Bedroom Tax – The NHF significantly underestimate the bedroom tax on Merseyside

Has the NHF and social landlords in Merseyside underestimated the bedroom tax financial risk by 11%?

I argue here that they have and this is very disturbing.

Today the National Housing Federation (NHF) has released a new report today on the bedroom tax in Merseyside which includes details from 18 housing associations in the area.

There is some significant and new detail in this report yet most significant of all and NOT picked up by the authors is the split of bedroom tax tenants.  This is why the financial risk of debt and arrears to landlord and tenant will be at least 11% higher and that means in figures the risk is £2.4m or so higher – a very significant sum.

The DWP say that 540,000 or 81% of the 660,000 households under occupy by one bedroom and the other 120,000 or 19% under occupy by 2 or more bedrooms.  This gives an 81%:19% split.  Yet across Merseyside the split of the 26,446 in this report is 65% by 1 bedroom (17,279 households) and a whopping 35% (9,167) by 2 bedrooms and that leads to much higher debt and arrears and financial risk to landlord and tenant.

That 65%:35% bedroom tax split is hugely significant

In figures and if Merseyside followed the national average of 81:19 this would see 21,421 under occupy by 1 bedroom with an average £14 per week loss and 5,025 by 2 bedrooms with a £25 per week loss.  This would be a £22.2m financial risk.  Yet because Merseyside has a much higher percentage of properties hit by the 25% bedroom tax deduction the actual financial risk is £24.6m and 11% higher than the national average figures.

This additional 11% risk is on top of the North West having 43% of working age tenants hit by the bedroom tax which is almost double the 22% figure for London.  It is also known that Merseyside has a higher than North West average figure and within it we also know that Knowsley one of Merseyside’s 5 councils has an ever higher still percentage affected and drilling down further that areas such as Norris Green an ex council estate in Liverpool alone has at least 1007 households affected and that 80% of the housing stock there is 3 bedroomed properties and the council had a policy of filling these for years with those who had a 2 bed housing need or even a 1 bed housing need.

While it is likely that Cobalt Housing the primary landlord in Norris Green will have more accurate figures for the area another aspect the NHF report fails to mention is the tenant abandonment issue due to the bedroom tax that an area like Norris Green is experiencing.  I have it on good authority from a number of sources that Cobalt’s budget for tinning up abandoned properties has gone and plastic sheeting is being used instead and all due to tenants simply abandoning properties there because of the 25% bedroom tax deduction.  I am sure there will be other pockets of social housing across Merseyside suffering the same fate, just as there will be in other areas of the North West and Yorkshire and Wales – the 3 highest areas of bedroom tax affected households according to DWP figures.

This is where I take issue with the NHF report again.  It doesn’t mention this abandonment problem which will add to the financial risk of the bedroom tax to landlords and to tenants.  Of course the social landlords will not give figures for this for many reasons and especially as if figures were released then the abandonment figure would likely increase.  However abandonments cause higher than anticipated losses for social landlords and in one sense the NHF report understates the financial risk by not raising this bedroom tax caused issue (which will get even worse when the benefit cap hits from a week on Monday, the 15th of July in Liverpool)

However the real issue with the NHF report is the bedroom tax split of 65%:35% which it fails to mention and the 11% increase in financial risk is a huge matter that it should have picked up.

As anyone who has read any of my blogs I like numbers and yet this report is the first time the bedroom tax split of 65:35% in Merseyside has been mentioned.  It is an incredibly significant statistic with very significant consequences; it is THE most significant statistic in the report yet it is not commented upon at all!

Many other statistics in the report are similar to other regions such as those which outline the extreme scarcity of 1 bedroomed properties or the tiny percentage of those that have been able to downsize (0.6% of those affected) and the fact that in Halton (curiously not part of Merseyside yet in the report!) the private sector alternative to downsize would cost £1500 per year per property more to the HB bill.

Another major issue I have with this NHF report is that it only considers landlord and tenant and does not mention the other key actor in the bedroom tax, the councils.  You cannot issue a report on financial risk the bedroom tax directly creates and omit such a key actor as the councils.

The 65%:35% split has other significant consequences for the bedroom tax financial risk to landlord and tenant  and of the 5 Merseyside councils I focus on Liverpool City Council to explain one key issue, that of Discretionary Housing Payments (DHP).

