In April 2013, the UK government introduced new reforms designed to cut welfare spend. Aimed at working age tenants on benefits who were deemed to have a spare bedroom in their council or housing association home, it was dubbed “the bedroom tax”.
While this reform was well received by the public, as little as one month on from the changes, there were reports of a 338% leap in the amount of people applying for emergency handouts . One year on, there are many social housing tenants in serious rent arrears, which is being blamed on this reform.
Reports say that two-thirds of households in England affected by this tax have fallen into rent arrears since the policy was introduced and one in seven families have received eviction risk letters and face losing their homes.
Jamie Smith, Business Development Manager from CreditG says that they have seen a 15% increase in the amount of requests they receive from landlords trying to recover rent arrears over the last year, though they could not prove whether the rise in tenant rent arrears was accounted for by the bedroom tax alone.
It seems that for many landlords and tenants alike, the bedroom tax has caused severe financial stress. So, what exactly is the tax?
What is the bedroom tax?
The concept is designed to ensure that welfare claimants are not living in bigger homes than they need to at the taxpayer’s expense. Those who are, can pay more rent or move to a smaller home.
The reform restricts housing benefit to allow for one bedroom for each person or couple living as part of the household, with the following exceptions:
- Two children under 16 of the same gender are expected to share
- Two children under 10 are expected to share, regardless of gender
- Adult children in the Armed Forces will be treated as continuing to live at home when deployed on operations
- Disabled tenants or their partner who needs a non-resident overnight carer will be allowed an extra bedroom
- Disabled children who are unable to share a bedroom with a sibling because of their severe disabilities are allowed their own room
- Approved foster carers will be allowed an additional room so long as they have fostered a child, or become an approved foster carer in the last 12 months.
Other exceptions do apply as well – to read more, visit Housing.org.
How does it work?
Tenants either see a reduction in the amount of benefits they receive (14% for those with one spare room and 25% for those with two), or, where their rent is collected from them by a social housing organisation, they are charged extra rent.
The shortage of smaller-sized social housing properties has also become apparent, with thousands of people nationwide seeking a smaller property but not being able to.
Reports from the BBC on the fall-out from the bedroom tax showed that just 6% of the 30,000 claimants affected nationally were able to downsize, leaving others struggling financially.
One year on and a report from the Commons Work and Pensions committee says that “there is evidence that many of these people are suffering financial hardship” as well as “having a particular impact on people with disabilities, especially those living in adapted accommodation, or who need an extra room as a result of their disability, and who are unlikely to be able to move house or enter work.”
The Lib Dems announced they were withdrawing their support of the reform on 2nd April 2014. Both tenants and social housing landlords will no doubt be waiting to see what happens next.