Bedroom Tax will cost more than it can save, say housing experts

New figures released by the two organisations reveal that the direct cost of implementing the bedroom tax would be at least £21m across the housing associations and Housing Executive. This is to cut the benefits bill by £17m.

The bedroom tax will affect 32,000 households in Northern Ireland. NIFHA and CIH are now calling for the proposals to be dropped in Northern Ireland.

Economic modelling undertaken by NIFHA and CIH estimates that in the first year following the introduction of the Bedroom Tax, housing association tenants will lose £3.8million in housing benefit. Compounding this loss to tenants will be additional direct costs to housing associations of £6.4million, including the significantly increased costs for collecting rent, managing tenancies and adapting current systems.

Direct costs to the largest social landlord in Northern Ireland, the Housing Executive, are expected to be at least £10million per annum with a further £0.5million needed to reassess Housing Benefit claims across the social housing sector.

Only £3.8million extra funding has been allocated for Discretionary Housing Payments (DHPs) to mitigate the worst effects of the Bedroom Tax.

Cameron Watt, Chief Executive of NIFHA said:

“Most people agree that welfare should be reformed to create a simpler system that makes work pay and reduces the benefits bill.

“However the Bedroom Tax is an ill-conceived policy that will achieve none of these things. Rather it will hurt vulnerable people in Northern Ireland, causing financial hardship for tens of thousands of families.

“Government has yet to calculate the true cost of implementing the Bedroom Tax. However these new figures from NIFHA and CIH show that the direct costs of £21million for the Housing Executive and housing associations will exceed the projected benefit savings of £17million.

“It’s clear that the numbers don’t add up on Bedroom Tax. Northern Ireland can’t afford the human or economic damage this policy would inflict.

“We share the Social Development Minister’s desire that no tenant should lose their home as a result of the various welfare reforms.

“However as our members are social businesses, they will have to continue to collect the full rent from customers to remain viable, providing good services to tenants and building much-needed social and affordable homes.

“A delay of even three years is not the solution for a policy that it is so unsuited to Northern Ireland. And even a ten-fold increase in the number of smaller social homes being built would still leave the vast majority of affected tenants without a suitable social home to downsize to.

“Therefore the only sure way for Minister McCausland and his NI Executive colleagues to protect social tenants, is not to introduce the Bedroom Tax.

“That’s why we’ll be campaigning hard for MLAs to bin the Bedroom Tax when the Welfare Reform Bill returns to the Assembly on 16th April. When even the Chairman of the NI Conservatives admits the policy is ‘unfair’ here, it’s definitely time for Northern Ireland to bin the Bedroom Tax.”

CIH NI Director Cecilia Keaveney said:

“These figures confirm what housing professionals have long suspected – introducing the Bedroom Tax in Northern Ireland just doesn’t add up. It will cause real hardship for some of the most vulnerable members of our society as well as posing huge challenges for social landlords, particularly given the unique profile of social housing here.

We’ve always known that there would be a significant human cost to the bedroom tax, but these figures show that there is also considerable financial cost to the sector and Northern Ireland Executive.

I would strongly urge our MLAs to take these figures into account when they consider the Welfare Reform Bill again later this month.”

Janet Hunter, Director of Housing Rights Service, which provides of specialist independent housing advice, training and information in Northern Ireland said:

“Housing Rights Service is already being contacted by social housing tenants who are very anxious about the ‘bedroom tax’. Many of these tenants have lived in the same home, as secure tenants, for a considerable period of time and cannot understand why they should suddenly be asked to pay more or move out. We have clients with disabilities who need an additional bedroom to store medical equipment and single fathers who require more than one bedroom to facilitate overnight access to children. Naturally, many have established firm community and family links and have invested significant amounts of time and money into their homes. It seems grossly unfair to force households who cannot pay the shortfall to move out, with absolutely no guarantee of suitable affordable alternative housing.”

Ends

Notes to Editors

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NOTES TO EDITORS

1. Introduced in Great Britain this week, the Bedroom Tax (also known as the social sector size criteria or under-occupation penalty) would see the tenants of Housing Executive and housing association rooms considered to have ‘spare bedrooms’ lose a large chunk of their housing benefit, 14% if they have one ‘spare’ bedroom and 25% if they have two or more.
2. A typical Housing Executive tenant with weekly rent of £58.76 on full Housing Benefit but who is under-occupying by one bedroom would see their HB reduced by about £8.25 a week. A tenant who is under-occupying by two or more bedrooms would see a reduction of about £14.70 per week. If a tenant’s Housing Benefit is cut they will have to make up the shortfall between it and their rent, forcing many in to severe hardship.
3. NIFHA/CIH have calculated the likely cost of the Bedroom Tax for social landlords by estimating likely additional costs in tenancy management (such as collecting the shortfall in rents caused by this policy, managing an increased turnover in stock and, in the last resort, taking legal action where tenants have fallen seriously behind in their rent payments). These costs are added to those for communications and engagement with tenants and upgrading systems to get an estimated total cost. It is expected that the 6,300 housing association tenant households will lose £3.8 million in housing benefit per annum. We estimate housing associations will lose on average at least £5million p.a. in the direct costs of this policy (£6,425,705 in Year 1, £3,986,231 in Year 2, and £4,650,581 Year 3).
4. The Northern Ireland Housing Executive (NIHE) is our largest social landlord. NIFHA estimates that the additional direct costs to NIHE as a landlord in the first year of the Bedroom Tax’s introduction would be at least £10million and potentially much higher.
5. The Housing Executive also administers housing benefit for the Social Security Agency. We calculate that re-assessing 32,000 housing benefit claims for the purpose of introducing the Bedroom Tax will cost £480,000.
6. Tenants will have their Housing Benefit payment reduced by 14% of their rent for under-occupation by one bedroom and by 25% for under-occupation by two or more bedrooms.
7. 26,168 households in Housing Executive homes and 6,262 families in housing association homes will be affected by the bedroom tax, a total of 32,430. NIFHA calculates that the under-occupation penalty in Northern Ireland will result in £17.3 million being less paid in Housing Benefit to affected households in social housing - £13.7 million to Housing Executive tenants and £3.6 million to housing association tenants.