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.