean that tenants are required to pay an increased rent even if they are expected to earn less in the current tax year.

Some RPs have other concerns about chasing revenues by imposing higher rents on households with high incomes.

Implementing such a system could be perceived as too difficult, and some may be concerned about charging different rents for similar properties. Some may also question whether it is right to ‘punish’ people in housing need who have improved their household incomes.

Is it really too difficult to implement?

Subject to any express ‘cap’ that is written into a tenancy agreement and putting benefit regulation to one side, landlords should be able to increase rents in line with market expectations for those tenants with ‘higher incomes’.

However, in order to do this they will need to obtain tenants’ earnings information.

Knowing which tenants to focus on could be a problem. But landlords do know which tenants claim housing benefit, and those who receive Universal Credit, largely due to direct payments.

Therefore, they will know by default which tenants could potentially come within the scope of ‘Rents for Tenants with Higher Incomes’.

These tenants could be invited by their landlords to provide evidence to demonstrate why they should not be required to pay a higher rent.

Implementing a system that requires higher earners to pay higher rents must be carefully handled, but it is not impossible.

Be careful what you wish for

Landlords are used to charging different rents for the same property depending on whether it is categorised as social, intermediate or affordable. So, this in itself shouldn’t be an issue.

The fundamental concern of whether higher rents for higher earners is fair to tenants is something for boards to consider. Some may be uncomfortable with the idea of ‘penalising’ tenants who have improved their income. 

But what about the other things that landlords could do with the additional income? For example, could they be doing more to help those whose need for social housing isn’t currently being met?  

Most landlords are charitable organisations, and as such is it right to be charging below market rents to tenants who could afford to pay more?

When weighing up the pros and cons of imposing higher rents for high earners, landlords should be careful what they wish for.

Staying open to the idea and exploring ways to increase revenues fairly could bring benefits for more people in housing need.

Jonathan Cox, partner, Anthony Collins