Bedroom Tax part 8 – far bigger cuts to come with the benefit cap!

I have published 7 bedroom tax blogs in the last 10 days – the first one is here and includes links to the other 6 – all of which have been very widely read.  Much more widely read than any other posts and I have had TV and radio and other media producers and researchers and reporters directly contacting me over them as well as a huge number of tenants as well as the usual housing professionals and that is strange for two main reasons.

The first is that earlier published blogs such as the systemic flaw in the overall benefit cap, the reporting of the freeze in LHA in 2012/13 and the 0.59% increase in 2013/14 not the 2.2% figure the government claimed were firsts.  The same can be said that I first posited the idea that the shared accommodation rate will be applied to social housing as many now believe and the first to say the banning of HB to the under 25s was all hot air.

The second reason is the more interesting one.  I have always argued that the worst of the welfare reforms was the overall benefit cap (OBC) which will hit vulnerable families much harder than the bedroom tax. 171,000 families penalised with an average £93pw cut is much more at circa £830m per year is clearly higher than the £480m the government claim the bedroom tax will save from an average £14pw cut to 670,000 households.  Then factor in that the systemic flaw will see more and more families caught by the OBC each and every year and you see my reasoning.

I have also been consistently critical of social landlords for in my view overly and often solely focusing on the bedroom tax and ignoring the OBC.  Then add in my post this week that the bedroom tax will cost more than it claims to save – a net cost to the public purse – yet still create misery for hundreds of thousands of vulnerable families.

Yet that outrage pales into insignificance compared to the OBC and the misery that will create and because the cuts are on average almost 7 times the weekly bedroom tax amount they will undoubtedly lead to eviction and homelessness.  This is turn will create even more cost to the public purse and so greater levels of misery and still no welfare bill saving.

Today I have come across a document – a very important document that will be regarded as a seminal document – in the welfare reform agenda.  It is a 117 page report entitled “Benefit Limits and Housing Affordability for Private Tenants” by Gareth Morgan and I would advise every social housing tenant and every social housing landlord to read it.

Question 1: Hang on Joe, how can a lengthy document for housing affordability for PRIVATE tenants be essential reading for SOCIAL housing tenants and landlords?

Answer: Because a tenant household can see at a glance how much

(a) They are entitled to in welfare benefits;

(b) How much they are entitled to if they are a 1 parent or 2 parent household with anything from 0 to 6 children;

(c) How much this leaves them in ‘housing payment’ (the replacement for HB and LHA) from the overall benefit cap;

(d) How much of a cut the OBC will give them in every local authority (BMRA) in the UK

Because a social landlord will be able to see:

(e) What household composition (1 parent / 2 parent ‘x’ number of children) presents a higher risk of arrears due to these cuts

(f) That as ‘affordable (sic) rent’ is 80% of market rent how affordable rent directly creates huge risk to arrears and too risky; and finally

(g) Get that the OBC is a much bigger risk to social housing in arrears and to the prevailing social housing model than the bedroom tax.

Question 2: Joe you must be getting a cut of any future business from this? Don’t consultants get asked to ‘recommend’ things all the time?

Answer 2: No and Yes.  No I have no financial interest in this at all.  Yes, consultants do get asked to ‘endorse’ all sorts of stuff all the time but I never have got involved in that. And by the way the fact this is free and can be freely downloaded removes any monetary interest issue

This document is lengthy but that means it is comprehensive.  Further it is written and presented in an objective way and details facts (and not riddled with subjective comments and inevitable bias that every blogger has).  Moreover, it lists table upon tables of facts in a very accessible way so anyone can see at a glance their entitlements now and when Universal Credit comes online.  In other words in welfare and housing benefit terms all a social or private tenant and social or private landlord need to know.

A cursory glance will reveal all I have been saying for the last 12 months – that the OBC is far more financial punitive than the bedroom tax. The OBC holds far more and higher level financial dangers to social tenants and social landlords, that the OBC will cost more than it saves and yet again and like the bedroom tax is a futile and inept policy; and that social landlords have been wrong to ignore the OBC in favour of the bedroom tax.

The OBC is much worse than the bedroom tax and here’s why:


The overall benefit cap (OBC) caps overall benefit (welfare benefits such as JSA or dole) and housing benefits in one crude cap.

