Room for improvement
by Claudia Wood
There has been growing discussion in the past few weeks of the so-called ‘bedroom tax’ – the exclusion of unoccupied bedrooms from housing benefit paid to social housing tenants.
As unpopular and controversial government policies go, it has all the right ingredients. It affects families that garner popular sympathy: foster parents, military families, and people caring for their disabled or terminally ill husbands and wives. No sniff of the undeserving poor here. What’s more, losing a bedroom is a highly visible, concrete sacrifice with obvious media friendly coverage; much easier than trying to illustrate the impact of benefits uprating. It even has a snappy, if inaccurate name – the ‘bedroom tax’ - perfect for a twitter hashtag and one which resonates with connotations of the poll tax, granny tax and pasty tax.
With all of this rich material to use, it’s understandable that Ed Miliband decided to criticise the policy by describing the case of the army mother who will be penalised for keeping her sons’ bedrooms free while they are abroad serving their country. And why ITV news decided to skip the detailed explanation of the policy and instead speak to the disabled woman whose husband had to sleep in their spare bedroom due to the spasms she has through the night, now devastated at the prospect of making him sleep on the floor for the rest of their marriage.
These are emotive, poignant cases, but by damning the policy based just on these, we risk missing the opportunity to hold the detail of this policy up to public scrutiny. Does the ‘bedroom tax’ deliver?
The government’s impact assessment states the policy has the dual objective of reducing housing benefit spending, and to encourage people to downsize in order to free up larger homes and ease overcrowding.
It clearly achieves the former, by reducing the amount of housing benefit it gives to those households with spare rooms. But the government seems less concerned with the latter. For a start, older people (who are most likely to be able to and benefit from downsizing) are exempt from this policy. The government also acknowledges that if everyone affected by the bedroom tax were to move, demand for smaller properties would outstrip supply. There just isn’t enough housing at either end of the spectrum.
But this isn’t a realistic prospect – as Patrick Butler’s recent column illustrated so well, people don’t like to move. Apart from the obvious upheaval, people often attach a huge amount of sentimental value to their home – places where they have seen their children grow up, where they had cared for their husband or wife before they died, where they had nested and invested, and made their own through adaptation and decoration.
It is these feelings of attachment that explain the ‘irrational’ decisions some families were preparing to make in Patrick’s column – working out how many dinners they needed to skip to meet the new shortfall in their rent, rather than simply moving to a smaller property.
We cannot view social housing simply as bricks and mortar which, when faced with financial disincentives, people will readily give up. This fact would be a major fly in the ointment of a policy intended to prompt large numbers of people to move, but as a priority of the second order behind cutting benefits spending, the government seems unconcerned by this. Indeed, the Impact Assessment suggests they are banking on many tenants staying put, and finding extra money through work to make up the shortfall in their rent.
But surely the first rule of Welfare Reform is that relying on increased financial hardship to encourage people into work, without considering the state of the labour market or the skills of those you are penalising, is a risky strategy. The Impact Assessment boldly claims 30 per cent of under-occupiers would ‘move into work or increase their hours’ to make up the rental shortfall, compared to 25 percent who report they would move. Yet the Housing Future Network report the Assessment cites actually states 29 per cent of those surveyed said they ‘would seek to earn some or more money’ – surely something any family might say when asked a hypothetical question about a budgetary shortfall. The enormous difference between ‘trying’ to get work and ‘moving into work’ in this economic climate seems to have been overlooked.
So should we label this policy as a cost cutting measure, masquerading as a housing solution? Well, there’s no guarantee it will reduce housing benefit spending as much as predicted, either. Those having to downsize, but faced with a dearth of smaller homes to rent, may simply move to the private sector – where rents are higher, met by an increase in housing benefit. The impact assessment suggests 35 percent of those affected by the policy will fall into arrears, which doesn’t come cheap. The immediate costs of evicting and rehousing families are estimated at £5,700 for housing providers and £3,800 for local authorities per eviction, in possession orders, admin and repairs. And what happens when housing providers have to bear the costs of large numbers of evictions and repossessions? They may be forced to increase rents, in turn increasing housing benefit costs.
It is worth mentioning that all of the projections in the Impact Assessment are based on a sample of 452 people. Given nearly 670,000 people will be affected in April, this suggests a lack of definitive evidence on how people will react to a rental shortfall. But this reaction is fundamental to the savings generated and the pressure placed on different parts of the housing sector.
In contrast with such an untried and untested approach, there are many more reliable and effective ways of reducing housing benefit. Addressing the housing shortage at the root of our spiralling housing benefit spending would be a good place to start, and better strategies exist to encourage downsizing. There are many social tenants (including numerous older people) who could readily (and in lots of cases, very willingly) give up their bigger home for something more manageable, if practical help and incentives were in place. But the ‘bedroom tax’ wields an unsophisticated financial penalty instead, even though people’s tendency to make irrational choices when it comes to moving home points to more positive ‘nudge’ strategies as more effective. It also is unable to distinguish between those who could downsize with help, and those whose ‘spare’ bedroom is vital to maintain their quality of life. As a behavioural change tool, this policy is a blunt instrument.
It is undeniable that the ‘bedroom tax’ will reduce costs and under-occupancy, to some extent. But the significant assumptions upon which this is based makes it very hard to predict how effective it will be. And it’s clear there are alternative strategies which are more effective, more reliable, and with fewer unintended consequences to achieve the same goals. The media will continue pulling on heart strings, but it’s the purse strings where the policy falls short.