A bad business for everyone caught in the bedroom tax trap
Collecting the rent is a basic function for any landlord, but a succession of reports has made it clear that the Government’s so-called bedroom tax has undermined this existential necessity by pushing more people into arrears
By Mark Cantrell
From Housing magazine, August/September 2014
Enough with the bedroom tax, already. Sadly, it’s not so easy to wish it away; as those on the receiving end – landlords and tenants alike – know only too well.
Some might prefer to use a less contentious term, like ‘removing the spare room subsidy’ or the ‘under-occupation penalty’, but whatever the moniker, the bedroom tax is proving mayhem for those trying to make ends meet – and that includes collecting the rent.
Even the ministers and their minions at the Department of Work & Pensions (DWP) appear to be cottoning on, quietly, to the hardships the policy is causing. They must be. Why else slip out a damning report while attention was distracted by David Cameron’s Cabinet reshuffle?
The interim report – ‘Evaluation of Removal of the Spare Room Subsidy’ (RSRS) – was produced by Ipsos MORI and the Cambridge Centre for Housing & Planning Research. Initially, at the onset of the bedroom tax, some 547,342 households were affected, but by August 2013 this was down 4.6% to 522,342. That decline is pretty much accounted for by the 4.5% of affected households that managed to downsize to another property. A further 1.4% – mostly in the North – shifted to the private rented sector.
That leaves the majority potentially stuck with a shortfall in their ability to pay the rent; a headache for household and landlord alike. During the first five months of the bedroom tax, 41% of tenants managed to pay that shortfall in full, 39% have paid some, and 20% have paid none at all.
“There was widespread concern that those who were paying were making cuts to other household essentials or incurring other debits in order to pay the rent,” the report said. “57% of claimants reported cutting back on what they deemed household essentials and 35% on non-essentials in order to pay their shortfall. A quarter of claimants (26%) said they had borrowed money, mostly from family and friends (21% of all claimants); 3% had borrowed on a credit card and 3% taken payday loans, although we do not know whether they have a history for borrowing for other purposes. In addition, 10% had used savings and 9% been given money from family.”
As it is, the interim report played it rather coy with the rent arrears question. It found that total arrears have gone up by 16% between April and October 2013, but added that the “cause of this is uncertain and we cannot directly attribute this increase to the RSRS”.
There’s no doubt over why as far as the National Housing Federation (NHF) is concerned. As the organisation’s chief executive, David Orr said: “We have published a series of reports highlighting the flaws of the bedroom tax, as have many of our members. Time and time again it has been shown that the bedroom tax is pushing people into rent arrears and people have been unable to downsize because of a lack of smaller properties. Now the figures from the DWP prove it is not working; surely now it is time for the Government to admit they got it wrong and repeal this ill-thought policy.”
Back in May, the NHF released its own report on the impact of welfare reform, and in particular the bedroom tax, on tenants. Carried out by Ipsos MORI, the research found that:
- 67% of affected tenants were finding it difficult to pay their rent, compared to 31% of non-affected tenants
- Affected tenants were nearly four times as likely to say they had needed to borrow money to help pay the rent since 1 April 2013 (46%) as before that date (12%). Non-affected tenants were not significantly more likely to say they needed to borrow money to pay the rent
- 42% of affected tenants said they were in arrears at the time of the survey. This compared with 25% of those not affected by the measure. All told, 31% of tenants surveyed said they had been in rent arrears for most or all of the time since 1 April 2013
- 69% of affected tenants said that prior to 1 April 2013 they had never been in rent arrears
- 35% of affected tenants said they had never been in arrears either before or after 1 April 2013
The study went on to say that of those tenants affected by the bedroom tax, 32% had cut back their spending on food, while 26% had reduced their heating/ energy use. Meanwhile, 18% were found to be spending less on nonessentials, and 10% were applying for Discretionary Housing Payments (DHP). A quarter of those affected had said they hadn’t done anything in response to the size criteria.
