Under-occupancy penalty

Protesters opposing the under occupancy penalty outside the Scottish Parliament. The term "bedroom tax" is used by critics to describe the changes to social housing occupancy rules.

The under-occupancy penalty (also known as the under occupation penalty, under-occupancy charge, under-occupation charge or size criteria)[1] is a reform contained in the British Welfare Reform Act 2012 whereby public-housing (also called council or social housing) tenants with rooms deemed to be "spare" face a reduction in Housing Benefit, resulting in them being obliged to fund this reduction from their incomes or face rent arrears and potential eviction by their landlord (be that the local authority or a housing association). The under-occupancy penalty has been widely branded the Bedroom Tax, especially by critics of the changes who argue that they amount to a tax because of the lack of social housing (or in some areas, any rented accommodation) for affected tenants to downsize to (and the refusal to accept the risk of taking lodgers in). The penalties are also criticised as having a disproportionate impact on disabled people.

In 2016 it was announced that the penalty would be extended to old people despite the government promising to protect the elderly from benefit cuts. Caroline Abrahams of Age UK, said: “Imposing the cap on older tenants will not only cause them anxiety and distress, it is also pointless given the lack of affordable housing options available to them.”[2][3]

Supporters of the changes have referred to the unreformed system as a "spare room subsidy"[4] whereby tax-payers are said to be subsidising social housing tenants living in houses larger than their needs require. The stated intention of the under-occupancy penalty policy is to reduce these costs and ease housing shortages and overcrowding. A similar policy was enacted over a decade beforehand in private sector housing, as the Local Housing Allowance, without attracting controversy, and this policy essentially represents an equalisation of treatment of benefit claimaints, regardless of whether they live in private tenancies or social housing. The reforms were one part of the 2010-2015 Coalition Government's wide-ranging welfare reform agenda which included the introduction of Universal Credit, the introduction of a cap on the total size of the welfare bill (see Welfare Cap), reform of Council Tax and reform of disability benefits (see Personal Independence Payment).

Policy

The under-occupancy rules apply from 1 April 2013 and applies to all those of working age . Having one bedroom more than the calculated allowance means a reduction in housing benefit of 14%, and two "spare" bedrooms means that a tenant will lose 25% of their housing benefit.[5] The rules for calculating allowed bedrooms are the same as for Local Housing Allowance for benefit claimants in private sector tenancies, except for the rules involving disability or the armed forces.

One bedroom is allowed for each of the following:

Exemptions

A number of types of housing are exempt from the changes. These include those living in temporary accommodation, shared ownership accommodation and non-standard accommodation such as houseboats and mobile homes.

There is a further category of exempt accommodation defined as "accommodation provided by a housing association, a registered charity or voluntary association where that body, or a person acting on its behalf, also provides the claimant with care or support" (supported housing), "or supervision" (sheltered housing).[5]

If a "spare" bedroom is created following a death then a council tenant's housing benefit will not be reduced until a year after the death.[6]

Rationale

The official rationale of the policy is to encourage council tenants living in houses too big for their needs to move to smaller properties so that existing housing stock can be better used. A second rationale made by the Department for Work and Pensions is to reduce the overall housing benefit bill.[7]

In 2012, speaking in the House of Lords, Lord Freud stated:

I remind noble Lords of the core argumentation. We do not think that taxpayers should be expected to meet the cost of somewhere approaching 1 million spare bedrooms, a cost of around £0.5 billion every year. Clearly this is unfair, or certainly different, to those in the private rented sector who receive benefits based on their household need.[8]

Public opinion

In a November 2013 opinion poll carried out by Ipsos Mori found that more of the public support than oppose the reduction of housing benefit for under-occupying social housing tenants.[9] The policy was most popular among owner occupiers and least popular among social renters.[9] In July 2014 a YouGov poll found that 49% of people opposed "the bedroom tax" and 41% supported it.[10] In 2015, political polling was generally called into question by the result of the 2015 general election, with an official investigation by polling firms (including YouGov and IpsosMori) concluding that they had systematically undersampled right-leaning individuals in their political polls; in essence, right-leaning individuals were more likely to be too busy doing other things than answering polling questions, so the people the polling companies found it easier to contact were disproportionately left-wing.[11]

