Bedroom Tax – part 4 – more perversity and why it will ADD BILLIONS to the welfare bill

I went back and re-read the coalition impact assessment on the bedroom tax yesterday.

The first thing to note is that the DWP refer to it as an under-occupation issue and the overview below is taken directly from the DWP website here:

“The Welfare  Reform Act 2012 announced that the current rules for the size of  accommodation that Housing Benefit will cover in the private rented sector will  be applied to working age tenants renting in the social sector.

From April 2013 all current  and future working age tenants renting from a local authority, housing  association or other registered social landlord will receive Housing Benefit  based on the need of their household.

The size criteria allows one bedroom for each  person or couple living as part of the household with the following exceptions:

  • Children under 16 of the same gender are expected to share
  • Children under 10 are expected to share regardless of gender
  • A disabled tenant or partner who needs a non-resident overnight carer will be allowed an  extra room.

This  means those tenants whose accommodation is larger than they need may lose part  of their Housing Benefit. Those with one extra bedroom will have a 14 per cent  reduction applied to their eligible rent and those with two or more extra  bedrooms will have a 25 per cent reduction applied.

Further Information can be found in the impact  assessment:

So while we all know it as the ‘bedroom tax’ it is officially called under-occupation yet this is a nonsense as the following simple example explains.

The Smiths are a couple with two sons aged 13 and 15.

A) The Smiths rent a property with 1 double ‘bedroom’ and 2 x single ‘bedrooms’ – This is known as a 3 bed / 4 in housing jargon – a 3 bed property that is meant to be occupied by 4 persons. Which it is.

Yet they have 3 bedrooms and so are penalised with a 14% reduction in HB

B) The same household composition could rent a property with 2 double sized bedrooms – a 2 bed / 4 to accommodate their family and would not be penalised under the bedroom tax.

They rent just two ‘bedrooms’ so are not penalised by the bedroom tax.

You can make the argument that in example A) the 3 bed/4 the two boys have a room of their own when they could share and so the bedroom tax has some sense of ‘fairness.’  Yet it also means having a room each could cost about £22 per week in London – a tax of £22 per week or £1,144 per year.

The size criteria is on the number of bedrooms and not the occupancy or household composition and so it is incorrect to label this as an occupancy charge; rather it is called quite correctly a bedroom tax.  It could be the case that the 2 double sized ‘bedrooms’ in the 2 bed / 4 could we larger in area than the 3 bed / 4 and the rents could well be the same level too.

And as I have argued before if the 2 single ‘bedrooms’ or just one of them is less than 70 sq/ft then they are not a bedroom as they are under the minimum bedroom size or MBS as so many of the smaller ‘bedrooms’ rented in social housing are 9 x 7 and thus below 70 sq/ft.

The issue is of classification and how the landlord defines a ‘bedroom’ and is not a size criteria on under-occupation but a size definition of what is a bedroom according to the landlords subjectivity. Just because a landlord gives the Smiths a tenancy agreement that says it is a 3 bed / 4 doesn’t mean that it is and housing benefit departments at local authorities cannot simply rely on the landlords subjective view of what the property comprises and is defined.  A tenancy agreement can state the moon is made out of cream cheese …until a court decides otherwise; just as it can say the tenure is a bare licence when in fact a court can rule it to be a secure tenancy.

Here is where I have a huge issue with the bedroom tax in operation.  When it comes in the Smiths dispute that the bedroom tax applies in the 3 bed / 4 they rent as (a) the 3rd ‘bedroom’ is only 9 x 7 and so is not a bedroom; and/or (b) the Smith household is 4 persons and how can they be under-occupying a property meant for 4 persons?  I foresee every such example of this being challenged and rightly so and on both simple arguments that the MBS means one or more of the ‘bedrooms’ is not a bedroom AND they are not under-occupying.

The bizarre and highly irrational aspect – and I mean irrational in a legal sense too – of the bedroom tax is that is says under 16s should share a ‘bedroom’ and that each under 16 is counted as half a person meaning that a 2 bed / 3 is suitable and the correct ‘need’ – a double for the parents and a single for the two boys.  Yet what is that ‘single bedroom’ is 9 x 7 or any size below 70sq/ft?  The Smiths still have a legal challenge on the definition of a bedroom.

Add to this that the HB dept of the LA must investigate any disputed decision and then ask the landlord to confirm what they classify the property is and in writing. This means that the social landlord is being asked if it believes a 9 x 7 room is suitable for two teenagers to share in simple terms – a subjective judgement.  The social landlord will also know that such a size of room breaches many housing regulations and guidance and so is being asked to confirm in writing, as part of a formal dispute that could end up in the Upper Tribunal (High Court), that this is acceptable.  The social landlord – directly through the bedroom tax policy – is exposing itself to legal actions and legal costs.

Additionally the social landlord is incurring the wrath of its customer, the tenant, by appearing complicit in what is rightfully called a bedroom TAX.  Further the social landlord with its financial head on knows that any bedroom tax deduction gives an increased risk of arrears and added cost to the business.  This ultimately leads to eviction and higher cost to the same local authority in terms of temporary accommodation for the now homeless Smiths.

What the bedroom tax does is transfer risk and cost to tenant, landlord and local authority…and in the above example created by a misnamed under-occupation policy where the family is not under-occupying!!

