A new experiment, set to begin in 2016, will see the residents of the New Era housing estate in Hoxton paying varying amounts of rent based on their bank balance. The community was successful in campaigning against Westbrook Partners’ proposed mass evictions and escalating rent last year, and the estate’s new owner Dolphin Living hopes that this will prevent families from losing their homes.
CEO Jon Gooding admits that it might seem “counterintuitive” for tenants to pay different rent for identical accommodation, but that “it makes sure no one would have to leave the estate because they couldn’t afford to live there… If we can make this work, I think the New Era tenants will have achieved something even greater than they achieved so far, because they may have achieved an example which others can follow.”
The initiative is not without its critics. Alex Hilton, director of campaign group Generation Rent, has called the whole thing “unsustainable”, saying that “it will work until Dolphin runs out of money and then the subsidy will stop.”
Some New Era residents have also expressed concerns over the fairness of the proposed plans, as it will mean a family of four could well end up paying less than a single person. According to Gooding, tenants who bring in £21K per year or less will continue to pay the same rent, whereas a salary of £66K would result in the resident paying more than double what they do right now. However, as this is solely an experiment at present, means-testing is by no means required of tenants, and anyone unwilling to disclose their financial information will be charged a set rate.
But if one tenant is earning £40K more per year than their neighbour, shouldn’t that reflected in what they pay? Higher earners pay more tax than lower earners, perhaps the same logic can be applied to the roof over their heads. And if it keeps a community together and prevents people with less cash to burn from ending up on the streets, all the better.
Whether this model is suitable for other landlords to adopt remains to be seen, although there is certainly an argument to be made for the reduction in financial risk. If the rent directly reflects the income of your tenant, they are considerably less likely to have trouble making payments, and would enable you to make shrewder decisions during tenant selection. While this would mean that you’d end up with renters paying wildly differing amounts for similar properties, you may well also find that on balance, you’re making more money from your lettings than you were before.
George Spencer is CEO of Rentify.