Does £40,000 make you rich?

I did not used to feel as passionately about politics as I do, but now that I am working in housing, I am astounded at some of the new housing legislation being bought in.

Take the new legislation in which any person in social housing earning over £40,000 in London and £30,000 outside of London will be made to pay the current market rent. To bring in such a law in London will be crippling to many families and assist the mass exodus of middle and working class families from the city – ethnic, social and class cleansing.

The reason I say this is that, on the face of it, £40,000 may sound like a lot of money. But is it really a lot to live on as a salary in London today?

George Osborne introduced the new policy saying: ‘We’ve decided it’s time to act on the higher earners who use taxpayer-funded subsidies to live in council and housing association homes when they could afford the market rent that others on their salaries pay. It’s a simple matter of fairness. The welfare system I want to see is one that helps people to get good jobs instead of giving them handouts.’

What is he saying? Many council and housing association tenants could probably (with a little budget rearranging) stretch to an increase in their rent, but not an over-inflated increase, and we all know that the current rents being charged are over inflated. How will Londoners afford these rents? Salaries are not increasing to absorb this.

Let’s look at how far £40,000 will take you.

Take a couple with kids earning a little over £20,000 each, or a single parent earning a decent £35,000 wage and her child gets their first job, which immediately sees that households income hit the £40,000 margin. Remember by the time you have taken off tax, NI and pension you are left with £16,687 for a person earning £20,000. This works out to be about £1,391 a month.

Therefore a couple with a joint salary of £40,000 would be making roughly £2,782 per month, which may be a good monthly liveable amount, but not when you have to pay full market rental.

So what is full market rental value? Suppose they live in Brixton or Hackney, social housing rent can rise from about £600- £800 per month to a minimum of £1,600 for a two bed property and £2,250 per month for a three-bedroom, but then they also have to pay gas, electricity, council tax, buy food and anything else the family needs – and you can guarantee, every month would feel like a struggle. And I have not even mentioned rental prices in areas such as Kensington and Chelsea, where astronomical house prices will see an exodus of social housing tenants once the new rules come in.

A person earning £40,000 a year sadly no longer means that you are rich, rather it means you are trying and that you are doing just about okay.

Council tenants do have the option of ‘Right to Buy’ and this is to be extended to housing association tenants. However, there is no talk about a ceiling price on the most expensive of social housing properties. In the 80s and 90s under Margaret Thatcher put a ceiling on how high council properties could be sold for to the tenant. This time around, those tenants interested in buying rather than pay over inflated rent may not even be eligible for a mortgage on their salary.

This whole system punishes those trying to make something of themselves – the workers. The non-workers will not be let off either, as the benefit caps bought in over the past 2 years will see many exiting London. At this rate, the changes being introduced will see people downsizing and possibly sharing bedrooms with their children, or dividing London into lower and middle class residents segregated from the rich. Is this really what we should be aspiring to in London in 2015?