Social landlords are financially rewarded for evicting the bedroom tax tenant

The average bedroom tax is about £700 per year and the average cost of an eviction Shelter estimated to be about £7000.  On those figures alone a social landlord would be silly to evict as the eviction cost all found (arrears. court costs, admin time, rent loss between tenants et al) is TEN TIMES the yearly bedroom tax loss.

Yet that is incredibly simplistic and social landlords can and will benefit financially due to coalition policies by re-letting the property at a much higher rent.  Here is how this works.

For example take the case of a tenant in Merseyside evicted directly due to the bedroom tax who lived alone in a 4 bed house (her 6 children all left) and her rent was £93 per week.

What options are open to the landlord?

  1. It can relet at a so-called “affordable rent” which is 80% of local gross market rent and this will see a rent of £136 per week being set.  The social landlord gains by at least £43 per week
  2. The social landlord can lease this to its own private arm and so get the Local Housing Allowance rate of £160 per week.  The social landlord gains by at least £67 per week
  3. The landlord could let this to a London council for their homeless cases and they are paying 90% of LHA plus £60 making £204 per week.  The social landlord gains by at least £111 per week.

As the above figures show a social landlord has a financial incentive to evict the bedroom tax (or benefit cap) tenant.

This is especially the case in Merseyside and the North West which has 43% of its working-age tenants affected by the bedroom tax which has led to social landlords there having many 3 and 4 bed properties being vacated by tenants.

Crunch the numbers on the above and you see it makes financial sense for social landlords in low rent areas such as the North West to evict the bedroom tax tenant.  On the lowest cost basis (point 1 above) the social landlord turns a £23.25 per week potential loss and financial risk into a £43 per week financial gain – a difference of £66.25 pw or a £3445 per year better financial case.  That is why the above figures say “at least.”

In summary, the social landlord has a financial incentive to evict the bedroom tax tenant and housing minister Mark Prisk stated publicly that in order for social landlords to access grants they would be expected to relet all voids as so-called affordable rent properties

Speaking at the Chartered Institute of Housing’s conference in Manchester today, Mark Prisk told delegates that developing associations considering bidding for grant must consider all relets for conversion into affordable rent.

Since then the CLG has tried to backtrack on these comments by saying not ALL relets though presumably this means the majority of them instead!  Here is what a CLG official said after this  comment by Prisk and publicly too which amounts to the same thing:

‘The government is expecting the sector to think much harder about using more re-lets for affordable rent but also think [whether] there are voids to dispose of, if costs are high and the income for rents are low

So, as you can see coalition policy is convert all new relets or as many as possible into the higher rent and higher HB costs of “affordable” (sic) rent which gives the social landlord a huge financial imperative to evict the bedroom tax and benefit cap affected tenant.

Next time you hear a social landlord say “we don’t want to evict the bedroom tax tenant”…or words to that effect take a huge pinch of salt reader!

8 thoughts on “Social landlords are financially rewarded for evicting the bedroom tax tenant

  1. Frank Field Labour M.P. said the bedroom tax “is wicked and requires a different response from Paliamentarians”. So what has the Labour Party done about this bedroom tax? Nothing?

  2. I suppose we will end up like the 3rd world countries, with refugee camps for the evicted social housing tenants, who are told this is what the LAW says you need to live on, But the government have given us carte blanche to take anything we want from this payment if you happen to live in a house to big for your needs, but wait you can’t move as there are no smaller properties for you to move into. Make sure you give the DWP your new address when you move into the refugee camp in your area.

  3. “Council estates breed Socialism” ( the late Margaret Thatcher ). This seems like another sneaky nasty hidden privatization to me – for other variants, see the NHS and the Welfare State …

  4. (With some reservations for my understanding of the underlying system as a non-brit.)

    Another aspect is game theoretical: If the landlord allows one tenant to live for 700 less p.a., others will want to do the same—and if the number reaches 11, making the one eviction would still be profitable with the remaining seeing the threat of eviction as highly credible. These would then likely either try to cover the amount out of their own pockets or move on and out in a semi-voluntary way.

  5. If a council has applied the size rule on a 3 bedroom privately rented property and reclassified it as a 2 bedroom property since July of this year and the adjoining houses are of the exact same size but some are social housing properties can the council or housing association still say that the properties are different?

    I think my local council has just been caught out. Am I right?

    This has just happened where I live. Your views would be greatly appreciated.

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