Bedroom Tax for Dummies

Welcome to my Bedroom Tax part 9 in which I attempt to inform the reader in simple terms just what the hell the Bedroom Tax is! Or at least make a start on h.

Facts – Always a good place to start!

Even more so in this case as there is so much false information and made up lies about the Bedroom Tax which too many believe.  Whether it is the Sun (online version) which on Monday this week said it applied to private tenants or the Daily Mail (online version) on Tuesday which copied this article including all the errors; or whether that is  the coalition spin which is that council and housing association tenants – the social tenant – live the life of Reilly.  They have spare bedrooms which the state should no longer pay for.  Additionally, if the government makes the feckless social tenant move to a smaller property by reducing their Housing Benefit, the government save money is what the general public have been told.

Doesnt that sound sensible and right?  Yes it does but it’s a crock of horses**t.  The Bedroom Tax will cost MORE in Housing Benefit if tenants downsize.

(a) Who does the Bedroom Tax affect

Facts:

  1. The government estimate the Bedroom Tax will affect 670,000 social tenant households with an average £14pw cut in Housing Benefit.  Government claim (wrongly see below) this will save £480m per year
  2. The average household is 2.4 people so thats 1.6 million adults and children
  3. Pensioners (in receipt of pension and or pension credit) are not affected and the Bedroom Tax does not aply to them as they have been exempted. (SEE UPDATE IN BOLD TYPE ON THIS BELOW AT END OF POST)
  4. Therefore the Bedroom Tax only affects social tenant households of working-age who get Housing Benefit.
  5. The governments own official data on who gets Housing Benefit reveals 3.4m social tenant households get HB yet about 1.6m – 1.8m of those are pensioners and exempt.
  6. Hence the Bedroom Tax can apply to between 1.6 and 1.8m working age tenants
  7. 670,000 social tenants will have their HB cut means it affects between 37% and 42% of all social tenants claiming housing benefit.

In summary at least one in three social tenants who receive Housing Benefit (in full or part HB and working or not working) will be affected by the Bedroom Tax.  It could be as high as 2 in every 5.

Yesterday, Channel 4 News ran a piece on the Bedroom Tax and made a false statement (inadvertently).  They said 660,000 affected out of 3.6m means 20% or 1 in 5.  As I have explained above its 1 in 3 or even 2 in 5 – something that public interest lawyers may want to note for the inevitable legal challenge to the Bedroom Tax.

(b) Why the Bedroom Tax will cost more in Housing Benefit

Last year the National Housing Federation (NHF) which is the lobbying umbrella group for housing associations released some data which nobody on any side of the argument disputes.

Of the 670,000 affected 180,000 are single people living in 2 bed social housing properties and last year only 68,000 1 bed social housing properties were let.

What does that mean?  If all 180,000 wanted to downsize to a 1 bed property, which is what the government say is fair, then 68,000 could move to a 1 bed social property but the other 112,000 would have to move to a 1 bed private property.

Some numbers.  A 1 bed social housing property is about £10pw cheaper than a 2 bed social housing property.  So the Housing Benefit saving is £10pw for 68,000 properties or £680,000 saving per week. This is a saving of £35.5m per year!

However, a 1 bed private property is about £35pw more expensive than a 2 bed social property.  This means the Housing Benefit bill increases by £35pw for 112,000 claimants.  An increase of £3.92m per week. This is an increase of £204.5m per year.

So just for single persons in 2 bed social properties to downsize would increase the Housing Benefit bill by £169 million per year.

That is why the Housing Benefit Bill will INCREASE if social tenants moved to smaller properties.

Note that the DWP, the government department responsible, estimate that 81% of those affected by the bedroom tax ‘under-occupy’ by just one bedroom.  This is about 543,000.  Take away the 180,000 single people who occupy 2 bed properties and this means the other 363,000 are either living in a 3 bed property when they need a 2 or in a 4 bed when they need a 3 bed etc.

Just as in the example I give above moving from a 3 bed social property to a 2 bed reduces HB by about £10pw yet a 2 bed private property costs about £35pw more than a social 2 bed so the HB bill would also rise there.  The same logic applies to the 124,000 underoccupying by 2 bedrooms – a 1 bed private flat costs more in Housing Benefit than a 3 bed council one, a 2 bed private flat more than a 4 bed council one.  In fact a 1 bed private flat in London gets £250pw in Housing Benefit and I doubt any sized social property has a rent of £250pw

In summary, the £169m per year increased Housing Benefit cost is a major underestimate of how much MORE the bedroom tax will cost the public purse.

It also means the government’s argument that this will save money is false, or more correctly they have lied!