LCC announced on 17 May 2013 that they had given out over £400,000 in DHPs with the majority going to bedroom tax cases and that has to mean over £200,000 has been given out for bedroom tax cases.  LCC has been ‘allocated’ when the figures are extrapolated just £270,000 or so for bedroom tax DHPs for the whole year and has spent 75% or so of this yearly amount in the first 5 weeks!!

And if Liverpool has a similar 65:35% split then bedroom tax DHPs will likely be higher than for other areas who have the 81:19% national average split – in simple terms the DHP budget that LCC has been given is even more insufficient than other areas and will not stretch as much as in other areas.  This of course means that the landlord arrears risk and tenant debt risk will be even higher still.

If, as I suspect, Liverpool spend a higher percentage than ‘allocated’ of their DHP budget on bedroom tax cases, then it also leaves less for Liverpool to spend on benefit cap cases or on private tenants, both of which have higher DHP ‘allocations’ than the bedroom tax.  Given that both of these areas will lead to more evictions and thus homeless costs on Liverpool City Council than bedroom tax cases as the benefit cap has an average £93 per week deduction and private landlords will evict tenants more quickly than a social landlord for arrears, then the Council is going to run into major cost difficulties with this.  So next financial year it is likely Liverpool City Council will reduce the percentage of its DHP allocation it gets on bedroom tax cases to reduce its own financial risk which of course means that landlords and tenants will carry a higher financial risk.

That has to happen this financial year too as LCC like all councils will run out of DHP money and will have to not renew the DHP payments it has made for three months or six months as it won’t have the resources to do that.  This means of course that arrears risks increase for landlord and tenant yet this bloody obvious element is not mentioned in the NHF report either! 

I could go on with more reasons why this NHF report significantly underestimates the financial risk the bedroom tax directly creates for Merseyside social landlords and social tenants.

The danger is that social landlords will believe the hype and nonsense that the NHF state in this report.  The hype is the report says that for social tenants:-

“Housing Associations are doing all they can to lessen the blow”

….which one would expect them to say yet is not the case. The real nonsense is when it says that reclassification “…is not a long-term viable solution.

Yet that is precisely what it is – a viable and long-term solution and also the quickest solution too.  I explained this last year and updated it again and Professor Steve Wilcox said the same thing.  I also said that reclassification does not automatically mean a reduction in income which the NHF believe and which Lord Freud issued a threatening warning over which I said was nonsense and a hollow threat.

Yesterday Leeds City Council told Lord Freud exactly the same thing in an article in Inside Housing and very significantly stated they had taken full legal advice on the issue of reclassification and if Freud wished to enact his (ignorant and errant) threat to reduce HB subsidy they would gladly take him to court over the issue. The article says: –

Leeds Council has reclassified 837 homes as having one fewer bedroom each, but is refusing to reduce the rent. Peter Gruen, deputy leader of Leeds Council, said: ‘We have taken all the legal advice we have and what we are doing is perfectly legitimate.’  He said the council would legally challenge any decision to cut the council’s housing benefit subsidy.

Reclassification and full reclassification of all properties is the most economic way forward for social landlords and social tenants and for councils too.  The NHF are in danger of following the hugely inept CIH view which is a sycophantic forelock tugging to anything Lord Freud says, by advising their members of the same.  It’s about time the NHF looked at reclassification as the way forward and began to advocate the economic sense it makes for the social landlord else it will soon become the irrelevance the CIH has rapidly become.

I have outlined some issues above all of which will see the bedroom tax get worse unless social landlords finally get their fingers out of their respective backsides and stop whingeing about the bedroom tax and do something about the solution.  That solution is a full reclassification of all properties and is the ONLY way social landlords can challenge this pernicious bedroom tax.

8 thoughts on “Bedroom Tax – The NHF significantly underestimate the bedroom tax on Merseyside

  1. In my local area rent areas have gone up by nearly 1,000%. From an average of £2,000 per months to £20,000 per month. Added to that the new rules to come in force later this year in which tenants are being told that they must sign a new 2yr to 5yr contract and this means that the ‘house for life’ will no longer exist.

    Reviews every few years to see if you still qualify to live in your house? This will mean no-one will spend money on their homes to improve them at all if there is the ever present danger of being told to move out because you are over-occupying.

    Who can win in this situation?