Reader, are you still following this bemusing and surreal situation.  Dont worry there’s much more to come and as I began this by saying I reconsidered the bedroom tax (sorry under-occupation that isn’t under-occupation) impact assessment I return to that.

Above I describe the huge additional admin burden to each local authority HB department with the huge likely number of disputes which will cost each LA far more.  Yet what does the impact assessment say about this?

Page 17 of the impact assessment discusses (the DWPs view of) those who will appeal and those who will seek a discretionary housing payment of the 660,000 the DWP say will be affected.

  • 53. As an illustration, it is estimated that if 40,000 of the householders that experienced a reduction at the point of transition were to make an application for a Discretionary Housing Payment, the total cost across all Local Authorities of administering these additional applications would be approximately £1m. This is the estimated cost of administration, regardless of whether the outcome of the application for a Discretionary Housing Payment is successful or not.
  • 54. Similarly, as an illustration, if 20,000 claimants chose to appeal the decision made on their Housing Benefit entitlement, DWP estimates the additional administration cost associated with these appeals would be approximately £4m.

Note before I discuss the above irrational nonsense that DWP state of the 660,000 households the bedroom tax will affect in the first year that 83% of these or 548,000 will be said to under-occupy by one ‘bedroom’ – lets call these the likely disputed cases which is what they are.

On Discretionary Housing Payment (DHP) Requests

  • So only 40,000 out of all 660,000 will seek to claim a DHP according to the DWP – a mere 6.06% and 93.94% wont seek to claim a discretionary housing payment!
  • If the mere 6% do claim a DHP then the cost to LAs will be £1m.  Hang on that’s a whopping £25 cost per case (£1m divided by 40,000).  Note here reader that the only cost factor I can think of is that LAs are guided to charge £27 per hour for admin when dealing with a freedom of information request and those figures are a few years old.  So each DHP application from sending out, reading, consideration, coming to a decision and then informing the applicant is about 45 minutes in total! My apologies I failed to include postage and other stationery costs and reconsidering and re-assessing each awarded DHP!!

On additional disputes to bedroom tax decisions

  • The DWP maintains just 20,000 of the 548,000 affected by one ‘bedroom’ will challenge!  That’s a whopping 3.65% challenging and a resigned 96.35% of social tenants who wont challenge then!  (The majority will be on welfare benefits too yet DWP maintain just 3.65% will challenge the bedroom tax decisions!!!!!)
  • If this miserly and irrational low percentage do challenge then this 20,000 will create a £4m added cost to LAs in the DWPs view.  That’s £200 per dispute of about 7 hours work for one person at each LA.  7 hours to acknowledge a dispute, record that dispute, consider it (including asking the social landlord to confirm the property size in writing!) and come to a decision (which may well including taking internal legal advice on the 3 bed /4 issue above) and inform the claimant….in 7 hours!!

The two areas above the DWP maintain will combined cost £5m more to local councils in a year.  One legal case on each issue will cost the poor local authority who is taken to the High Court and beyond will alone cost how much?

What about the many Facebook groups that have already got 10,000 or more members and the DWP thinks just 20,000 will appeal!

What about the many concerned professionals with a knowledge of appealing and disputing HB decisions who will gladly in the spirit of the Big Society donate some days of their time in training those volunteers (the real Big Society eh Dave!) who are aiding those affected by this pernicious policy on how to challenge and what form such challenges take.

I wonder if such huge numbers of disputes and public awareness of them will see some of the £6.7bn per year that the DWP admits knowing is claimable but not claimed by tenants in HB will be claimed. Perhaps the same raising of awareness and the many online benefit calculators will also see some of the £8.4bn per year known to be due but also unclaimed in Working Tax Credit / Child Credit to be paid out by the coalition.  That’s £15bn per year unclaimed but known to be due and just needs the prompt of national ire that the bedroom tax creates to see that happen.

Hang on if just a miserly 3.65% (the same irrational percentage the DWP maintain will challenge) of the HB and WTC unclaimed but due is claimed and paid then that means the coalition will be paying out £551m more per annum in benefit against a £480m per year expected bedroom tax saving.

What about all the CABx and other welfare rights groups who will be inundated with appeals from tenants or the local authorities and other social landlords who have freely accessible online benefit calculators so individual tenants can see in 5 minutes what they are entitled to and should be receiving in welfare benefits.

If 10% of that unclaimed but due HB and WTC is realised then the bedroom tax will cost the coalition and the public purse £1bn per year more than it saves! And that is just two benefits of many!

Yes the bedroom tax will cost the public purse billions in added benefits and after all how can the coalition argue that this is unfair that claimants are simply claiming what the government knowingly withholds and they are due.  Oh I see that’s why the coalition is shying away from the shirkers and strivers issue as it knows and admits £8.4bn per year is due to all ‘strivers’ (those in work are the only ones eligible to claim WTC) yet the coalition knowingly and immorally and distinctly unfairly keeps money from these strivers and even breaches its own pithy spin strategy of saying we will always make work pay more!

Who would have thought the bedroom tax, the most despised tax since the poll tax, would end up costing so many billions more? Who would have thought that the coalition and IDS in particular couldn’t foresee this…er…on second thoughts…..!

The bedroom tax IS the straw that broke the camels back as it has spawned benefit calculators that are accurate and do finally work (the early ones ignored the overall benefit cap see here) and rather than attack and blame social housing tenants the bedroom tax has mobilised social tenants to say enough is enough.

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