Social Security and Welfare Reform

The great shame of the bedroom tax is that it is a missed opportunity

  • Published: Apr 03, 2013
  • Author: Hannah Aldridge
  • Category: Social Security and Welfare Reform

This week, we are posting a series of blogs that look at the main changes to social security benefits introduced this ‘Black April’. All impact mainly or wholly on low income households. But as we argued on in the first posting, this is not enough of a reason to oppose them. Taking each in turn, we look at the potential savings, the other problems the policy tries to address and how might this be done better?

Today is the turn of the “bedroom tax” (the under-occupation penalty) where working age households living in social housing with a spare bedroom (according to the bedroom standard) have their housing benefit cut by 14% (or 25% if they have more than one spare bedroom).

How much money does it save?

Actually, the potential savings are not the main reason for introducing this policy; its aim is to make better use of the social rented stock. However, the DWP Impact Assessment does claim that the policy is intended to contain Housing Benefit expenditure in the social rented sector. The savings would result from cutting housing benefit to 660,000 households by an average £14 per week, saving £480million in the first year. But this would only be achieved if people stay put and bear the cut and as such it would be at the expense of the goal of making better use of the social rented sector.

Alternatively, if an affected household swapped with an over-crowded household the housing benefit spent would be unchanged (although each household would be more appropriately housed). If smaller social rented accommodation was not available the other option would be to move into a smaller private rented home, where rents are typically higher. In that case the housing benefit paid to that family would increase as a result of the bedroom tax.

What else does it achieve? And how well?

But the savings aren’t the main reasons for this policy, there are two better reasons: to encourage greater mobility within the social rented sector, and to make better use of available social housing stock. These aims are worthwhile. If there is demand for social rented housing we should try and make sure the resource is fully utilised.

But the bedroom tax won’t achieve these goals to any significant degree as it only covers 29% of under-occupiers in the sector. Some 38% are exempt because they are of pension age and another 32% are exempt because their incomes aren’t low enough to be on housing benefit. A policy that includes all under-occupiers rather than only the poorest would surely be more effective.

Moreover, a household’s benefit is cut even if there is no alternative social rented accommodation available. So the policy penalises people for not living in housing that they are unable to access and it provides little incentive to social landlords to build smaller accommodation for under-occupying households to move into.

Another reason given by DWP for the bedroom tax was that it would improve work-incentives. But work incentives hardly change as a result of the bedroom tax. In fact the group who will see the greatest increase in their incentive to work are those with high enough incomes to only get partial housing benefit (i.e. those already working).

What are the alternatives?

The concern that we should make better use of the social rented sector is legitimate: 8% of social rented households are overcrowded while 40% are under-occupied. But this policy is the missed opportunity to deal with some of these issues in a more effective way. So what might be better? 

Firstly any policy should apply to everyone in the social rented sector rather than only those in receipt of benefit, for example, by increasing rents for all under-occupiers. Secondly, if a penalty is imposed it should only be applied to the tenant if they have refused reasonable alternative accommodation (and this should take disability requirements into account). If there is no such alternative, any penalty could apply to the social landlord for failing to provide this option and to provide an incentive to build more appropriate sized dwellings.

All of which deals with individual incentives. But the connected problems of under occupation and overcrowding are systemic, and require broader changes. In the longer-term more flexible tenancies are required, where rights to social rented accommodation are retained, but not the right to a particular dwelling. This should be flexible to respond to the changing needs of the household, offering support to families when they move.

Finally, there is a very basic issue of supply. With housing waiting lists long and growing, and rising private rents pushing up the housing benefit bill, investment in affordable social housing would solve more problems than the bedroom tax ever could.

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