  2. Well it seems that housing associations are damned if they do and damned if they don’t! They certainly do not underestimate the effects of the Bedroom Tax. Let’s be clear, that this latest publicising of the BT is a joint initiative of HA’s working on Merseyside to start to throw light onto the effects of the BT on their tenants. Those consequences are important to bring to the attention of those who set the rules. It is not the last nor is it the only thing that they are doing to combat this cruel imposition.

    Yes it is the case that the North West has a lot of 3 bedroom property. This has been pointed out to Lord (let them eat cake) Freud who is not interested even if he understands (his answer apparently is for families to share houses – like students do in London). The underoccupation issue is particularly acute in money terms accordingly. The NHF publication,”The Bedroom Tax in Merseyside – 100 days on”. points out the cost of having void properties as a further consequence.

    You cannot simply go on and on about all that is wrong, illogical and unfair about BT; it would take all day so you have to target information in the most effective way and that is what their report does. It is right and proper that it focuses on the effect on people first and the financial affairs of HA’s second. As I said once before, it does not serve our tenants for us to go broke but I suggest that surprise, surprise, the Government aren’t likely to care, after all didn’t Esther McVey virtually accuse us of building the wrong sort property over the whole of the last 60 years?

    As for DHP, it is becoming very obvious that the sums being given to Councils by Government as (as pointed out by the NHF) inadequate and that the implication of this is short term decisions and full allocation of budgets before the year end. This problem is alluded to in the report also but since the Government response is going to be something like, “we’ve heard all this scarmongering stuff before – and it didn’t come true then…”) there is little value in going into to detail at this stage. This is better done when it turns out to be true. Anyway this is something that Council’s (or the LGA) should be campaigning about shouldn’t it?

    Yes it will be interesting to see what happens over Leeds Council and Lord F. Good luck to them as it will be a very important legal precedent, but it has a variety of complications for HA’s in doing something similar even if they were minded to. These have be well rehearsed before but quite simply it is not possible to directly compare Councils and HA’s.

    You may be right about what you say about the CIH but I find it hard to understand why you then criticise the HA’s in Merseyside for standing up and trying to make a fuss about the effects of BT on people, just because in your eyes it doesn’t go far enough. Hopefully it will encourage other regions to pick up the baton.

    Tenants have options available to them as I said once before to fight the BT, Council’s also. We have to use the tools which are available to each of us and the tools for one are not the same as the other. To my mind, the truth needs to continue to be told to expose the lies being perpetrated by the Government so that we can get broad public support for a fair system and allow the space for this stupid, distruptive BT to be repealed by socially minded polititians.

    I am very angry about the BT, because of the widespread damage I believe it will do for individuals, families and communities. If I am accused of being a ‘whinger’ just because I am complaining about that injustice I’d be saying to that person, that that means I have won the argument. The fact that I am typing this also suggests that I am not sitting here with any of my fingers up either my (or anyone else’s) backside.

    1. You raise a number of points. Firstly and quickly I strongly doubt Leeds and Freud issue will ever get to court. Freud was posturing and his threat was an empty one, Leeds have called his bluff and Freud will back down and backtrack.

      HA response to bedroom tax is too little and far too late. A minority of HAs did publicly stick their heads above the parapet before April ( and yes I am aware of the unreported lobbying that went on behind closed doors too) yet as we now see clearly, the bedroom tax is a public issue being played out in the public domain, itself highly unusual for a housing issue, and HAs were inept in challenging BT before introduced and still are today. They did also underestimate the impact too as most doubled their provision for bad debt from 2 to 4% yet the arrears figures are much higher than this and much higher than ANYONE expected…then with benefit cap, monthly payments, direct payments, council tax and other general austerity measures still to come the odds are strongly in favour of this getting worse. The BT is and always has been an attack on social housing per se yet as usual the G15 and other London lobbies view held sway and as NW has twice as many working age tenants affected than London….

      The SRS has largely stood idly by while social housing has been attacked and the NHF has done far more than the sycophantic forelock tugging CIH to challenge yet what the NHF and individual landlords have done has fallen way short of what was needed. The lack of challenge to BT in the public arena gave 12 months of momentum to the coalition bull and myth that BT was fair and equitable with PRS position and no mention or challenge to the downsizing nonsense arguments or equally nonsense freeing up properties arguments. If we could turn the clocks back 12 months do you really believe SRS would not challenge the BT far more?

