6 Feb 2013

‘Bedroom tax’ will cost taxpayers more

Data Correspondent and Presenter

The government’s controversial new “bedroom tax” will cost rather than save money in parts of the country, it has been claimed. Reporter Ciaran Jenkins explains.

In some areas, it is predicted the welfare bill could spiral as social housing tenants are forced to move into more expensive private accommodation.

From April, social housing tenants deemed to be under-occupying their properties will be charged an under-occupation penalty, dubbed the ‘bedroom tax’ by opponents, which will be deducted from their housing benefit entitlements.

Channel 4 News has seen figures from a number of housing associations in the north of England, which suggest the policy may generate costs rather than savings and may result in fewer new homes being built in certain areas.

Forced to move

The government hopes the ‘bedroom tax’ will trim £500m per year from the housing benefit bill, but there are signs that in some places the burden on the welfare budget will actually increase, as tenants move from social to private landlords.

Wigan and Leigh Housing, the arm’s length company which manages 22,000 social housing properties on behalf of Wigan council, says the ‘bedroom tax’ will not produce savings to the public purse in the region it serves.

“With some 4,500 tenants affected and little social housing stock available it means it is inevitable households will be forced to move into the more expensive private rented sector,” says Ashley Crumbley, chief executive of Wigan and Leigh Housing.

Higher claims

Mr Crumbley estimates the welfare bill could go up by £500,000 per year in Wigan, as tenants moving into private accommodation may be able to claim far more in benefits than they currently receive.

The problem is not confined to Wigan, nor the north of England.

Read more: 'Bedroom tax' - the key questions.

Channel 4 News spoke to a single mother in Southampton, who faces a 14 per cent reduction in housing benefit for the home she shares with her two children.

Her rent is currently £365 per month for a three bedroom house with a social landlord, but she could claim £664 per month for a smaller two bedroom property with a private landlord.

Commons clash

David Cameron and Ed Miliband clashed over the issue at Prime Minister’s Questions as the Labour leader read out a series of letters from tenants who will be affected by the penalty (see video, above).

Mr Miliband quoted a letter from “Diane” who said: “My rent for my family home is at present £65.68 whereas a one-bedroom in the private sector would cost over £100.”

“How can it possibly make sense to force people into a situation where they cost the state more, not less, by moving into the private rented sector?” he asked.

The prime minister – who emphasised that the policy was not a new “tax”, but a change in benefit rules – said the government was building more homes and added that a £50m fund had been established to support tenants affected by the reforms.

He said the Labour leader had “absolutely no suggestions for how to get on top of welfare, get our deficit down, get our economy moving or frankly do anything else”.

The policy will also come at a cost to social housing providers, which is likely to mean some existing plans to build new homes will be scrapped, Channel 4 News has been told.

Landlords suffer

Social landlords expect a significant percentage of tenants not to pay their increased rents once their housing benefit levels go down, and therefore anticipate increased costs in dealing with arrears and evictions.

Landlords are also calculating the cost of having to adapt properties for tenants with disabilities who will be forced to downsize, many of whom will be moving out of homes which have already been adapted at considerable expense.

One housing provider in Yorkshire says it now plans to build 2,200 fewer new homes over 30 years, the equivalent of more than one home per week not being built.

Wigan and Leigh Housing says the significant costs it faces will need to be offset by savings, meaning schemes to build new homes and renovate existing stock will be “at risk”. It is already planning for an increase in homelessness as a result of the ‘bedroom tax’ at an estimated cost of £10m.

A spokesman for the Department for Work and Pensions said: “Changes to housing benefit in the social sector will save the taxpayer around £500m a year.”

“It’s only right that we return fairness to the system and ensure a better use of housing when there are nearly two million households on the social housing waiting list and over a quarter of a million tenants are living in overcrowded conditions.”