Bedroom Tax, Universal Credit and Implications for Housing

My chain of thought on this started with a conversation with a developer back in March about the bedroom tax. When he asked me if I thought it was fair he probably wasn’t expecting a detailed, researched answer setting out statistics, what North Herts Homes has said and the failings in pilots of Universal Credit but that’s what he got.  Thinking about it, the point he added was blatantly obvious and I’m slightly embarrassed I didn’t mention it in my original post. He agreed about the unfairness of what I was describing but added another factor. “We can’t get planning permission for smaller social housing.” This isn’t a “boo hoo poor little developer” point because what he’s talking about is the size of the properties being allocated as social housing on the development.  Whenever a developer wants planning permission, they have to account for the requirement to build social housing, (although the Government’s taken steps to relax this rule which could result in even less social housing being built) and this is what he was talking about. He was basically saying he builds what he’s told to build when it comes to the size of social housing. That said, even if they were given planning permission to build smaller properties, when social housing started being mixed into private estates there were concerns it would suppress the value of the private properties, put private buyers off and therefore reduce the profitability for the developer. I suspect that concern would crop up again for some developers if they were asked to add, for example, one bed flats into a development of three and four bedroom houses.

Our conversation started over the assumption that a social landlord had plenty of cash available. The previous day I’d heard the results of pilots which showed an extraordinary rise in rent arrears in areas where Housing Benefit was being paid directly to the claimant, rather than to the landlord. The Universal Credit pilots involved a very small sample and some people were deliberately kept out of the pilot because it was believed that they wouldn’t be able to handle direct payments. In theory this ensures individual autonomy and, in theory, it’s hard to argue against direct payments without seeming patronising, a supporter of the nanny state. The practical reality is that people struggled. They couldn’t manage their personal finances effectively.

I’d love to be able to say that our education system has successfully prepared everyone for managing their money. I’d love to be able to say that people’s household incomes aren’t stretched painfully thin and they don’t have to make choices like whether to feed the meter today for a less immediate risk of being evicted. The reality, though, is that education does fail many people and that poverty is real. A third of the UK population is unable to add up two three figure numbers (and 20% are functionally illiterate). Household budgeting includes doing precisely that. It is inevitable that people with poor numeracy skills will be among the poorest in our society. It’s inevitable that many will be in receipt of benefits. Housing Benefit is also received by people with better numeracy skills – it’s a broad reaching benefit – but we shouldn’t create a system that is too complex for many recipients to handle.

The statistic on numeracy skills also makes a mockery of the Government’s claims that unemployed people make an active decision to stay out of work to keep benefits after calculating them. In an interview with Sky from his own home on 31 March, Grant Shapps defended benefits changes by saying that people can believe the Government when it says they’re better off in work without having to “study the Job Centre Plus computer for an hour and a half” (if JCP’s online calculator takes that long to use, its developer should be put down). And these pilots didn’t even include people with learning disabilities or mental illness. So, in addition to the tenants who will be unable to top up their rent after their Housing Benefit is cut by the Bedroom Tax, social landlords face further drops in rental income under Universal Credit.

It’s also been correctly pointed out elsewhere that redesignating properties as having less bedrooms will help the tenant who would otherwise be subjected to the bedroom tax but will reduce the amount of rent the social landlord can charge, which will have a knock on effect on cash flow and, in all likelihood I would think, capital spending.

If the outcomes of the Universal Credit pilots are replicated nationally, will we see an increase in private sector arrears and a decrease in the availability of private rentals to Housing Benefit recipients? Where Housing Benefit is highest, it’s down to the demands of private landlords. They set the rents and we don’t have rent control mechanisms in place. They’re entirely in it for the money. Over the past five years, home owners have been helped to keep their homes when they default on their mortgages but I don’t believe for a second that most private landlords will be sympathetic to their tenants if they go into arrears. It’s equally unlikely that the Government will feel that there is any political imperative to protect renters who get in arrears (if anything, I expect the Government to say that the failure to properly budget constitutes incontrovertible proof that people on benefits spend them on useless things like booze, fags and gambling and that the rise in rent arrears proves that benefits should be reduced). In fairness to individual private landlords, if a landlord has a buy to let mortgage on the property, he may well go into arrears himself and risk repossession if he allows his tenant’s arrears to mount up. Owners of investment properties can’t expect to be treated the same way owner-occupiers are if they go into mortgage arrears.

If housing wasn’t already stretched thinly, this might all start bringing rents down a little bit but the rental market is so overheated in areas like here in the South East that it’s entirely plausible that we won’t see a reduction in rents. I suppose one possibility is that we’ll see shifts in market rents for different sizes of properties. People driven out of social housing may look for a smaller property but they’re already occupied by other renters. If demand for larger properties dips, private renters who aren’t on benefits may be able to consider moving to a larger property but wages are suppressed across the board. How many people would be able to afford to do that?