The way it works is:

  • Start with the £500pw overall cap figure
  • Then deduct the amount of welfare benefits – e.g. Couple with 3 children of £327.05pw
  • What is left is £172.95pw which becomes the maximum that will be paid for rent as HB or LHA is paid now

So if you are a couple with 3 children on benefit and you lived in a privately rented property in London with a rent of £340pw (all of which is currently met by LHA) you will this year only get £172.95pw towards that rent and have to make up the other £167.05 yourself.

So if you are a private tenant you WILL be evicted very promptly and you WILL become a homeless family.  There is no ‘if’ about this only a question of when

If you are a couple with 4 children you will get £392.76 per week in welfare benefits thus leaving a maximum HB of £107.24 pw towards your rent.  If you live in a Housing Association 3 bed property in London paying £150pw which you now get in full, you will soon have to pay £43.24pw yourself for your rent.

And you thought that the average £22 per week bedroom tax deduction in London was bad!

Note if you are a couple with 4 children living in a 4 bed HA property and you are also subject to the bedroom tax I have absolutely no idea if you then get a further 14% cut.  Though neither does the coalition as they have not said anything at all about this!  This of course goes to show how inept the impact assessment was on the overall benefit cap in the first place!

I return to the welfare benefit total of £327.05 per week – the rate for a couple with 3 children – which leaves £172.95 as the maximum that will be paid towards your rent,  The official government release on private rent levels is done by the Valuation Office (VOA) and their figures contains details of almost half a million private rent levels (excluding service charges) right across England.  They reveal the average 3 bed private rent level is £765 per calendar month (excluding service charges) which is £176.67 per week plus service charges.

So the couple with 3 children living in privately rented 3 bedroom accommodation as a national average will have to pay towards their rent from their dole or child credit, Heaven help them if a fourth child appears as the residual maximum of £107.24 will only be able to afford the average 3 bed private rental in just Barnsley and North East Lincolnshire – that is 2 areas out of 371 local authorities in England and not in the other 369!

In 369 out of 371 local authority areas a couple with 4 children can’t afford to rent privately and will run up arrears very quickly and also very quickly be evicted and become a ‘homeless family’ likely to be accommodated in temporary accommodation such as a B&B.

The same couple with 4 children will find the same happening right across London in social housing.

Yes reader you can just picture the private landlords in Stoke and Barnsley and Hull and Boston rubbing their hands with glee at the London councils exporting their homeless cases to these cheaper areas with the private landlord charging so much more than they get now from Stoke Council, and in turn evicting non-arrears cases to accommodate these much higher-paying new tenants!

Yes that’s right London’s homeless families will create a new homeless case in Stoke or Hull or whatever ‘low-cost’ area they are sent packing to by the London councils.

Let me put that in very plain and simple language for all the new readers, mostly tenants that have begun to read my bedroom tax posts.  Last year you may recall a right old rumpus when on the national news it was revealed that a council in London, (Newham to be exact but not the only ones doing this) was asking private landlords in Stoke to house their homeless families.  The proverbial hit the fan with the general public.  You can’t just ship families 130 miles away! What about new schools? What about their friends and families etc.  And all of course right. Yet two things.  One is happening still and to a greater extent and will increase.  The second is what many will not remember – the details of what Newham offered to private landlords in Stoke.

The offer was Newham would pay private landlords 90% of the housing benefit plus a further £60pw.  In Stoke for a 2 bed property this meant a private landlord would get £141pw per house rather than the £90pw – an increase of £51 per house per week or £2650 or so per 2 bed house more per year and a percentage increase of 57%.

If you were a private landlord would you want a 57% increase in your income?  Of course you would that’s a silly question.  If you were Newham Council would you want to pay £141pw per family or you would prefer to pay £500 – £1000 per week to a local private landlord?  Again a silly question: Yet that is what is still happening and will explode once the OBC comes online in the summer of this year.  Note it was supposed to be April 2013 but the government delayed the OBC and instead are running 4 pilot areas for it in London and say it will be national in the summer.

Yes you thought the bedroom tax was bad enough didn’t you!  The OBC is much worse isn’t it? There’s a small chance the bedroom tax will lead to eviction, with the OBC it’s a cast-iron certainty!

Ok new readers if you are still reading this firstly close your mouth which is agape with this horror story.  Secondly note that this gets worse every year and no I am not kidding but it is difficult to explain what is known as the systemic flaw in the OBC.

Try this.  We know that welfare benefits are only going to rise by 1% this year and the following two years and this is below inflation.  We can (almost) certainly assume that the £500pw cap figure will also rise by 1% in the next 3 years yet rents will rise by at least 3.1% this April and only last week Stevenage Council increased their rents by 5.1%.

