Monthly Archives: August 2014

Summertime… but the living ain’t easy!

Andrew Arden QC & Robert Brown

The bedroom tax is now 16 months’ old. Publication of a new report shows that it is not working.

We considered part of the Government’s package of benefit reductions (or “reforms” as the Government insists on calling them) a few months ago, in ‘Being for the benefit of Mr Tight’. One of the key measures is the bedroom tax. To recap, the bedroom tax is implemented by regs A13 and B13 of the Housing Benefit Regulations 2006 (SI 2006/213) (as inserted by the Housing Benefit (Amendment) Regulations 2012 (SI 2012/3040)). It requires local housing authorities to calculate the housing benefit payable to social housing tenants by, inter alia, reference to the number of bedrooms for which the claimant is eligible, defined by the number of occupiers of the property – for instance, a couple are expected to share a bedroom; likewise, two children under the age of 10 are expected to share. If the property contains an extra bedroom, the housing benefit payable is reduced by 14 per cent; if two or more extra bedrooms, by 25 per cent.

As we noted back in April, the impact assessment supporting the amending regulations suggested no great financial savings, maybe even none. The theory behind the bedroom tax was that under-occupied social housing should be freed up in order to allow families to move out of over-crowded housing. As we said then

“In reality, it is not so simple: there are many more cases where an extra bedroom is legitimately required than the Regulations provide for; and, it is outright ignorant to assume that moving is simple or in many cases even possible, especially if a social landlord (offering an affordable rent) does not have (or is not willing to offer) an appropriate, smaller property. Thus, there is no qualification on the reduction that smaller, affordable accommodation is available, or that the local housing authority will make it available. …

“We do not need to rely on our experience of working with social landlords and tenants to know just how exceptional it is to be able to make this sort of home-swap. Not only is it general knowledge but it was also the predictable consequence of an increasingly-capped housing benefit system that more and more private landlords would cease to accommodate tenants dependent on it.”

You no longer need to just take our word for it: DWP has now published an interim report, Evaluation of Removal of the Spare Room Subsidy, which looks at the first six months of the bedroom tax. A final report is promised for 2015 but for now there is much to take from the interim report.

Discretionary housing payments (which, if Government is to be believed, are the solution to any discrimination caused by the bedroom tax) are not sufficient. The interim report notes that some disabled applicants for DHP have failed means tests applied by local authorities, because they are in receipt of disability benefits – even though those benefits are meant to help with some of the extra costs of having a long-term disability or health condition and are not intended to help with housing costs: see Burnip v Birmingham CC [2012] EWCA Civ 629; [2013] H.L.R. 1.

Another concern in relation to DHPs was that some benefit claimants affected by the bedroom tax had either failed to apply for a DHP altogether or failed to provide adequate evidence in support of their application, especially where there was a mental health condition.

Finally, so far as DHPs are concerned, awareness of their availability is too low: over half of those who were affected by the bedroom tax and had not applied for a DHP said that they were not aware of the possibility.

Tenants, meanwhile, are clearly struggling with the financial impacts: 57% say that they have spent less on household essentials, 21% that they have borrowed money from family or friends, 3% have borrowed money via a credit card, while 3% have borrowed money through a pay day loan. The researchers do not appear to have asked tenants whether they had borrowed from a loan shark, but we note that 2% of affected tenants said that they had taken some “other” action, which must raise concerns about the measures to which tenants are being forced to resort.

On the other hand, only 13% of tenants said that they had looked at moving to another social housing property. Just 3% said that they had looked at moving into the private rented sector although those who had done so did appear (according to the report) to have had some success: 1.4% of affected claimants (i.e. half those who had looked into it) moved out of social housing and into the private rented sector. The net result for the HB bill is fairly obvious.

Unsurprisingly, rent arrears have increased. While the interim report was careful not to attribute this directly to the bedroom tax, it is surely the most obvious candidate. The conclusion seems logical: 41% of affected tenants are reported as having paid the full shortfall; if 41% did…

And what does the interim report say about the grand aim of the bedroom tax: incentivising tenants to move to smaller properties and free up space for larger households? Very little, it seems. A mere 4.5% of affected claimants managed to move to a smaller property.

If the Government is concerned about wasted space, it is not even clear that the right people are being targeted. A recent research paper, ‘Quantifying the extent of space shortages: English dwellings’, has concluded that, if the Government wishes to identify oversized homes, the relationship between the number of inhabitants and the number of bedrooms is a poor metric to use. The researchers found that under-occupation was less common in dwellings where HB was paid and that most properties for which HB was paid were undersized when compared with the space standard adopted by the Greater London Authority for new-build homes. The researchers also found that, somewhat counter-intuitively, 75% of households who lost some HB due to the bedroom tax were undersized when compared with the space standard. Based on their analysis, only 19% of those affected by the bedroom tax actually had more space than they needed. One cause of the problem is that properties in the UK are simply too small: the UK has the smallest homes by floor area in Europe. As the research paper concludes

“the vast majority of homes are at or below acceptable space standards. This physical shortcoming has been mitigated by residents having low occupation rates, which are necessary and should not be regarded as a wasteful use of space.”

Assuming that the policy goal is a legitimate one, the bedroom tax fails to achieve it because the brute-force methodology does not identify those properties with excess space.

The future for the bedroom tax is uncertain. Labour have said that they would scrap it, while the Liberal Democrats have undergone a partial change of heart and no longer support its current implementation. Given the damage that is being done to tenants, and to the budgets of social landlords, the real question is whether change can await the final report and the general election.

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