26/06/2013 06:20 BST | Updated 25/08/2013 06:12 BST

A Fair Deal for Social Tenants

Poverty campaigners often talk about the 'unmet needs' of one group or another. And there is no doubt that our welfare state leaves a lot of needs unmet.

But we don't talk often enough about a second category - people who don't have needs but have these un-needs met.

Last week Centre for London (the think tank I run) published a report on higher earning council and housing association tenants - a good example, arguably, of people with 'met-unneeds'. Our research showed that around 16 per cent of London 'social' households earn above the average London median wage (around £27,000). Yet social tenants pay on average around half the rent that their homes would get on the open market, in effect receiving a subsidy of around £5,000 a year. (We focus on London because London has by far the highest number of higher earning social tenants receiving by far the biggest subsidy of any region of the country).

With social housing in very short supply and public spending on the rack, it seems right to ask if this is fair. Can we justify a system that charges tenants a sub-market rent regardless of income?

The Chancellor appears to think not. In the last Budget he pledged to introduce reforms that would give housing associations and councils freedom to charge all social households earning above £60,000 a year a market rent. We are expecting further details in the follow up to next week's Comprehensive Spending Review.

But less than one in 50 London social households have incomes above £60,000 and, and Pete Redman, the report's author, estimates that charging them a market rents would raise only around £30 million a year. At the same time, hiking rents up in this way creates an obvious problem. In effect any household moving from income of less than 59K to 60k is going to be a lot worse off - hardly an encouragement on aspiration.

Our report puts forward an alternative approach. We argue that social landlords should be allowed to raise rents incrementally on higher earning social tenants. Most of the 115,000 tenants earning above London average income would pay only a very slightly increased rent. Yet this scheme would raise around £300m a year in London alone, which could pay for more than 3000 new social homes a year.

We don't want to squeeze higher-earning tenants out of social housing. On the contrary, we argue that noone should face loosing their home because their income goes up. On our proposals higher-earning tenants should always be offered right to buy their homes or stay on at a market rent.

But the public is increasingly concerned to know that the welfare spending is directed to those who need it most. We need a fair deal for social tenants, and we should be asking higher-earning tenants to contribute a bit more.