Notes:

Channel 4 News piece Wednesday was mostly very good and alerted many to the bedroom tax farce. It also said there are 600,000 looking for 1 bed properties yet there are only 300,000 1 bed social housing properties in total.  I don’t know where C4 got that 300,000 1 bed properties from, though it sounds realistic.  It also means those with 1 bed properties are not going to give them up doesn’t it, which must means more and more that do downsize will have to downsize to private 1 bed properties which must mean HB bill will increase and not decrease.

That would mean 300,000 reductions of £10 per week and 300,000 increases of £35 per week meaning an increase of £7.5m per week a trifling £391m per year increase not a £480m per year saving!

Same C4 News programme had an interview with Steve Webb, a junior minister at DWP.  He was asked about bedroom tax (remember £480m pa cut to tenants) and he avoided answering all questions and only responded with we have put £30m into discretionary housing payments (DHP) for this.

So:

(a) Government has put in £30m to help tenants with a £480m loss hence 1 in 16 at most will get help

(b) The national lottery says a punter has a 1 in 14 chance of winning – which shows just what a lottery DHPs will be and outs that into context.

(c) The £30m DHP budget is there also for private tenants who have a shortfall in their benefit received and their rents – very common in the private rented sector.  Last year housing benefit rate to tenants was frozen altogether while private rents went up by more than 3% so many more private tenants will want a share of this £30m pot.  This year housing benefit to private tenants is increasing by 0.59% and private rents will likely rise again by 3% meaning more and more private tenants will want some of that £30m pot.

In summary, even at best the DHP pot will help 1 in 16 of those affected by the bedroom tax and if that happens 15 out of 16, or 94% of those with a bedroom tax cut wont get any DHP money!

Sorry I said simple language didn’t I – The government have lied again.

Tomorrow I will tell you in the next instalment of Bedroom Tax for Dummies why you could be evicted with a criminal record if you do as the government says and take in a lodger.

UPDATE late Friday 1st February

I promised to publish Bedroom Tax for Dummies 2  – the lodger issue today and havent.  This is because it is a minefield even for me to understand and then explain in anyway let alone a simple one.

For example what is known is that a lodger or boarder does NOT count as part of your household for bedroom tax purposes.  So if you take one (or more) in you will still get the bedroom tax cut.

That’s the easy bit. However in looking into this the lodger is not classed as a non-dependant deduction for Housing Benefit purposes (which would mean you could lose £65 per month or more from your Housing Benefit on top of your bedroom tax cut) but is classed as a non-dependent deduction for Council Tax Benefit purposes so you will lose money there and will have to pay CTB.  Or at least I assume that will be the case with Council Tax Support which is replacing Council Tax Benefit yet I can’t find anywhere where it says this will continue under the new Council Tax Support, which in any case is for each local council to devise and not for central government.  So the answer is nobody knows! Still following this?

Then if you are allowed to keep the first £20 of any income from a lodger what is the impact on the rst of the wekly rent you charge.  Again very difficult to find and despite the “Rent-A-Room” guidance on the government website this doesnt say anything at all about how this will be treated under Universal Credit – Oh dear not another thing the government have overlooked…Yes!

Then you are allowed to earn under £4250 per year in renting out part of your home, or £81.45 per week but if you go over this you will have to complete a Tax Assessment form at the ned of the year.

Then what happens if the lodger leaves and hasnt paid rent?  You have told HB and CTB so you are getting paid on that basis so how long will it take for that change in circumtances to correct your payments?  You really do not want to know.

What about did you know there are legal regulations about how you charge your lodger for his or her share of any electricity or gas?  No neither did I.  I also presume, though again hard to find, that as a landlord for a lodger you need electrical safety, gas safety and other certificates and of course have the correct form of tnancy for them – excluded occupier or not?

Then if you are renting out a room which is below the minimum bedroom size, which the 1935 Act covers yet Government don’t want you to know about, you could well be committing a criminal offence, which, though unlikely but not impossible, could mean your landlord could evict you for the comitting of his criminal offence.

What a lot of hassle eh? Far easier to think about it as I did on twitter by a pithy Limerick

There was a a tenant called Rodger

Who was forced to take in a lodger

In a room six by six

for his bedroom tax fix

Which I deliberately left the last line for others to complete and which was firstly done by an eminent barrister who said:

was scared that his daughter would be raped by the old codger

Quite rightly there as no way to compete with that, despite not tripping off the tongue with the same scansion of spondees and dactyls (never mind but yes I did Latin at school….long story!) and in summary the government idea to take in a lodger (who would you think need a CRB check though that may infringe his human rights – also from eminent barrister) is one of those ideas that comes out of your mouth before you put your brain into gear and you regret saying instantly.  It is a bloody stupid idea in other words.

