The Costs of Under-Occupancy
It is estimated that there are 8 million under-occupied households in England, or to put it in to perspective, 36.5% of the total households in England are under-occupying their home. Given the big housing and financial crisis England is facing the Governments introduction of Housing Benefit regulations, as set out in the Welfare Reform Act 2012, seemed to be a way for them to kill two birds with one stone: to incentivise those is the social sector to move in to more appropriately sized accommodation and to save money by reducing the Housing Benefit Bill at the same time. This all seems like a reasonable idea, after all maximising the use of housing stock can only be a good thing for society and is an issue that has long needed addressing, however the way in which the Government appears to be attempting to meet their policy aims is frankly illogical.
Firstly I will focus on the argument that this policy will save money, but before I do I will touch on my own opinion; I do not believe cutting Housing Benefit is an ideal way to make savings to the welfare bill as unlike other welfare benefits Housing Benefit does not go to people; it goes straight in to the back pockets of Landlords. Landlords who, since Thatcher ended rent controls in ’88, have been able to charge what they want, leaving the private sector inaccessible to many without the help that Housing Benefit provides. Social Landlords differ as they are still very much tightly regulated and have agreements with Local Authorities to charge ‘fair rents’. They are a form of affordable housing for those that are most in need so why are these people being targeted for savings? Especially considering that Private tenants make up 33% of the Housing Benefit caseload yet 40% of Housing Benefit expenditure (a dig at private landlords rather than the tenants that need to claim benefits to pay their rent).
What will the Under-Occupancy regulations mean for Social Tenants?
For households who are deemed to have one extra bedroom above their needs they will be hit with a 14% reduction in the amount of Housing Benefit they receive, for those deemed to have two or more bedrooms, this increases to a 25% reduction in their Housing Benefit. Considering the aim of Social Housing is to provide affordable housing to those most in need it seems absurd to then reduce their benefit by such high amounts and expect them to use what little income they do have to meet the shortfall.
Just as an example; the Government says that a single person over the age of 25 needs a minimum of £71 per week, excluding housing costs, to live off. This single person rents from a Social Landlord, and has their £71.40 per week rent paid for them, but unfortunately they live in a 2 bedroom flat as there are no one bedroom flats available to them as demand is high but supply low. From April 2013 they are told they now need to pay £10.00 per week towards their rent, leaving them with just £61.00 per week to pay their bills, food and any other costs they incur. So the Government says a person needs a minimum of £71 per week excluding housing costs to live on, yet this policy is going to leave people with far less than the minimum. This will not only leave households poorer and surviving on below the Government minimum income but will result in the “affordable, tightly regulated” Social Sector becoming unaffordable. This may push people in to the private sector which is less secure and tends to be of a lower standard as it may mean they may be entitled to more Housing Benefit, as rents are higher. If this happens it will cause the Housing Benefit Bill to rise.
Back to the example: If this person, who we shall say is over 35 and therefore eligible for the one bedroom room rate, manages to find a one bedroom flat in the Private Sector to rent we may consider this as good news as it is maximising the use on the housing stock in the area as the individual will no longer be under occupying their home. However it will also raise the amount of Housing Benefit this individual is eligible for, as well as pushing them in to a less secure and safe home. In the private sector this individual living in the same area will be eligible for £96.92 per week Housing Benefit, where average rent for a one bedroom flat is £450 per month or £103.85 per week. As you may have worked out this would mean the individual would have to pay £6.93 per week towards their rent, rather than the £10.00 per week in the Social Rented Sector, which would leave the individual financially better off, whilst increasing their Housing benefit by £25.52 per week.
Have a little faith
The argument from Government is that this will not result in a rising Housing Benefit Bill as it is believed that for every under-occupying family moving in to the private sector, a family of a suitable size for the accommodation on offer will move in, and thus reduces the overall cost of Housing Benefit to the state. This assumption relies heavily on being able to ensure there are enough families of the right size to fill the homes that are spare, an assumption which seems to rest more on faith rather than fact.
Other than the financial costs that could incur as part of the Under-Occupancy regulations, there are also big social costs to consider. If a person or household is forced to move out of their social house and in to the private sector as it may be economically logical, but they do so at the risk of never being able to get a social house again. It is well known that waiting lists for properties in the social sector are long and for those that are deemed less in need the wait is even longer. If a person is forced to give up their social house because it is no longer financially viable or because they have accrued high rent arrears they may find themselves excluded from social housing in the future, or face an even longer wait than usual if they can get back on to the lists. The policy may have the adverse effect of excluding vulnerable people from accessing social housing and allocation may become based on household make-up and the ability to pay rather than on the basis of need.
This has only touched on one little aspect of the Under-Occupancy regulations and in summary I do not believe the policy will save the government much money but may even increase the welfare bill and may even prevent people who need social housing most from having access to it. If the government is serious about reducing the expenditure on Housing Benefit they would start looking to implement rent controls to prevent Landlords charging what they want and target them instead of the vulnerable people being left to make up the shortfall from what little income they do have.
*The figures for the rent amounts have been calculated by using the average rents of social and private houses in the B37 area and similarly the Local housing Allowance is based on the figure for the B37 area.