The problem is that as rents rise faster than the cap and welfare benefits that the cap reduces in real terms.  A small table below explains and I have used the same examples as above a cap of £500pw (rising at 1% inflation) a couple with 3 children for the welfare benefit level (again rising by 1%)and the average 3 bed private rent level of £176.67 rising by 3%:


Cap figure

Welfare benefit

3 bed PRS rent

















As you can see from the shortfall column because rents rise faster than the cap and welfare benefits the amount the tenant has to pay – the shortfall – increases year on year.  Ah yes well £11 isn’t much you say? Perhaps but that’s for a couple with 3 children and hardly a large family.  The couple with 4 children can add £65.67 to each of these shortfalls – yes you’re right they will fall into arrears and be evicted and become homeless and yes sent to Stoke (not that there is anything wrong with Stoke of course!)

But let’s stay on the couple with 3 children and look what happens over a few years and below shows what a simple 3% rent level rise does when the cap and welfare benefit level remains at 1%


Cap figure

Welfare benefit

3 bed PRS rent

















  • The systemic flaw means that the shortfall, the amount tenants have to find themselves increases dramatically from £3.72 per week to £87.18 per week;
  • Or from 0.77% of the cap figure to 14.7% of the cap figure – a massive rise. 
  • Or the shortfall that the tenant has to pay towards rent is 1.14% of their welfare benefit this year but rises to 22.51% of their welfare benefit by 2030!!

Again this is worse with couples with 4 or more children and worse for couples in high rent areas with 3 children and even with 2 children!

Basically the benefit cap hits more families each and every year when rent increases rise faster than welfare benefits and/or the cap.  That is the systemic flaw in the OBC explained in simple terms.

Note well I have used 3% rent rises which mirrors the private rented average rent increase last year.  This year in social housing many rent increases will be much higher than this and as I mention above Stevenage has increased council rents by 5.1%.  3% overall is a very low figure for rent increases compared with the past decade or more and my figures above are on the conservative or low side for tenant shortfalls.

Still think the bedroom tax is the more severe welfare reform policy?  No didn’t think so!

Do you know about the above impacts of the benefit cap?  No! Why not?  Oh I see your social landlord has said something like our rents are only £100pw and we have so few tenant couples with 4 children on £392.76 per week welfare benefits.  Let me give you the figures for a couple with 4 children in a 3 bed London social rent of £150pw.

This year – Cap £500 less £392.76 welfare benefits so £107.24 as maximum HB towards the rent of £150.00 – Yes a tenant shortfall and a reduction in HB of £42.76.  Using the same 3% figures for rent rises (though social tenants should expect 5% rises and more) the amount this tenant family will have to pay each week by 2015/15 will be £54.50 per week.

  • By 2020 this increases further again and so a couple with 4 children cannot afford to live in social housing – the cheapest form of rented housing – in London.
  • 5 years later a couple with 3 children will not be able to afford council housing.
  • 5 years after that a couple with 3 children anywhere in the UK will not be able to afford council housing.

So where will they live!!!!  Sorry reader I have a knack of asking simple questions like that and what is a bedroom!  I must stop that mustn’t i?

You still think the bedroom tax is bad.  You know the one social landlord will take 5 or 7 years to downsize all under-occupying tenants and will no longer exist?

Hang on how can social landlords develop new properties NOW? Eh?

Social landlords develop new properties based on at least 30 years of rent and up to 60 years of rent.  Yet if in 30 years time the only household that can afford a council or housing association property is a couple with 1 child and then in 60 years the only household is a single person with no children – which is what the systemic flaw in the OBC means – then your local council or housing association would be bloody stupid to build 3 bed houses now wouldn’t they?  You know the same social landlords who have been saying the OBC doesn’t affect us!!

It also means that the few remaining private landlords that are willing to take families on benefits need their bumps read.  As soon as they realise the above they will drop housing benefit claimants like a hot potato.  So where will all the 1.65m private tenants now claiming housing benefit live? Apologies reader I’m asking simple questions again aren’t I?

What was that?  You thought the coalition hadn’t thought the bedroom tax through properly!  I see you are now realising that when the government simply said £500pw (net) for those on benefits was too much to pay that this pithy superficial spin sounded right?  Yes it did sound right didn’t it?  Yet that old saying comes to mind, you know the one, when something sounds too good to be true, it never is is it?

