Bedroom Tax!

by Mark Johnston

Bedroom Tax!

A recent report has revealed that the UK housing benefit bill has ballooned out of control and it therefore now stands at around £23 billion. This in part is due to the fact that the government has failed to build enough new social housing.

Therefore one of the government’s new policies to bring this bill under control is the ‘bedroom tax’, with effect from April 2013.

The ‘bedroom tax’ is a new change to housing benefit entitlement that means people will receive less in housing tax benefit if they live in a housing association or council property that is deemed to have one or more spare bedrooms.

Having one spare room will mean a loss of 14 per cent of housing benefit and having two or more spare rooms will mean an even bigger loss of 25 per cent of entitlement.

The government suggest that the ‘bedroom tax’ will encourage many tenants to downsize and therefore free up larger social homes.

The National Housing Federation (NHF) has estimated that there are 180,000 households under occupying two bedroom homes.

Only 85,000 one bedroom homes became available last year, which means that 95,000 households now face the choice of either staying out and making up the shortfall in their incomes or moving in to the more expensive private rented sector.

Sam Lister, policy and practice officer at the Chartered Institute of Housing, said “most people do not want to move, it is their home and they will therefore try to make ends meet”.

A recent survey has revealed that 46 per cent of households in social housing have now opted to stay put and try to cover the shortfall in their benefit.

David Orr, chief executive of the National Housing Federation (NHF) has suggested “this policy could ultimately cost the tax payer more in the long term”.

Sue Sutton, director of customer and neighbourhood services at the Arms Length Management Organisation (ALMO), stated “tenants in social housing are very vulnerable to changes in their circumstances, such as changes to benefis, which means they are more likely to fall in to arrears”.

Some landlords expect that in the long run this particular new policy could end up costing them around  £40 million a year in arrears and other costs associated with the tax, such as administration costs and rent collection.

So it seems then that faced with a huge increase in arrears as a result of the ‘bedroom tax’, some social housing providers have taken major steps to protect their residents and themselves by re-classifying properties.

However, some experts have warned that larger scale re-classification of properties could present a real financial danger for landlords as they could potentially face significant drops in income as rents reduce.

All in all many critics of this new policy have argued that it is severely flawed and therefore they believe it merely serves to penalise social housing residents financially for the government’s failure to build enough or the correct sized social homes.

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