Summer Budget: ‘High wage earners’ a misnomer as Pay to Stay causes more issues than it solves, says KPMG

Summer Budget: ‘High wage earners’ a misnomer

Jan Crosby, Head of Housing for KPMG in the UK, comments on the announcement that ‘High wage earners’ in London will have to pay market rents.


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Commenting on the announcement that those living in social housing and earning over £40,000 in London or £30,000 elsewhere will have to pay market rents, Jan Crosby, Head of Housing for KPMG in the UK, said:

“Cutting the deficit by targeting ‘high wage earners’ living in social housing is likely to generate extra income for local authorities and housing associations, which can be used to build more homes or shore up under-funded services, but that’s where the positive angle for this announcement ends.

“To earn £40,000 in London or £30,000 elsewhere cannot be classed as being a ‘high wage earner’ – we know from recent research that someone would have to earn £77,000 in London or £43,000 in the rest of the UK, to be able to buy a first time buyer home, so already these people are priced out of homeownership. With that not an option, they face a future of paying market rent. Those who choose to stay in their local authority or housing association home and pay the increase are likely the lucky ones, even while they struggle to make ends meet, whereas those who choose to move on to private landlords face the vagaries of an unregulated sector.

“As well as issues around quality and safety, those in private rented homes face rapidly increasing rents. With landlords seeking to keep their yield constant as house prices increase, rents will inevitably follow suit. And as social landlords and local authorities will use these to define market rent, those who ‘stay’ will pay this increasing cost too. And why are those house prices increasing? Because there is too much demand and too little supply.

“The issue here is that this announcement is all about cost cutting and not about housing strategy and supply. While the Government will say it will pay for more homes to be built, there are better ways to make this happen – release more land, put funding in place for smaller builders, relax planning laws – think about long-term solutions and not short term headlines.”


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About KPMG

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff.  The UK firm recorded a turnover of £1.9 billion in the year ended September 2014. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 162,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.

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