Tuesday, August 21, 2012

Bedroom Tax - Penalty or Profit?

It is hard to believe that the introduction of bedroom tax will have any impact on overcrowding as the government does not expect people to downsize.  If people do not move, all that will be achieved will be further hardship for the genuinely needy and vulnerable in our society who will have their benefits reduced.

Most people would probably agree that there is a need to radically review the social welfare system to try to address issues such as fraud, difficulty in administration and enforcement and to try to plug the financial burden on the UK by making it pay to work.  Over the years there has been a lot of media publicity with stories of those claiming benefits being better off not working than actually taking a paid job.  In their manifesto, prior to the last general election the Conservative Party were very bold in their plans for the future of the welfare system, and now in government, as part of a coalition we are about to see some of these plans coming into force under the Welfare Reform Act 2012.

In addition to unemployment the welfare reforms are also trying to address issues such as overcrowding and will penalise those on benefits who are deemed to not be using their rented accommodation to its full capacity by reducing benefits for under occupancy.  This is something that is commonly being referred to as 'bedroom tax'. Presumably the idea is that social housing providers will be required to match the needs of their tenants with the size of property they actually need, and no bigger!  In an article in Inside Housing on 23rd July 2012 the welfare reform minister Lord Freud claimed that bedroom tax will ease overcrowding and help tackle the shortage of social housing. The article makes interesting reading (Extract):

'Speaking at a Local Government Association conference this morning, the welfare reform minister defended the controversial policy, which will see social housing tenants of working age docked benefit for having a spare room. The policy is estimated to affect 660,000 households, who will lose £14 a week on average. 
Lord Freud said: ‘Nearly a third of working-age social housing tenants on housing benefit are living in accommodation which is too big for their needs, in spite of the fact of severe overcrowding. 
‘We are stopping the practice of the state paying for rooms beyond claimant needs, and that should go in some way to help tackle the social housing shortage that has been blighting too many lives.’ 
The policy is controversial as the £430 million of savings expected by the government is based on an assumption of ‘little tenant mobility’ – suggesting the government does not expect people to downsize'

Source: http://www.gentoogroup.com
It is hard to believe that the introduction of bedroom tax will have any impact on overcrowding and Lord Freud openly admits that the government does not expect people to downsize.  If people do not move, all that will be achieved will be further hardship for the genuinely needy and vulnerable in our society who will have their benefits reduced. This makes one question if overcrowding is just a smokescreen and the main motive is a stealth reduction in benefits.

In any event, if those affected were willing to move, where would they go? Have the government forgotten that there is a shortage of housing in the UK particularly in the social housing sector. In my local area the Coventry Telegraph recently reported a chronic shortage of social housing with almost 20,000 families on the homefinder waiting list – with 10 per cent deemed in urgent or extremely urgent need. This situation is typical to varying degrees across the UK.   As there is already a major shortfall in available housing, social housing providers will not have the opportunity (nor the time) to play 'match the property' if approached by a tenant who wanted to move to avoid falling foul of bedroom tax, as their more immediate priorities will be trying to address their ever increasing waiting lists and also homelessness. 

Bedroom tax is proposed for introduction in April 2013 under the Welfare Reform Act 2012. As it is mandatory to comply with legislation then there can be no question about its legality from the moment it is introduced.  A key point however is that in most cases the legislation (once introduced), will apply retrospectively and will affect many tenants claiming benefit who have been in residence in their homes for many years. It will be interesting to see if any legal challenges are made any tenants who claim that they are being penalised for something that they were not aware of at the start of their tenancy, and if they had been they may have opted for a smaller property.  Also, as there may be no suitable smaller properties available a tenant may argue that they are willing to move, but through no fault of their own they cannot.  

Lord Freud also suggested that taking in lodgers could be a solution for tenants hit by the tax!  An earlier article in Inside Housing on the 20th July claims that tenants will be able to keep rental income from lodgers without affecting their benefits!
'The major impact of the move, which the Department for Work and Pensions described as a ‘positive side effect’, is that it will help under-occupying tenants pay the bedroom tax. The change was made possible because the government has amended what counts as income in its draft regulations for universal credit.  
Currently, claimants must declare income from lodgers. This can affect their entitlement to housing benefit, jobseekers’ allowance and income support.  
Under the new regulations, from October 2013 tenants will be able to keep income from lodgers and retain full entitlement to benefit. The room let to a lodger will, however, be classed as a spare room and fall under the bedroom tax, which will be £14 per week on average'.
How ridiculous is this? This is suggesting that someone claiming benefit can now make an income by letting any spare rooms and best of all this will not impact on their benefits!.  How exactly is this going to encourage people into work, when they can have a nice little rental income sideline?  Will they pay tax on this income? Does the letting of a spare room need to be to someone who is working or will they also be claiming benefit? 

Whichever way you look at bedroom tax it is easy to foresee the fiasco that is waiting just around the corner when it is introduced.  This is undoubtably going to prove to be an administrative nightmare and it is difficult to see how it will achieve the purposes for which it will be introduced.

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  1. A nightmare situation. My brother a middle aged bachelor with a drink problem was given a two bed flat over ten years ago even though he wanted a one bed. He now has to look for a one bed. I go on property pool to look for a one bed for him, only to find there are ten or over thirty in some cases looking for properties, ahead of him. Imagine if the likes of him took a lodger in, he could be open to abuse. I despair, they should admit this is all a mistake.

    1. Completely disagree with your slant on this.

      the idea recognises the housing shortfall and that is the whole point. It is clearly to get families out of overcrowded properties and people occupying properties with spare bedrooms into properties where they wont be taking up needed bedrooms needlessly.

      its ridiculous suggest this is not fair, its made to be fair for everyone. Housing is so expensive in the UK that for tax payers to pay for unoccupied bedrooms when they themselves cannot afford properties with spare bedrooms is not right.

      honestly, social housing funded from much needs taxpayers money should not be spent on unoccupied bedrooms whilst other families have 3-4 to a room.

      to suggest otherwise is frankly stupid.