The grim reality of the bedroom tax

Originally posted on December 17 on Inside Edge 2, my blog for Inside Housing

So here it is, sneaked out on the last day of the parliamentary year: the independent evaluation of the bedroom tax (or removal of the spare room subsidy).

This is the final report to complement the interim evaluation that the DWP just happened to publish on the day of the Cabinet reshuffle in July 2014. Its conclusions were subsequently used by the Liberal Democrats to withdraw their support from the controversial policy under the coalition.

The evaluation was only commissioned in the first place to comply with a House of Lords amendment to the Welfare Reform Act. This final report covers the first 20 months of the policy up to November 2014, making me wonder just how long the DWP has been sitting on it.

The evaluation by the Cambridge Centre for Housing and Planning Research and Ipsos MORI covers the effects of the policy on claimants, social landlords, local authorities, voluntary organisations and advice agencies and lenders and includes surveys, interviews, case studies and data analysis. So it’s almost certainly the most comprehensive assessment yet of the policy even if it only covers what happened up to a year ago.

Here are 10 of the main conclusions:

• The number of households affected fell from 547,000 to 465,000 between 2013 and 2014. Almost half of them said this was because of a change in their household composition or children’s ages. One in five had found work
• The vast majority (83%) who were affected in Autumn 2013 were still affected in Summer 2014. Only 29% of them had applied for a discretionary housing payment though awareness of DHPs had increased
• The number of affected claimants who have paid none of their shortfall fell from 20% to 10% but that still represents almost 50,000 households. Half those affected had paid all of their shortfall
• They had paid their rent by using savings, borrowing or running up debt and cut spending on energy (46%), travel (33%), food (76%) and leisure (42%)
• Overall 55% of affected tenants were in arrears in Autumn 2014, up from 43% before the introduction of the bedroom tax
• Around 45,000 affected claimants had downsized within the social rented sector by Autumn 2014, up from 24,000 in Autumn 2013. Some 16% were registered for downsizing, down from 19%. Around 12,000 are estimated to have moved to the private rented sector
• 42% of landlords reported difficulties letting some properties because of the bedroom tax but there was no statistically significant evidence of an increase in voids.
• There was no significant change in arrears between 2013 and 2014 and no discernible increase in evictions. Landlords reporting that they consider the affordability of the rent for prospective tenants before letting. Advice agencies were worried about the cumulative impact of welfare reform.
• The proportion of affected claimants in arrears fell from 47% to 40%
• The bedroom tax has had some impact on homeless families in temporary accommodation, making it easier for families to move to larger homes freed up by downsizing but harder for single people who are now competing with downsizers. Some homeless families in low demand areas were being allocated temporary accommodation that was too big for them and subject to the bedroom tax.

Overall, it seems that landlords are coping: most tenants are paying something; there have been no mass evictions; and voids haven’t gone up. Changes in housing management and allocations seem to be partly responsible. However, very few properties had been reclassified and even fewer physically altered.

Landlords had applied for possession against just under 4,000 affected tenants by Autumn 2014. Most went to court but over half resulted in suspended possession orders. They had only evicted 356 tenants, most of whom had pre-existing arrears or had not engaged with their landlord and were ruled intentionally homeless by their local authority.

For tenants it’s a very different story and one that backs up the warnings that the bedroom tax was being imposed on people with limited choices.

The top three responses have been to spend less on household essentials (57%) and non-essentials (49%) and apply for a DHP (29%). However, a total of 37% had borrowed money, mostly from friends and family (25%) but also from lenders including pay day loans (7%) and credit cards (5%). Another 14% had used savings while 13% had received money from friends and family there were not expected to pay back.

Contrast those figures with what the DWP argued would happen: looked to downsize (16%), looked for a job (15% plus another 6% who had looked for better pay or more hours) and taken in a lodger (1%).

There may have been 45,000 downsizers by Autumn 2014 but the numbers still looking to downsize only fell slightly. Many do not want to downsize for family reasons, because they like their home or neighbourhood or because they live in an adapted home. For families with children, schools (48%) were the most important barrier to moving. For landlords, the main barrier was unsurprisingly a shortage of smaller properties.

Areas like London and the South East with the lowest number of tenants affected by the bedroom tax have seen the highest rates of successful downsizing. In contrast, tenants in the worst affected areas worst like Wales and the North East found it much harder because of a shortage of smaller homes and a surplus of larger, hard-to-let homes.

As for a reduction in overcrowding for other tenants, there is no data beyond a modest increase in lets to overcrowded households.

The effect on employment has been pretty dismal. Only 5% of bedroom tax households found work between 2013 and 2014 but to put that in perspective only 2% became unaffected as a result and 3% of affected households who had someone in work in 2013 had lost it by 2014.

As for Lord Freud’s favourite response, just 1% of affected tenants had taken in a lodger in 2014, down from 2% in 2013.

None of which makes it very surprising that the DWP left publication of this report until MPs were about to go home for Christmas. With the government secure (Tory MPs worried by what they heard during the election campaign now seem to have gone quiet) there seems little prospect of change any time soon. Attention will now turn to the next wave of benefit cuts, including the reduction in the benefit cap and the LHA cap on housing benefit for social tenants. The government may have increased the budget for DHPs but demand for them will increase by more.

Tenants in Scotland and Northern Ireland have devolved governments able to mitigate or abolish the bedroom tax. For those in England and Wales, the grim reality for most seems to be that they will continue to have to pay their shortfall by eating less, heating less or borrowing the money.

And one question perhaps looms larger still: what happens to the 50,000 households who had paid none of the shortfall against their rent in Autumn 2014?