Positions of political parties

Conservatives

The Conservative Party has tended to refer to the under-occupancy penalty as the removal of a "spare room subsidy" (implicitely taking into consideration the entire housing benefit paid out for the tenancy, rather than the net payment made by the tenant). Writing in The Telegraph Conservative Minister Iain Duncan Smith has argued:

"...We need to put an end to the unfair situation where the taxpayer is subsidising people to have homes, paid for by the state, with spare rooms they do not need. This is effectively a spare room subsidy. Britain can not afford it and nor can the taxpayer."[12]

Liberal Democrats

As members of the government, the Liberal Democrats voted for the Welfare Reform Act 2012. At their 2013 Spring Conference, members voted to review the policy that looks at the "money saved, costs incurred and the effect on vulnerable tenants".[13] In March 2014 Inside Housing reported that the Liberal Democrats plan to scrap the "bedroom tax" for those who refuse a suitable and reasonable offer of accommodation.[14] This represents a change in position as the party voted against a similar amendment to the 2012 Welfare Reform Act. Liberal Democrat Party Leader Tim Farron (at that time President of the party) has also criticised the distorting effect that the under occupancy changes have on the market.[15] Following their change in policy, the Liberal Democrats voted with Labour on 5 September 2014, for Lib Dem MP Andrew George's private members bill to restrict the number of cases in which the penalty could be levied.[16]

Scottish National Party

In their 2015 General Election manifesto the Scottish National Party stated that: "We will vote for the immediate abolition of the unfair bedroom tax".[17]

Labour

The Labour Party pledged to repeal the act had they been elected in 2015.[18]

Other parties

The under-occupancy penalty is opposed by the Trade Unionist and Socialist Coalition,[19] the UK Independence Party,[20] the British National Party,[21] the Green Party of England & Wales,[22] Plaid Cymru,[23] the Democratic Unionist Party,[24] the Social Democratic & Labour Party (SDLP),[25] the Alliance Party of Northern Ireland,[26] the Ulster Unionist Party[27] and Sinn Féin.[27]

Reaction

In August 2013 The Independent newspaper released figures that it argued show that 96% of people that will be affected by the changes are not able to move due to the lack of available social housing.[28] Although it is illegal to sub-let a social tenancy, it is perfectly legal, and encouraged by the government, for social tenants in this situation to take in lodgers, to cover the extra cost; this potentially provides the tenant with a net profit, and will reduce the total number of people seeking alternative accommodation.

The under-occupancy penalty has been criticised for potentially costing more than it saves by forcing individuals into the private rented sector where rents are higher thereby increasing the cost to the taxpayer.[29] The National Housing Federation has estimated that the housing benefit bill could increase by £143 million if affected tenants downsize into private rented accommodation. However the Government argue that by freeing up social housing there would also be a reduction in the cost of housing people in expensive temporary accommodation; since these people were more likely to be in overcrowded accommodation than those affected by the penalty, the combined impact should be to reduce net costs, and reduce net overcrowding.

The impact of death

Michael Rosen writing in The Guardian has criticised how, under government proposals, parents living in social housing could become liable for what he calls the bedroom tax after only three months following the death of a child – something that inadvertently causes the creation of a "spare" room.[30] In March 2015 the Daily Mirror, a British tabloid newspaper, reported that a woman had become liable for the bedroom tax following her son's death from a brain haemorrhage following an assault.[31]

Effect on disabled people

The changes in housing benefit have been criticised for having a disproportionate effect on disabled families. Two-thirds of individuals affected by the under-occupancy penalty are registered as disabled.[32] Historically, most care and support for disabled individuals was provided by local councils, and their predecessors, rather than central government; in consequence there is an expectation from the government that costs arising out of care needs - including extra bedroom space - should be met by local council budgets. However, over the 20th century, central government took over the cost of providing benefits that cover housing costs; therefore, the government provided a new annual grant to councils, so that they can make discretionary housing payments for disabled people in this situation. The government has recently merged this grant into the general funding provided to councils.

