Bedroom Tax – a VERY interesting development!

I read something very interesting yesterday  – a comment on Facebook by a tenant which I followed up and have seen the documentary evidence to support.

In a nutshell the events are:

1. A tenant gets a letter from the landlord saying in arrears with the bedroom tax.
2. The tenant writes to landlord saying a bedroom tax appeal has gone in.
3. The landlords income officer writes back and says okay and says pay £3.60 per week while you are appealing!

If that becomes common practice and is not just a one-off example then the social landlord is in big financial trouble! Yes the tenant will get into arrears too and get into trouble and I discuss this below, however, the financial mess the landlord will get into deserves much closer consideration.

Firstly, issues spread like wildfire across social media and especially Facebook and tenants will believe this is correct as they will want to believe it.  It cuts the average bedroom tax shortfall payment of £14 per week down to £3.60 per week and that explains why the bedroom tax tenant will want to believe it and especially so if they have a 25% deduction obviously.

Secondly, there is some underlying credence to this as prior to the bedroom tax being applied a judge would invariably suspend a possession order based on two conditions – (a) the payment of full rent and, (b) £3.60 per week off the arrears.  That traditional view has also implied that the judiciary believe paying £3.60 per week off rent arrears from welfare benefits is both realistic and a maximum amount.

Thirdly, and linked, the tenant may want to or may choose to ignore the first condition of suspending a possession case which is the payment of full rent.  They should not do this of course but I suspect they may.

Fourthly, there is a sense of ‘can’t pay won’t pay‘ right across social tenants and this has become a bit of a mantra. Whether this position is right or wrong is not the issue, the issue is its perception of right amongst tenants.

Fifthly, first impressions count as the old adage goes and so doubtless many tenants will believe they can ‘get away’ with paying just £3.60 per week and when the inevitable response from the social landlord is this is not the case, then the social landlord appears even more ‘complicit’ in the bedroom tax debacle.  The social landlord cannot win either way.

Sixth, I had a national editor on the phone to me two weeks ago saying they have polled Local Authorities up and down the country asking their views on how many tenants would NOT pay the bedroom tax shortfall.  While this can only be a view or a best guess the answer was about 20% – 25% of those with 1 spare bedroom would not pay anything and on average 50% of those with 2+ spare bedrooms would pay nothing.  That in money terms translated to about a £140m non-payment and a £140m hit to social landlords.

When you then add to this the errant perception that tenants will have that it is ok to simply pay £3.60 per week that £140m figure increases significantly and if all tenants did this it takes the hit of social landlords to £360m or so!

Then evictions will happen more and a lot sooner.  Yet this increases the landlord hit again because the average cost of an eviction is about £8,000 to the landlord in costs, arrears and rent loss etc according to figures from Shelter and it could be as high as £24k per eviction as I discussed here.

For every 1% of bedroom tax tenants evicted this is a further £53m pa cost to the social landlord!

The social landlords have yet another huge issue to counter and past performance suggests they will struggle massively with this one!