The very few that do take it up, which will be out of ignorance of some if not all of the above issues, will if the lodger claims Housing Benefit, or more correctly LHA as your dear tenant will become a private landlord, increase the overall Housing Benefit bill and the taxpayer pays out more

UPDATE

it has now become evident that 90,000 pensioners WILL be affected by the bedroom tax from October 2013 but not before. See my post here which explains this very sneaky change the government dont want to be publicized!

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7 thoughts on “Bedroom Tax for Dummies

  1. I noticed an interesting development here in Liverpool. The choiced based letting scheme is being amended to take into account legislative changes for Armed Forces Personnel and the Localism Act. They are consulting on other changes to be included, among these is:-

    *The requirement for a bedroom to be not less than 10 square metres
    for it to be classed as suitable for two persons to share.

    Discuss……

  2. I think you may want to revise a few figures (not to say that the changes won’t increase costs but the more accurate the figures the more credible).

    Firstly, you calculation does not allow for the fact that for every two bed “over accommodated” person who mores to one bed (social or private) there will be another two bed free for an over accommodated three bedder to move into (reducing the number in the PRS). This would simply reduce the PRS bill a bit. The same logic would apply to other larger properties.

    Secondly, if people are “moving down” then presumably there will be more spare accommodation in the social sector at the large house range, meaning that councils that are currently paying PRS LHA for a large house will not need to as they can have one of the freed up social houses. a small number of these may even be in more expensive temporary accommodation.

    I have no figures about the effects but clearly this will at least reduce the increase in costs you state?

  3. i have 2 jobs , one as a carer and one working in a school and i still need help with my rent i have 3 boys , one of 19 and two boys aged 7 and 8 , once my oldest leaves home , i will get charged for this 3rd room , making us even worse of than we already are .Who is going to help pay for downsizing , furnishings , removals to smaller properties ?, i seem to always be on this border line that means i get basic help and can’t seem to better myself without being penalised. My youngest two may also end up having to change schools if i cant get a property near where we are now , this new ruling is ridiculous , no one is going to look after their council/housing association homes if their going to have to keep downsizing .i love my home and have spent all have doing it up ,yet i’m going to be forced out of it !

  4. Just because the private rent in an area is £35 per week more expensive does not necessarily mean that the housing benefit given out will be £35 more. The new private rent will have to lie within the LHA cap, ie the lower 30% of market rents for that area.

    I am very dubious as to whether this policy will save money, ironically for the very argument you are making here. However the sums you are using to justify are incorrect.
    In some areas the average rent for a 1 bed will be more than the social rent for a 2 bed, will indeed lie within the LHA cap and will be paid. In others it will be more but may be higher than the LHA cap and will not be paid in full. In yet others a saving will be made.

    I would be extremely interested to know the exact figures but your simplified example of an average rent of £35 more scaling up to £169 million per year simply does not hold as it does not take into account the LHA cap.

    I do not however contest your reasoning. I remain convinced that moving into private rental does come at a high cost and that the cost is more than the savings.

    1. Lets work through an example using figures from London and from the provinces using Liverpool as an example of a low cost area

      London – 2 bed social flat £130 per week of which £130pw HB is paid. Move to 1 bed private flat £300 pw of which £250 is paid in LHA – a rise of £145pw in public purse cost Liverpool – 2 bed social flat £77pw of which all paid in HB – A 1 bed private flat £425pcm or £92.38 pw rent of which LHA pay £92,31 per week – a rise of £15pw or so in benefit cost

      So if social tenants do move into private rented to downsize there is a significant increased ongoing cost to the HB bill as even in the lowest housing cost areas such as Liverpool (and you can even use Stoke or Hull or Boston in Lincs as the lowest cost areas the same issue applies – that a 1 bed private property gets more in benefit than a 2 bed social property does.

      The same differential applies as a 2 bed private property attracts more in benefit than a 3 bed social property so it is not just an increase from a 2 to 1 bed downsize. And remember 83% of all affected by bedroom tax is by one bedroom

      Lets look at downsizing from a 3 bed social property to a 1 bed private (the other 17%)

      London 3 bed social flat lets say £160pw (and most below this) and that moves to a £250pw benefit payment so significantly more Liverpool 3 bed social properties are available for less then the £92.31 per week it pays out in LHA for a 1 bed

      So even when it is a downsize by 2 bedrooms the public purse pays out more in overall housing benefit, although only slightly more in low rent areas up to huge amounts more in London still. There will be an odd exception I am sure, but in the overwhelming majority of cases and by that I mean 95%+ of cases downsizing means an increase to the HB bill

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