Legal challenges

In July 2012 the High Court rejected the premise that the policy was a breach of Article 14 of the European Convention on Human Rights due to the effect on disabled people.[33]

In January 2015 it was announced that the Supreme Court of the United Kingdom would rule in March 2016 on whether the "bedroom tax" was illegal on the basis that it unfairly discriminated against disabled adults.[34]

In May 2015 a father successfully challenged the penalty at a tribunal. The father had separated from his partner but was able to argue that his "spare" room was occupied by his son who stayed with him three nights a week. However it is believed that the Government will seek to challenge this ruling.[35]

In February 2016 a decision by the Upper Tribunal involving Stevenage Borough Council considered the question of what constituted a room for the purposes of the regulations. Judge Lloyd-Davies decided that a room "should be capable of accommodating a single adult bed, a bedside table and somewhere to store clothes, as well as providing space for dressing and undressing." This implies a minimum size of 65.81 square feet for a rectangular room.[36]

Case law

Effect

The Centre for Housing Policy at the University of York have concluded that the under-occupation policy has saved money but that the potential savings forecast by the Department for Work and Pensions have been overestimated.[37] The use of Discretionary Housing Payment has partly reduced the savings predicted for the penalty.[38]

In the 12 months since the policy was introduced, the original aim of freeing up underoccupied properties had, in the eyes of some, largely failed. In July 2014, a report was published by the DWP that said only one in 20 claimants affected by the change had downsized their property; however, since the social housing sector in the UK is quite large, this number of downsizers equates to tens of thousands of people.

The report also showed that there has been great demand for downsizing properties but there has been nowhere near sufficient supply of suitable sized housing.[39] Some social landlords have started subdividing their stock into 1- and 2- bedroom properties, which has more demand than the 3- bedroom properties that much of their stock had consisted of in large numbers; questions have been raised why it took them until now before they did this.

In response to this report, the Liberal Democrats signalled a change in their support for the policy, with both Nick Clegg and Danny Alexander stating that they would like to see changes to the way it is implemented.[40]