“People stung by the bedroom tax are being forced to make difficult choices on which bills to pay and which essentials to go without. They are living in fear that they will lose their homes and have resorted to borrowing from friends and family to try and get by,” Orr said at the time it the NHF released its findings.
“Housing associations have spent millions of pounds working more closely with their tenants, introducing projects to tackle fuel poverty and working with food banks to help alleviate food poverty. But these services have costs, which leaves less money for building new homes. The results of [this] survey are depressing. As we feared and warned, the bedroom tax is having a disastrous impact. The only solution is to abolish this policy which fails on every level.”
And it’s not just housing association tenants. Councils, too, are feeling the pinch, with over a third of stock-retaining authorities’ tenants in arrears nine months after the introduction of the bedroom tax, according to research published ahead of this summer’s CIH conference.
The result of a joint research project by the National Federation of ALMOs (NFA), the Association of Retained Council Housing (ARCH), and the Councils With ALMOs Group (CWAG), which between them represent over 1.3 million council properties, this report found that more than half of their tenants affected by the bedroom tax are in arrears – an increase of 27%.
“[W]elfare reform is still adversely affecting both tenants and landlords,” said Chloe Fletcher, policy director at the NFA. “Housing organisations across the country have put a great deal of effort into reducing the impact of reforms such as the bedroom tax and it is certain that without this support and assistance, the situation would be even more serious.”
However, Andrew Warburton, the policy director at ARCH, believes that “we are yet to see the full impact of these reforms”.
“The majority of under-occupying tenants are still trying to ‘pay and stay’ but few will be able to sustain this approach,” he said.
Rent collection is an existential basic for any landlord, and it ought to be a relatively straightforward function, but the above reports and others have amply demonstrated that the bedroom tax has served to undermine not only the sector’s social purpose – but its bottom line too.
The sector may not be suffering arrears as a result of direct Government decree – but it might as well be.
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Damage limitationHousing associations may not have much room for manoeuvre when it comes to dealing with the ramifications of the bedroom tax, but that’s not to say they are entirely helpless.
Thrive Homes, for instance, braced itself for impact by budgeting for an increase in rent arrears ahead of its introduction. From October 2012 it also put into effect a series of measures to mitigate its impact. The organisation must have done something right, because it claims to have seen a decrease in arrears from 1.53% in March 2013 to 1.1% in March 2014.
Among the measure it implemented, Thrive identified those tenants likely to be affected by the bedroom tax and contacted them directly, offering help with such things as managing their finances, looking at their benefits entitlement, as well as looking at options such as moving to a smaller home.
“Thrive has put in place a flexible allocations policy allowing it to provide the best solutions and support for people to get off benefits and into employment,” said chief executive Elspeth Mackenzie. “This has included offering practical advice and assistance, and financial support to move where needed. Additionally, highly popular speed-dating-style events that get people together to discuss mutual home exchanges.
“[We] also review transfer cases and tenants registered with Home Swapper to establish chain mutual exchanges by directly matching tenants in different sized homes. This is providing tenants with additional housing options and helping Thrive to provide sustainable communities.”
Liverpool Mutual Homes (LMH) has also found itself changing the way it operates in an effort to mitigate the impact of welfare reforms.
“We have had to do a great deal of ‘hand holding’ – really intensive work with tenants who are being impacted by multiple changes, not just the bedroom tax. Many are vulnerable and have little or no money management or debt management capability and are financially excluded,” said Angela Forshaw, LMH’s director of housing and customer services, who also chairs Merseyside’s Welfare Reform Group. “Our approach is to try to make a difference on all fronts. To do this we have moved resources into welfare reform awareness and welfare rights advice work. We now make applications for DHP on behalf of tenants. We are picking up people who have been sanctioned and signpost them to foodbanks.”
The organisation is also trying create a culture of self help, with an officer from the DWP seconded to help tenants find local training and employment opportunities. It has also created a small team to work with tenants who need additional support, such as sorting out utilities, rent payment methods, and so on, to help them make a success of their tenancy.
This article first appeared in the August/September 2014 print edition of Housing magazine. It was subsequently re-published on the Housing Excellence website, 1 October 2014