Bedroom Tax – why reclassification is best for landlords and councils

The bedroom tax is a highly emotive issue yet to understand it you have to view it dispassionately.

Yesterday I released what could seem like a rant against Joe Anderson the Mayor of Liverpool who was berating Stephen Timms and the Labour Party generally for not committing now to scrap the bedroom tax.  They should scrap it yet that is not the point.

The real point is that the Mayor of Liverpool was being hypocritical and was playing politics in his comments and especially so as he has far more power to challenge the bedroom tax than the national Labour Party;  as does every local council in the country, and all local councils can lawfully challenge it now and could have done so from the start.  That is why I was angered by the rank hypocrisy of Joe Anderson’s comments.

In the short post I asked 3 simple questions to which the answer is a resounding YES:

  1. Can a council decide that a room under 50 square feet in floor area is not a bedroom?
  2. Can a council decide a room 50 to 70 square feet is not a full bedroom?
  3. Can a council decide not to go the cost of defending an appeal?

The answer is yes they can and they can do so as part of the bedroom tax decision making process and the bedroom tax is a mere HB decision.  Councils are the decision makers for Housing Benefit decisions and they act as the agent of central government in all HB decisions and the bedroom tax is just another HB decision: That is all the bedroom tax is, a HB decision and it needs to be correctly viewed in this dispassionate way.

If Liverpool City Council or any other council wished to operate a policy on what a bedroom is in terms of size they can do so and there is nothing unlawful about it at all.  If they did so LCC could significantly reduce the 11,680 estimated households affected by it.  Yet Liverpool City Council instead of seeking to reduce the pernicious impacts it has on about 28,000 men, woman and children in the city who they are elected to represent prefer to cave in to about 18 social landlords in the city. When I place my comments in that correct context you then start to begin to see why I was angry at the hypocrisy and politicking of the Mayor Joe Anderson – He has the power to do something yet he chose to do nothing and then blames somebody else! 

The council in Liverpool caves in to these social landlords despite the fact that it will cost LCC more financially by doing so in for example homelessness costs.  They cave in despite it costing the city more as business rates will fall as small local businesses will fold due to anywhere between £8m and £20m being taken out of the local economy.  Liverpool generally will suffer huge decline in parts of the city with local shops boarded up and communities devastated and higher policing and health & social care costs will arise that can all be traced back to the bedroom tax policy AND the councils economically inept and politically spineless response to it.

The council is in cahoots with social landlords and has made two critical mistakes. 

The first critical mistake is that it believes it cannot ‘rule’ that a room under 50 square feet cannot be a bedroom as the 1985 Housing Act says

That would be an error of statutory interpretation being the most cited excuse given by local councils, and excuse it what this is.  I call upon Liverpool and every other council to release legal opinion on that issue as I strongly doubt it exists.  If they are unwilling to do that then that says it is a mere errant assumption on their part that councils cannot interpret what a bedroom is in that way.

The second critical mistake is they have merely assumed that if they adopted size criteria for a bedroom then the social landlord rent level and the HB in payment would also fall

The council has believed the errant and assumptive myth social landlords have been peddling about reclassification, and these social landlords have got this from the even more inept CIH view on this and it is a case of the inept spineless leading the ultra conservative by nature social landlord. 

Note this stems from a critical error from social landlords who wrongly believe that reclassifying a now purported 3 bed property to a 2 or 2.5 or 2.99999 means that the rent level falls and the HB in payment would fall.  This has been stated so often and without any foundation in fact that it has become an urban myth.  Let’s examine this issue in some detail.

There are a number of issues which stem from the situation in Leeds which the following excerpt from an article in Inside Housing in early July is highly pertinent:

Lord Freud said councils found to have reclassified properties without reducing the rent charged would face a cut in their housing benefit subsidy.

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

The 4 short sentences above say a hell of a lot!

  1. The first sentence is the government threat to any council allowing reclassification and is Lord Freud saying reclassify a 3 bed down to a 2 bed and the rent and therefore HB level must fall.
  2. The second states the facts in Leeds and that they are refusing (as a landlord) to reduce the rent.
  3. The third has a councillor saying we have checked this out legally and it is lawful
  4. The fourth sentence says “bring it on; we are calling your bluff!And note well this is a councillor saying the council – as a corporate entity and not as a landlord – will legally challenge central government if they enact the threat that Lord Freud says they will.