  3. I still don’t understand why HA’s are so against their tenants. Work with us not against us. Every day I work with desperate tenants praying they are not postponing the inevitable. When 99.9% of the homes on your estate are 3 bed with a downstairs bathroom, some still not improved and none really meeting decent home standards, 90% needing flat roof replacement & all needing a rewire, yet every rent is the most the HA is allowed to charge, something needs to be done..If these were all 2 beds there would be a shortage and a fight to live in them. HA’s need a new 30 year business plan which incorporates welfare reform. Planning means planning for disasters too and this is one big disaster for HA’s.

    I don’t see any PL scrambling for the 21+ empty 3 beds on my estate, because they will get less HB than LHA and cannot afford social housing, so they stand empty. Where are all the overcrowded tenants we keep hearing about in the governments flawed statistics? They certainly are not moving in around here. All I see are people moving out, most late at night! Social housing rent may be cheaper than private rental but, bizarrely, it is too expensive & out of reach of the welfare recipient.

  4. I see the BT report by Merseyside HA’s as being as a case of we told you so Government (which implies they were active before the introduction of same) but its clear that they won’t listen any more now than they did then. Sadly it will take some of those nightmare scenrios to come to pass before any change will come. The ground is so thoroughly poisoned by the Government, that they can claim to have the backing of the majority in the Country at present and that is because the real situation is so complex that those people are happy to stick to their prejudices instead.

    Yes it will get a lot lot worse but it seems to me that it is impossible to quantify just how much for HA’s. The Council Tax contribution adds to the current problem as well but Benefit Cap (more a problem for London) for tenants,especially with winter approaching. As for HA’s they can probably stand BT losses but who knows what will happen when Universal Credit comes in? Based upon such little information is being made available by DWP on that it is possible to imagine some HA’s being knocked out. If this were to happen you can take the view on whether this is by design (I know a lot of people think it is) or like I do whether it is a sign of short-terminism. If big HA’s where to fail, it would start to rock the whole sector and I don’t think that would be in any Government’s interest. Estates of empty property could have the same effect. Of course there will have to be evictions (due to BT or arrears arising from Direct Payments or both)? Not by choice of course, but failure by a HA not to do this could risk a similar finacial failure as decribed above. How many families will it take living on the street or expensive B&B before the Country wakes up to the housing scandal? Not enough till well after the next election methinks.

    Such is the hype, people are scared of applying for a 3 bed house in the North but do we really imagine that this Government care what happens outside London?

    I applaude Leeds and yes I think they will get away with it and in my view, every Council needs to follow their example to expose the nonsense that BT is. The reclassification itself is as you say not directly aimed at the BT issue of course and although open to HA’s has ‘consequences’ for them, some financial, some ‘political’ (in terms of regulatory.)

    I don’t see anyone other than the NHF and its members standing up for the tenant and community. If tenants vote with their feet and turn their backs on social housing this Government may not shed a tear but I suspect a solution will emerge, whether that be demolition or takeover by an increasingly smaller number of London based, national housing associations.

    1. I have no doubt whatsoever that WHEN HAs fail and it will be sooner than anyone expected, the larger ones will be waiting in the wings and present themselves as knights in shining armour…this is just an escalation of what these (super?) HAs have been doing for years with their growth by acquisition strategies. Yes the NHF are doing much more than CIH and NHC and G15 but it is still woeful and nowhere near enough.

      The reclassification need not have the financial and regulatory implications for HAs at all and the vast majority of those arguments which have been promoted by HAs are frankly lame ones and more excuse than explanation. If HAs and SRS collectively told government to shove the rapidly dwindling capital subsidies up where the sun doesn’t shine and insisted on charging the same in HB as the PRS receive in LHA, which they could an in practical terms too – then they could exert huge influence and kill of the bedroom tax. They wont of course and not because it isn’t possible (legally or otherwise) or that it appears radical and especially by SRS standards as the sector is ultra conservative, but because they dont have the will to do it.

      Social housing saves the public purse an absolute fortune each year and saves the economy a fortune too, and way in excess of the bedroom tax. Yet the SRS has never sold the huge ECONOMIC benefits it holds and has been content with LETTING it be perceived as the housing of last resort and a political dinosaur. If ever there was a cause for housing bodies such as the NHF and any other SRS body to take up…

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