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Calculating Pay to Stay type rents in Canada

Trevor Hampton, Head of Housing at Northgate Public Services 

Canada has linked household income to social housing rents since the 1970s, and along the way has negotiated a lot of the same problems that face the UK as it implements Pay to Stay.

Social housing providers in Canada are required to capture the same financial information as UK providers will via Pay to Stay. Under the Rent Geared to Income (RGI) scheme, housing providers obtain pay slips, income tax forms and benefits information from tenants in order to charge a social housing rent of around 30% of household income.

To make the scheme work, the housing provider’s IT system needs to calculate not just the RGI, but also create annual income check reminders, and determine eligibility for the scheme. The system not only calculates social rents but looks at any additional charges caused if tenants go beyond the income threshold. If tenants breach their income thresholds, their rents can be raised to ‘market levels’, which are calculated by the NPS’ housing platform.

In short, the system needs to be able to cope with greater complexity.

Over the last few years Northgate Public Services has worked closely with Ottawa Community Housing to implement Rent Geared to Income.

Says Michael Wilson, Director of Operational Effectiveness at Ottawa Community Housing:

“Raising the rent to ‘market levels’ can occur with a change in income and or a change in household composition. Typically, this could occur to ‘empty nesters’ who no longer qualify for the size home they previously had, or when people gain higher paid employment. “While we give them a grace period of time, if they don’t move and the grace period expires, the rental charge goes to the market level regardless of income.”

It’s necessary to check household incomes on annual basis to ensure tenants are paying the right rents. The IT platform generates the reminder notices and also helps create the calendar entry for tenant contact. It’s potentially a multi-stage process.

Firstly, the NPS IT platform automatically generates a letter letting tenants know it’s time for their annual review and requesting financial and household information. If necessary, this escalates into telephone calls, followed by employees physically visiting the property to get the required information. 

OCH start the process that they start five months in advance because ‘….to not have the information from tenants results in becoming ineligible and a loss of subsidy,” says Michael Wilson. “In challenging situations, it often needs a hands-on approach to go and talk directly with tenants, or, help them to get the required information.”

In Canada supplying financial information is mandatory, which is a key part of the scheme’s success. In practice tenants’ rents can be raised to several times what they were if the information isn’t supplied, creating a strong incentive to supply the information.

A key positive aspect to implementing RGI (and Pay to Stay) is the far greater understanding that housing providers gain about their tenants financial and living arrangements. It opens up a much greater opportunity for dialogue, and opportunities to help tenants ensure they are getting the right benefits, than would otherwise be possible. 

In preparation for Pay to Stay, NPS is taking what it has learned from its work in the Canadian market – and others such as Ireland and Australia where there are similar systems – and used it to inform its software solutions and also to offer a Pay to Stay service which will help gather the financial information.

Northgate Public Services provides housing solutions and services to the UK and international markets. NPS Housing, its flagship platform, is helping Canadian social housing providers calculate rents, and generate the customer contact schedule that enables income verification; NPS also provide welfare verification services to local authorities.  

This article was originally published in the September 2016 issue of Housing Technology.

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