The reality is Lord Freud for the government said you can’t do this.  Leeds, as a council, said oh yes we can, we have sought and got legal opinion and they expose and call this bluff and empty threat from Lord Freud.

If Leeds as a council can and are willing to do this and have had this legally checked then every local council can do it and it is in their financial interests to do so.

Social landlords as well as every council should strongly reconsider the reclassification arguments as here we see Leeds as a landlord saying they can and will and are reclassifying and NOT reducing the rent. If this position holds for 837 properties as in the case with Leeds the same legal position holds if you reclassify 1 or 10,001 properties and holds good anywhere in the country.

When I first advocated reclassification of properties from a 3 bed to a 2.9 bed I also stated it would NOT see a reduction in rent.  When the highly respected and regarded Professor Steve Wilcox advocated reclassification two months ago his figures did assume a reduction in rent, to which I will return, yet still argued even with a reduction in rent that reclassification is in social landlords best financial interests – a critical point even if I am wrong on my view that rents need not reduce and the same issue that Leeds City Council say they have checked legally.

The Janet Bell case which I was involved in centrally and discussed in much practical detail was a case where a 3 bedroomed property had only 2 bedrooms.  Yet, the rent stayed the same and so did the HB payment.  The landlord LMH knew of this, Liverpool City Council HB department agreed and very speedily agreed the property was a 3 bedroomed property with only 2 bedrooms.  A property is NOT the same as the number of bedrooms!

I do not hold that up as a precedent per se, or even a precedent for Liverpool where it happened, yet it suggests my view that HB regulations do not allow and confer no powers on HB decision makers at councils to reduce the HB level.  This is all the more so as the coalition took away HB departments entitlement to refer a social rent level to the Rent Officer service which they did in April.  That regulation no longer exists and hence councils have no regulatory powers to reduce the HB or rent level and if they tried to do this then they must surely be acting in an ultra vires capacity seems a strong argument to me

To return to Liverpool we find that the Mayor welcomed a motion of no bedroom tax evictions.  Yet that has always been in practical terms no more than politicking, all for show and a case of a fur coat and no knickers. Liverpool City Council is not a landlord and so they have no practical power to stop a bedroom tax eviction as the only parties involved are the tenant and housing association landlord and NOT the council.  The many political activists in the anti-bedroom tax groups place far too much store by a No Evictions pledge from a council, it is and always has been largely symbolic.

Joe Anderson as the Mayor has much more political power than most councils by virtue of his elected office of Mayor.  He can AND SHOULD direct his council to look at the council HB department adopting a position that anything under 50 square feet CANNOT count as a bedroom for HB (bedroom tax ) purposes and similarly that a room 50 to 70 square feet is in effect half a bedroom and again not considered for the bedroom tax HB decision.  Mayor Joe Anderson should be engaging and leading the 18 housing associations in the city (who have come together in a welfare reform group) to reclassify properties with no rent loss or at worst with a small insignificant rent loss which can be easily made with next year’s last rent convergence formula.

I estimate no more than 5% of social properties in Liverpool (or elsewhere nationally) have a purported ‘bedroom’ of less than 50 square feet and at 50 to 70 square feet of floor space this may be 15 – 20%. This would remove the bedroom tax (or reduce it from 25% to 14%) something like 2336 to 2920 households in the city from the bedroom tax.  It would also take away the financial risk of arrears to social landlords from the same number of properties.

That would take 5600 to 7000 men, woman and children in the city out of the bedroom tax so the tenant and electorate would be happy.  It would massively reduce social landlord’s financial risks and they would be happy.  It would massively reduce the financial risk to the council from homelessness and other additional costs it will have if it, and Joe Anderson, merely sit back and continue on their current course.