Is that why you were confused that this coalition said they would bring down the costs of welfare spending yet it is £14bn higher than when they took office and Cameron said this month it will rise further?  Yes that doesn’t make sense reader does it?

But don’t take my word for it.  Have a quick look at the excellent tables in Gareth Morgan’s excellent and seminal paper that state the precise figures.  Go back and read that welfare benefits will increase at 1% for the next 3 years…you know the ones the Tory-led Coalition told us were fair this month.  Get your rent level now and think how much did it go up by last year (probably 5.7% and possibly a further £2pw on top).  When the 3.6% (again possibly with a further £2 on top) is notified to you in the next month which it has to be for social tenants and your landlord has to rise by this maximum amount due to the higher risk of arrears the bedroom tax, the OBC and direct payments give to them – and then use a simple spreadsheet or even a calculator and a pen and paper.  The figures are correct and they reveal the coalition policy of the overall benefit cap and what a monumental pig’s ear it is!

Yet remember I’m just the messenger not the architect of this farce.  That belongs to Iain Duncan Smith the DWP Minister, yes him the one that Cameron tried to move (ie get rid of) in the last reshuffle but refused to go.  You know the one even the most ardent Tories admit was the worst party leader (of all parties) in the post-war period.

If you are a tenant ask the government and they will say we will not allow London councils to export their homeless cases.  Yet they are doing it will increase this activity and have no alternative but to do this.

If you work in housing there is only one way and one way only that the systemic flaw can be eradicated.  That you will be pleased to read is to peg social and private rent levels to 1% per year along with the cap and welfare benefits. (Cue screams of horror from every social landlord!)

That, short of the coalition abandoning the overall benefit cap, is the only way to prevent the homeless diaspora, the only way to prevent private landlords from pulling out of the benefit claimant market altogether; the only way to prevent social landlords out of financial necessity and survival refusing to house a family with more than 3 children, the only way to have any logical rationale to build ANY new properties..I could go on.

Oh sorry I forgot, social landlords will always house the most vulnerable – Yes they want to do that I fully agree but that phrase will become as clichéd and dated as our rents are only £90 per week the benefit cap won’t affect us!

4 thoughts on “Bedroom Tax part 8 – far bigger cuts to come with the benefit cap!

  1. Joe,

    What’s missing from the analysis is a consideration of the number of tenancies involved. According to the impact assessments 660,000 social tenancies will be affected by the bedroom tax whereas 46% of 56,000 or 25,760 social tenancies will be hit by the OBC.

    So for your average social landlord, for every tenant they have affected by the OBC they have around 25 affected by the bedroom tax!

    In money terms, again according to the impact assessments the average benefit cut for the bedroom tax will be £14 per week. For the OBC it is £93 per week but this includes private tenants, the average for social tenants is probably a lot less because the rents are lower, but even using the £93 overestimate this means that for an average social landlord, for every £93 potential arrears from OBC there is potentially 25*14 = £350 per week from the bedroom tax.

    You are right to say that as time goes by what you have called the systemic flaw will increase the impact of the OBC (although I’m not sure I agree with your decription of it as a flaw – that implies some kind of error or oversight whereas I think the government knows full well that it will draw more people in!!) It is also true that for any individual case the impact of being hit by the OBC will in most cases be a lot harder than for an individual hit by the bedroom tax but for the vast majority of social landlords the bedroom tax is the bigger issue at present simply because of the numbers involved.

    1. Eddie – read the bit where I say its 171,000 affected by the benefit cap. The link is here – – which shows the DWP is misleading and MPs are misleading when they say it is 56,000 affected.
      The figures in a FOI request from DWP to Full Fact this contains confirm it is 172k or so and that is based on 2010 figures. As claimant numbers have gone up 6.3% since then it adds a further 10 – 11,000 to this figure. As rents have risen higher than welfare benefit levels it also means average £93pw figure is too low too

  2. Joe

    I followed that link to your post about the FullFact FoI request and there is a major problem with the analysis.

    If you look at the right hand column of the table of figures it is the average number of people in the household not just the children. The vast majority of cases are three person households, there must be at least one adult, and there could be two so these will mainly be families with one or two children but you’ve treated them all as households with three children. Presumably the amount of welfare benefits that those families will get will be lower leaving more headroom for Housing Benefit.

    I wouldn’t be at all surprised if the government was under-estimating the figures but I’m afraid that analysis doesn’t prove it.

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