An article appeared on Inside Housing last Friday stating Lord Freud has announced a change in how lodgers will be viewed in Universal Credit.
Briefly the changes ‘appears’ to be that from October 2013 when Universal Credit begins a lodger (not to be confused with a sub-tenant) will (a) not be classed as part of the household and so the tenant will receive a bedroom tax penalty; however (b) the tenant will not have any income they receive from the lodger affectign their benefits. This latter point needs clarification and IH say it is in new draft UC regulations which it doesnt reference and I cant find anywhere.
At face value imagine the implications, some of which I have outlined. on the IH discussion site.
Scenario 1 – A single tenant (widow/widower) in their 50s in a 3 bed council flat in London with the kids having flown the nest – the all too typical example used paying £120pw in rent.
(a) will receive a 25% reduction of £30pw to their HB – a reduction of £1565pa
(b) yet apparently will be able to rent out both rooms to lodgers at say £140pw (cheap in London) thus receiving £280pw income or £14,610 yearly increase in income yet still get the HB paid.
(c) the two lodgers will be able to claim HB too and if they receive £125pw each in HB then this adds £13,044pa to the HB bill for that property.
Hence the same property will see HB rise by £11,479 for that one property [(c) – (a)] and means the overall HB bill will rise surely?
More bizarrely it provides a huge incentive for the non-working tenant who is underoccupying (the nasty workshy scrounging feckless scum as portrayed by the coalition) being massively incentivised to stay non-working and become to in effect a sub-letter (boo – further evil nasty workshy scrounging…etc scum as portrayed by the coalition).
Even accepting that the tenant lettigng to lodgers will probably incur a tax liability (first £4250 is tax free of rental income in own home) this is still a financial incentive to take advantage of HB. And think if tenant will only let out a room to working persons (a la Rigsby in Rising Damp) charging each of her two lodgers £280pw in rent – a mere £40 per night – this becomes £29k per year income while getting her own rent paid by HB!
Imagine if she has a 4 bed flat!!! – Kerching indeed!
The wording of the IH article says: –
“The major impact of the move, which the Department for Work and Pensions described as a ‘positive side effect’, is that it will help under-occupying tenants pay the bedroom tax. The change was made possible because the government has amended what counts as income in its draft regulations for universal credit.
Currently, claimants must declare income from lodgers. This can affect their entitlement to housing benefit, jobseekers’ allowance and income support.
Under the new regulations, from October 2013 tenants will be able to keep income from lodgers and retain full entitlement to benefit. The room let to a lodger will, however, be classed as a spare room and fall under the bedroom tax, which will be £14 per week on average”
I have emphasised the key sentence which says “…tenants will be able to keep income from lodgers and retain full entitlement to benefit.” Currently the first £20 of income is disregarded (and then taxed at the marginal rate of 65% – more than anyone else pays!) and this apparent change – as I say no link is given to this – represents a massive change and one that will see the bedroom tax produce a net cost to government and not a saving.
We are informed that there are 660,000 (feckless, workshy, privileged etc) underoccupiers who will lose on average £14pw in HB this according to govt estimates realise a £430m pa saving (despite 660,000 x £14 being £482m per year!)
Yet if just one in 5 take in a lodger at £70pw then any saving will be wiped out. And with this level of incentive more than one in 5 will.
What is the purpose of the bedroom tax other than to save money as it clearly wont with this change? Thats a rhetorical question. What is to stop an underoccupying tenant renting out to say her niece or nephew or other familial members or their partners or friends? Absolutely nothing as these would qualify for HB and give younger persons their own space fully paid for in HB. Such an arrangement takes away the many potential pitfalls of taking in a lodger too.
This is ill-though through and wholly illogical policy which is a knee-jerk one from Freud that will end up costing the HB bill even more than it proposes to save and financially reward the workshy, privileged underoccupying scum that the bedroom tax iss supposed to financially penalise!!
Absolute madness!….unless you are an old codger!
The more you think on this the worse the reality becomes.
660,000 new social housing tenant landlords – what form of tenancy / licence will the lodger receive? How will they evict a bad lodger? Will greater wear and tear on properties mean higher rents eventually being charged by social landlords? Under new allocation policies and localism and the subjectivity within both see prospective tenants going to view large properties with padded brown envelopes for the viewing officer?
As Ive commented upon in response to Shapps today publicising a new phone number for RTB, does remaining a tenant taking in lodgers provide a better financial incentive than RTB. Yes it does. Take in lodgers for 5 years then take up RTB a much better option and see many more potential RTBers given the income they have realised as a tenant.
Will we see brothers and sisters each taking each others adult children in as lodgers so they can all claim and get HB? Or friends children swapping houses as definitively no contrivance there in HB regulations. The system is ripe for taking advantage of hugely and all over the country. Swap houses claim £90 per week in HB and just give me £60 – I can see the feckless scheming ne-er do well indolent scrounging benefit-dependent scum (etc, etc) loving this idea.
Has Freud nicked this idea from an episode of Shameless anyone?