Bedroom Tax and reclassification of properties – a way to avoid this pernicious tax?

Today I read that Knowsley Housing Trust (KHT) are reclassifiying properties and the article is here and it makes really interesting reading: –

Knowsley Housing Trust is reclassifying 566 properties as smaller homes, in a move which will help tenants affected by the bedroom tax. The 14,000-home association is re-designating some of its two and three-bedroom homes as one and two-bedrooms respectively, which will cost it £250,000 in rental income per year.

What interests me?

Silly question its the numbers.

Crunch the numbers and we see £250k per year is the differential between 1 bedroom for 566 properties.  This means the difference between a 2 bed and a 3 bed (or a 3 bed and a 4 bed etc) is on average £8.47 per week in KHT properties.

[£8.47 x 566 x 52 = £250,000 if you want to follow the figures]

Let’s say a 2 bed is £75.00 per week then this means a 3 bed is £83.47 per week and this will not be too far away from real costs in Knowsley

(a) A 14% deduction for bedroom tax purposes on a 3 bed property at £83.47 per week would be £11.69 and more of a risk to KHT than the £8.47 above.

(b) The KHT landlord risk has reduced by 28% as the £8.47 per week hit they are taking is less than the potential arrears from the £11.69 bedroom tax hit to tenants. In money terms it is a reduction in potential arrears of £3.22 per week (£11.69 minus £8.47).

Now imagine if rent was £10 pw higher at £85 for a 2 bed and £93.47 for a 3 bed.

(a) The 14% deduction for bedroom tax would be £13.09 per week – and even more of a risk to arrears than the actual £8.47 reduction and hit that KHT is facing.

(b) KHT the landlord has reduced its potential risk by 35% and in money terms by £4.62 per week

In summary as rents increase the landlord saves more and reduces its exposure to the risk of arrears the bedroom tax directly gives.

However, why should landlords take the hit?  The above will be welcomed by KHT tenants and very warmly as it takes them out of the bedroom tax and so the landlord will be rightly applauded by its tenants.  Yet I am minded of a post I put out a few weeks ago entitled the Bedroom Tax doesn’t measure up and how to get around it.

Briefly I was looking at what is a bedroom and a minimum size for a bedroom or perhaps more correctly a FULL bedroom which is 70 square feet (think 10ft x 7ft) and I posited should a social landlord describe a room that was 63 square feet – think 9ft x 7ft) as 0.9 of a bedroom.  So what is now called a 3 bed property would accurately be described as a 2.9 bed property.

The reasoning was the bedroom tax only applies when you under-occupy by ONE bedroom or more and so if you are deemed to under-occupy by 0.9 bedrooms then 0.9 is less than 1 and so the bedroom tax couldn’t be applied.

QUESTION FOR HOUSING PROFESSIONALS HOUSING LAWYERS – Is there anything in regulation to prevent this as I don’t think there is.  Significantly social landlords would be ‘accurately’ describing their properties which is what the HB guidance says they should do.

Now go back to KHT case of today and they have a differential between a 2 bed and a 3 bed of £8.47 per week and are reclassifying 566 3 beds as 2 beds and taking a £250k per year hit.  If they reclassified them ‘accurately’ as 2.9 beds then they should charge for 2.9 beds which would mean instead of losing £8.47 per property per week they would lose 84.7 pence per property per week!

Of course this only applies if the smallest ‘bedroom’ is less than 70 square feet – Yet so many of the smaller ‘bedrooms’ in social housing are roughly 9 x 7 and in accurate reality 0.9 of a bedroom.

Further if KHT are prepared to take a £250k hit on 566 properties then the 2.9 bedroom argument above would mean they could take the same £250kpa hit on 5660 properties – ten times the number!

Imagine how happy 10 times the number of tenants would be as they all avoid the bedroom tax.

Note in the above 2.9 bed post I refer to here I could and still can see thousands of legal challenges to the bedroom tax on this basis and tenants should get their smallest ‘bedroom’ measured to see if it is less than 70 square feet.  I still suggest that happens.

However, rather than having to issue a formal challenge to a bedroom tax HB decision, simply inform your landlord of the size and ask your landlord to vary your tenancy agreement so that is says 2.9 bedrooms rather than 3 bedrooms.  This way you don’t get hit with the bedroom tax and your landlord doesn’t get hit with arrears – everybody except the pernicious coalition wins on this and a huge element of the claimed bedroom tax savings goes away.

You as a tenant won’t have to downsize, not that such an option ever existed. You can still have your children or grandchildren stay over as they do now. You can keep the family home you have create that this pernicious government want you to leave.

Next time you see IDS on the telly the initial snarl on your face will quickly become a smug grin and you will look and feel younger wont you?

Whatever happens KHT are to be warmly applauded for this initiative and the housing sector just like Lord Freud DIDNT expect many landlords to reclassify down.  Time to turn that trickle into a torrent do you think?

The other major advantage I see of the 2.9 issue and especially rather than simply reducing it to 2.0 as KHT has done here is the risk it would have to financial covenants for landlords.  Downgrading 3 beds to 2 beds wipes a huge chunk off the asset value and reduces the ability of social landlords to borrow to fund new developments.  So reducing them to 2.9 bedrooms also reduces that risk by 90% too and reduces the overall bedroom tax risk considerably.

Social landlord and social tenant can get on with their lives and work..until the really big issue such as the overall benefit cap and direct payments come in later this year and both are worse than the bedroom tax. Still approaching those fight with a trace of a smug grin from winning over the bedroom tax uts the fire back into the belly to win those fights doesn’t it?

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One thought on “Bedroom Tax and reclassification of properties – a way to avoid this pernicious tax?

  1. thanks for this information I’ve got 2 autistic boys one is nearly 15 the other is nearly 3 and as I’m living in a 3 bed house we are being hit with this tax but after measuring the box bedroom which is only 58 square feet floor space I will be getting in touch with East Durham Homes tomorrow to try and get the room reclassified,I’m not sure legaly where I stand on this, are they legaly bound to reclassify my home on these grounds ?

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