See also

References

  1. ↑ "Bedroom Tax". National Housing Federation. Retrieved 17 July 2014.
  2. ↑ Poorest pensioners to lose hundreds of pounds a year in ‘new bedroom tax’ BBC
  3. ↑ Poorest pensioners to lose hundreds of pounds a year in ‘new bedroom tax’ BBC
  4. ↑ "Local authorities and advisers: removal of the spare room subsidy". www.gov.uk.
  5. 1 2 "Under Occupancy (bedroom tax) Charges". Trafford.gov.uk. 1 April 2013. Retrieved 14 April 2014.
  6. ↑ "Housing Benefit size restrictions in social housing: special circumstances". citizensadvice.org.uk.
  7. ↑ Wilson, W. (2013) Under-occupation of social housing: Housing Benefit entitlement, House of Commons Library, SN/SP/6272 p 4
  8. ↑ HL Deb 14 February 2012 c706
  9. 1 2 "Poll | More support than opposition for 'bedroom tax', but policy divides opinion". Ipsos MORI. Retrieved 14 April 2014.
  10. ↑ William Jordan, ‘tax’ as divisive as ever’, 18 July 2014, YouGov.co.uk
  11. ↑ "Post-mortem analysis of pre-2015-election political polling". Guardian. Retrieved 13 March 2016.
  12. ↑ "Britain cannot afford the spare room subsidy". Telegraph.co.uk. 7 March 2013.
  13. ↑ "Bedroom tax: Lib Dem conference says no – as do 53% of party members". Libdemvoice.org. 17 September 2013. Retrieved 14 April 2014.
  14. ↑ Apps, Pete (28 March 2014). "Lib Dems propose to overhaul bedroom tax". Inside Housing. Retrieved 14 April 2014.
  15. ↑ Patrick Wintour (2 April 2014). "Lib Dem president will withdraw party's support for bedroom tax | Politics". The Guardian. Retrieved 14 April 2014.
  16. ↑ McSmith, Andy (5 September 2014). "'Bedroom tax' to be abolished as the Coalition is rocked by Lib Dem-Labour alliance". The Independent. Retrieved 6 September 2014.
  17. ↑ http://votesnp.com/docs/manifesto.pdf
  18. ↑ Liam Kelly (2013-09-20). "Drop bedroom tax now, says Byrne". The Guardian. Retrieved 14 April 2014.
  19. ↑ Trade Union and Socialist Coalition Press Pack
  20. ↑ "Manifesto watch: Where parties stand on key issues". BBC News.
  21. ↑ "Abolish the bedroom tax-where's Labours pledge?". British National Party.
  22. ↑ "Green Party - Green Party leader speaks out against bedroom tax as she visits Tameside homelessness project". greenparty.org.uk.
  23. ↑ "BBC Democracy Live - 'Scrap Bedroom Tax' say Plaid Cymru". BBC Democracy Live.
  24. ↑ Nicholas Watt (2015-03-11). "Democratic Unionist Westminster leader lays out demands for supporting government". The Guardian.
  25. ↑ "SDLP vow to block hated bedroom tax". Derry Journal. 19 November 2013.
  26. ↑ "Cochrane calls on Executive to explore all options to avoid 'Bedroom Tax' (The Alliance Party of Northern Ireland)". allianceparty.org.
  27. 1 2 http://www.insidehousing.co.uk/northern-ireland-rejects-bedroom-tax/6526399.article
  28. ↑ Emily Dugan (5 August 2013). "'Big lie' behind the bedroom tax: Families trapped with nowhere to move face penalty for having spare room – UK Politics – UK". The Independent. Retrieved 14 April 2014.
  29. ↑ "'Bedroom tax' will cost taxpayers more". Channel 4 News.
  30. ↑ "Bedroom tax plans are a levy on the grief of the poor". The Guardian. 2014-01-14. Retrieved 14 April 2014.
  31. ↑ Jeremy Armstrong (15 March 2015). "A mother's anguish: A 'killer' took my son and now the Bedroom Tax will take my home". Daily Mirror.
  32. ↑ Patrick Butler (28 March 2014). "Bedroom tax has failed on every count | Society". The Guardian. Retrieved 14 April 2014.
  33. ↑ Shiv Malik (2013-07-30). "Bedroom tax legal challenge dismissed by high court". The Guardian. Retrieved 14 April 2014.
  34. ↑ Jamie Doward (2015-01-10). "Disabled tenants to challenge bedroom tax in supreme court". The Guardian.
  35. ↑ Julia Rampen (27 May 2015). "Bedroom Tax: 40,000 parents 'could appeal' after one dad defeats it - how you could do it". Mirror.
  36. ↑ "2016 UKUT 164 AAC". Ministry of Justice. 8 April 2016. Retrieved 11 April 2016.
  37. ↑ "Testing DWP Assessment of Impact of SRS Size Criterion on HB Costs University of York.pdf" (PDF). riverside. Retrieved 14 April 2014.
  38. ↑ http://www.insidehousing.co.uk/dwp-cuts-discretionary-housing-payments-by-40m/7008045.article
  39. ↑ "Evaluation of Removal of the Spare Room Subsidy: Interim Report" (PDF). 15 July 2014.
  40. ↑ Nicholas Watt (17 July 2014). "Nick Clegg defends bedroom tax policy shift". The Guardian.

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