Tory climbdown over pay-to-stay plan to raise social housing rents

Partial U-turn part of bid to clear decks ahead of Europe referendum poll day

Ministers are preparing a climbdown over controversial plans to force hundreds of thousands of social housing tenants to pay market rents once they earn more than £30,000 a year – as they “clear the decks” of controversial policies ahead of the EU referendum.

George Osborne has abandoned a package of radical pension reforms, including cuts to tax relief for higher earners, for fear of upsetting voters and causing a political distraction. The Observer now understands that ministers are also planning to modify hugely contentious elements of the housing reforms the chancellor announced last summer.

A retreat on the “pay to stay” policy – which is under attack from a cross-party group in the House of Lords – will be seen as part of an attempt to avoid issues that could create negative headlines before the 23 June vote.

Ministers have also delayed a range of controversial decisions until after the referendum, including those on expanding airport capacity in the south-east and the future of the BBC. The Queen’s Speech, which lays out the government’s upcoming legislative programme, has also been put back until after the vote.

The partial U-turn, while unlikely to satisfy all critics of the policy, means that rather than social housing tenants facing massive rent rises once their household income rises above £30,000, a tapering system will mean that those who earn just over £30,000 will pay only “a few pounds extra a week”. This will rise gradually in line with income, and the most brutal increases, it appears, will not come in until a household’s combined income exceeds £50,000.

The Observer has highlighted intense opposition to “pay to stay” since it was announced in last summer’s budget. Criticism of the policy has come not only from housing experts, thinktanks and charities, but also from the Tory-controlled Local Government Association, which warned recently that tens of thousands of families would be forced out of their homes, and unable to buy or rent locally, if the policy was introduced as planned from April next year.

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