Experts warn George Osborne’s little noticed ‘pay to stay’ scheme will leave an estimated 250,000 people in social housing worse off.

Hundreds of thousands of council tenants are facing a steep rent rise of up to £3,000 a year.

Experts warn George Osborne ‘s little noticed “pay to stay” scheme will leave an estimated 250,000 people in social housing worse off.

Under the Budget measure anyone earning more than £30,000 a year (£40,000 in London) will have to pay the market rate for rents.

The Institute for Fiscal Studies (IFS) think tanks calculates this would see nearly one in ten council and housing association tenants having to pay an extra £3,000 a year on average.

The IFS also said the Chancellor ‘s plan to cut rents by 1% for all other tenants will “be of little or no direct benefit” to most of the 3.9 million households in England living in social housing.

It says as most of their rent is covered by housing benefit, they will not be better off.

And because councils and housing associations will have less rental income fewer houses will be built, the IFS says.

The Office for Budget Responsibility notes that 14,000 fewer social sector properties will be built between now and 2020 – 21 as a result, the analysis notes.

Shadow Chief Secretary to the Treasury Seema Malhotra MP said: “This report from the Institute for Fiscal Studies completely undermines David Cameron and George Osborne’s claims that reductions in social rents will help offset cuts to tax credits.

“More than three million working families are set to lose an average of £1,300 from next April as a result of tax credit cuts. The Tories need to reverse fully their cuts to tax credits – not exaggerate the impact of the reduction in social rents to those affected.

“The IFS is also right to raise concerns about how the Tories’ approach could reduce the amount of new housing supply and the potential ‘cliff edge’ caused by their Pay to Stay policy. Millions of people struggling to cope with their housing costs deserve a real plan for more affordable homes to rent and buy from this Government – not another five years of failure.”