It is beneficial to all involved except central government. All those other parties, the tenant, the landlords and the councils roundly and rightly condemn the bedroom tax and its consequences.  Such a proposal – let’s call it the Liverpool argument – gets what should have happened in the first place, the landlords and the council standing four-square behind the tenant.  Yet as we have seen social landlords and local councils have not done this and instead opined…there is nothing we can do, government imposed this pernicious policy on us; Yet here is something that landlords and councils can and SHOULD do which to date they have not had the balls to do.

Maybe in light of the bizarre bedroom tax judicial review this week landlords and councils could also argue this is a proportionate response too!

One final and very significant point on reclassification is bedroom size.  The 1985 Housing Act does provide a rational justification for reclassifying the number of bedrooms a property has.  Yet the reclassification to date which KHT in Knowsley set in motion has had nothing to do with bedroom size, it has all been about difficult to let (DTL) properties.

Every social landlord has DTLs – they are properties in areas where nobody wants to live or in high rises or other less desirable properties for one or a combination of reasons.  When the bedroom tax began these DTLs became ITLs or IMPOSSIBLE to lets as if nobody wanted them before then with the bedroom tax to pay this increased sharply and hence social landlords got a zero income from them.  Social landlords out of financial pragmatism decide to reclassify as some rental income is better than none at all.

KHT as one of the first to do this reduced the rents and took the financial hit.  Leeds is refusing to take the hit by not reducing the rent and therefore HB income and have called the bluff of government on this. Yet this is a separate argument to room size.

The Leeds argument is we can reclassify but not reduce the rent in ANY circumstances and WITHOUT reason; whereas the bedroom size issue has a strong reason and justifiable reason to reclassify.

Also the Leeds argument is landlord led whereas the Liverpool argument is council led.  Yet the Leeds argument seems to also give legal backing to the Liverpool argument, which in any case is a stronger and more justifiable position to begin with than the Leeds argument.  Moreover, the Liverpool argument I propose here, should have the full backing of the 18 major social landlords in the city, and bolstered by the reclassification does not equate to rent loss position they have no reason not to reclassify!

You have to ask why 18 major social landlords in the city of Liverpool have not all chipped in to get three or four separate counsel opinions on the issues.  Or why all councils nationally not just Liverpool have not done the same.  Some state they have taken legal advice (which may mean the council solicitor) yet so has Leeds and they maintain and forcefully maintain they have the powers and rights to reclassify both as a landlord and as a council.  Leeds has called the government’s bluff and done so publicly as the article above clearly demonstrates.

The only problem is perception and the social landlords think moving from white envelopes to buff is a radical decision and so reclassification with all its myth laden prejudged nonsense is seen as radical beyond belief for the notoriously conservative and compliant and indeed complicit social landlord.  For those social landlords who are aware of the Leeds argument (and a number I have spoken with are not!!) you can almost write their minutes on this should they even get around to discussing it….Let’s wait and see what happens to Leeds! The same can be said about local councils who are likely to sit and play a waiting game…oh no not for us to upset the applecart or some other similar EXCUSE will be made.

In the meantime, the bedroom tax, which is not by any measure the worst of the welfare reforms, will see huge extra costs and possibly survival for some social landlords and see councils incur huge additional costs too…oh and shaft the hell out of tens of thousands of vulnerable people in Liverpool alone, but hey both the council and the social landlords inactions so far show they couldn’t care less about that.

6 thoughts on “Bedroom Tax – why reclassification is best for landlords and councils

  1. Will they do it? If they are considering it, it has to be soon. The reason I say that is, people WILL be evicted. Imagine reclassifying a house someone has been evicted from. If they evict a high percentage of the 7000 households affected, they wont be able to let the empty houses. (They can’t let them now) Will they turn them all into 2 bed & upstairs bathroom? Or, maybe they make more money selling empty houses. Don’t they get extra government money for every house they sell? They all demolished sound houses after stock transfer. Somewhere I have the paperwork detailing why it was financially better to do that than improve.

  2. jo, if i got 49 square floor space feet in the spare room after fitted wardobes have been fitted. Or 65 square feet with the room bare, IS it worth my while having these wardrobes fitted? Or diy wardrobes put in place? Or will the space be measured without fixtures etc?

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