Biting arses in the bedroom – the underoccupation tax

The long drawn-out age of the under-occupancy HB reform has come to an end we are told in the media today (a chillingly accurate title of the Last Post by Jules Birch) with Lord Best withdrawing his last amendment late yesterday in the House of Lords.

Or has it?

Lord Freud and the Coalition would like to hope so but it will come back with a vengeance and bite them on their respective arses, and bite them bloody hard too and deservedly so. However not until a huge number of vulnerable families have been kicked out on their arses due to arrears and rapidly escalating rents directly because of this punitive under-occupancy’ tax on social tenants.

Before I explain my point a couple of deserved and honourable mentions and plaudits.

Firstly for Lord Best who argued this vociferously in the Lords and deserves credit for his lead.  Yet the concessions he won simply made this callous Coalition increase the average HB cut from £13 per week to £14 per week. Secondly, for Riverside Housing Association who, unusually for any HA led on this fight and get credit for showing that housing associations can put their heads above the parapet.  Not before time and let’s hope all other HAs remember that if they position themselves as ‘community champions’, which they like to do, it means they have to challenge on behalf of their communities and the tenants that reside their rather than tugging their forelocks to the government of the day.

Back in December 2011 I wrote that the ‘bedroom tax’ will cost the government more in overall HB terms. This was in response to David Orr at the National Housing Federation in an article for Inside Housing stating the fact that 180,000 2 bedroom social housing properties are under-occupied yet only 68,000 1 bedroom properties were let in the past year.  This meant when the downsizing rationale was extrapolated that 68,000 would move to lower HB cost 1 bedroom social properties but 112,000 would have to move to higher HB cost 1 bedroom properties.  The figures based on the then £13 per week average reduction meant an increase in the overall HB bill overall of some £64m per year.

Lets re-emphasise that point.  For the ‘downsizing rationale’ to be a valid reason it would have to reduce cost but it clearly doesn’t.  The real rationale must be something different.

Imagine you are a single social tenant in a 2 bed council or HA flat, the reasons why don’t matter  – you are still being blamed for this symptom which conveniently deflects blame away from the problem of the chronic shortage of social housing supply – and let’s look at the ‘informed’ choice that Lord Freud wants you to make.

You could see if you can downsize to a 1 bed social let but so few are available and note that social landlords have stated it would take at least 6 years for this to happen even with a change in allocation focus to include this increased downsizing element.  In reality very few have this option and it becomes a non-option for the overwhelming majority.

You look at moving from a 2 bed social property to avoid the £14pw average cut but you find that a 1 bed private property has both a higher rent and because on average LHA HB only covers 66% of the rent then you will have to pay about £30 per week to make up your rent.

Downsizing to a smaller private property costs you more!!  No need to evaluate smaller space, greater insecurity of tenure and removal costs, it’s financially better for you and the informed choice in Lord Freud’s parlance to remain as an ‘under-occupier’ in social housing!

So Lord Freud and the Treasury are right then.  This will lead to a reduction in overall HB costs?

Quite the opposite and here’s why!

The under-occupier social tenant remains and suffers a £14pw cut to their HB payments. This is far more at about £25pw if under-occupying by two bedrooms yet still cheaper than downsizing to a 1 bedroom private let!!  So even they remain on financial grounds and keep greater space and greater security of tenure.

You are that tenant and the £14 pw reduction hold choices.  Do you find £14pw from your other benefits or savings to make up the rent?  How?  Do you put on 3 extra layers and don’t put the heating on?  Do you eat less?  How long can that last?  It can’t of course and the likelihood is you run up arrears.

Now put on your social landlords shoes.  You know arrears will rise because of the under-occupancy tax and so the 97% of all rent you collect may fall to 95% and then to 93% and this tax will inevitably see a downward trend in the proportion of all rents collected. (Add in the change in direct payments which sees rent going to tenant and not direct to landlords and this emphasises this worrying trend.)  You react as you should by increasing the provision for bad debt (arrears) from 3% to 5% then to 7% to reflect this.

Yet the reality of this is that rent levels for all tenants increases. The HB bill will rocket.

And here’s the reality – the vicious circle of Coalition incompetence

Landlord increase rent levels to pay for likely greater arrears.  This leads to under-occupying tenants having to find even more per week as the £14pw figure above increases to £16pw.  The result is greater arrears by the landlord.  The landlord in turn has to increase rents to reflect this bad debt, which in turn sees the under-occupying tenant having to now find £18pw in place of the £16 which was £14pw.  Arrears increase which in turn …ad infinitum!

This is a vicious circle of reality and not a Yes Minister sketch!

Rents will rise for all social tenants as a result of the under-occupation tax.

That means all 100% of social tenants – the 20% under-occupiers and the 80% who are not. It means for the working tenant and non-working tenant.

The overall HB bill will rocket!

Silly me!  I forgot to add in the context of the Coalition’s announced plans to increase council rents by 41% and HA rents by 24% by the end of this parliament, both of which are set against an anticipated RPI of 16%.  The HB bill will rocket again and as a direct result of Coalition policy which of course, Freud, Shapps and the rest will seek to blame on existing social tenants – Of course these freeloaders are refusing to downsize will be the spin but the reality is different as the above explains.

So when Freud, Shapps, Grayling and whoever else in this Coalition blames the burgeoning HB bill on freeloading, workshy, feckless under-occupiers that refuse to move, or when they blame social landlords for increasing rent above inflation and more still to reflect the bad debt of arrears this under-occupancy tax will obviate, you know who really is to blame!

I started by praising one social landlord for putting its head above the parapet and challenging this punitive under-occupancy tax.  The rest need to learn from that experience as all of you will be getting blamed for increasing rents by this Coalition in the near future directly because of this policy.

In short social landlords need to get off their arses while tenants are kicked out on theirs and then hopefully some real teeth will bite the arses of Freud, the CLG, the DWP and the rest of this Coalition, who when it come to housing policy don’t know their own from their elbows!

2 March 2012 – Quick Update in response to comments

(a) Arse is in the dictionary – and if the purpose of grammar is to be not misunderstood rather than being understood (yes there is a difference!) the use of arse conveys no ambiguity in meaning or in tone.

(b) Need for a calculator? – Every £2pw rent rise in social housing rents adds £350m per year to the overall HB bill.  The bedroom tax expected to save £112m per year. One is bigger than the other!

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