There is a slim chance this could produce a beneficial change for young house buyers. If lenders are unwilling to give buy to let mortgages, owner-occupiers stand a better chance of being able to buy properties which would be attractive to investors. However, the words in my head as I write this are “no DSS”. Whether properties remain in investors’ hands or are bought by owner occupiers, the one thing that seems a near certainty is that less privately owned properties will be available to people on Housing Benefit. These outcomes seem to fit the Government’s ideological desire when it comes to the distribution of housing. They hurt the poorest but possibly put a few more middle income people onto the housing ladder. If you want to be really cynical about it, it also blocks upstart investors who need mortgages so that only cash buyers can confidently buy to let. That would be a satisfactory outcome for wealthy investors the Tories may want to woo in 2015.


2 thoughts on “Bedroom Tax, Universal Credit and Implications for Housing

  1. lawgeekblog Post author

    I changed a bit of the first paragraph of this after hearing from someone who seemed annoyed by this post. She even seemed offended by the blog’s name, which is derived from the slightly self-mocking name I chose for Twitter and which amuses me because of other silly and non-law related things like enjoying sci fi & fantasy and having alphabetised cds. My blog isn’t written for lawyers. It’s read by some but nobody’s going to meet their cpd requirements by reading it. It’s not about drumming up business or giving advice. Being a solicitor is only part of who I am. I don’t stop being one when I write but this blog is about more than that. It’s a place where I put thoughts on a range of different issues (and silly parodies – let’s not forget the parodies). Given that she even incorrectly identified my gender, my complainant presumably hadn’t looked very hard at my blog and hadn’t realised what it’s all about, or cared either.

    To be honest, I’ve no idea how many people might read a post like this with no prior knowledge of me or this blog. Not many at a guess. I’m just not that important – popular posts might get 100-500 hits. That’s all. Still, having had one rather rude gripe, I’ll clarify the opening paragraph of the post. This post was preceded by one about North Herts Homes’ report on the likely impact of the bedroom tax. That report was linked to in the original post which I linked to in this post in turn. This post assumes that readers have read the original post previously (or when they come across the link above) and understand that I’d been looking at this on a local level because it so happened that our largest social landlord commissioned such a valuable report. North Herts also happens to be a district where no social housing is owned by the Council. It’s surprising and irritating that someone who writes in such a finicky way herself hadn’t bothered to read my previous post before going on the offensive.

    This follow-on post came after a conversation with a small scale developer. It was a passing chat. I’m not claiming to have made an in depth study of developers’ views on the bedroom tax and certainly didn’t intend to give that impression when I said I’d spoken to “a developer” and referred to “him”. His point was that the local planning authority will have its say. A developer who suggests x 2-bed social houses may be told that the planners want him to put in y 3-beds instead. I’ve edited it to clarify that’s the intended meaning. If the local planning authority incorrectly assesses need or has the rug pulled out from under it by a reform to the benefits system, the decisions they’ve made are the ones we’re stuck with. Decisions a developer with a conscience might regret, even if he’s not responsible for them. There must surely even be a decent possibility planners won’t change their assessment of need now, on the assumption that the bedroom tax won’t be around for long and that there’s reasonable justification for building homes which provide a better quality of life than the current Government is willing to allow people to have (again, see my original post for my personal opinion on the Government’s policies in this area) to secure a better long term future for residents.

    That conversation had been knocking around in my head along with the numbers on the Universal Credit pilot and Grant Shapps comments at the end of March and the thoughts on indirectly related issues were slotted into the one post. It’s a post about social policy issues and not a recitation of relevant law in these areas.

    If you know me and my blog you probably realised that when it comes to the end of the first paragraph, I’m not expressing sympathy for developers as such or suggesting social housing should be built separately from private housing. I don’t see how it helps matters to deny prejudices exist though. Some people might be uncomfortable with my even expressing the idea that private purchasers might be prejudiced but the fact is that some are. Some people don’t like the thought of buying an ex-council house for heaven’s sake. Large numbers of people must be prejudiced or the Tories’ disgusting rhetoric would just disappear. I’ve been criticising that rhetoric since I started this blog and anyone who read my previous post on the bedroom tax knows I live on a street among a number of streets (old properties as it happens) where private and social houses sit side by side and have very strong opinions on the way the Government is treating my neighbours. I would resent any implication that I’m in favour of segregation by someone who hadn’t read that post. I may have read her comments in this regard wrongly but after her previous rudeness, that’s the point at which I just switched off and clicked out. I’d had enough.

    I’m not going to say more about the particular person I was talking to but I was writing from the perspective of small scale developments. I didn’t make that clear in the post. To my mind the practicalities are different. There are differences in areas such as business strategy, financing and economies of scale between larger and smaller developers. There’s a difference between a new estate of hundreds of houses (we’ve got some potentially slated for a thousand or more here at the moment) and a smaller development like a single street, a row of new houses on a former commercial brownfield site or carved out of the grounds of other properties.

    I didn’t stop to clarify the fact that my thoughts stemmed from local considerations in this post. Perhaps I should have done. We’re in an area with an ever increasing shortage of housing, ridiculous prices and rents and where sensitivities (which I share on a personal level) relating to the green belt have a significant impact on large developments. While a proposed large development gets hung up, potentially for years, small developments are getting built. It was suggested by a District Councillor late last year that if the Council approved plans for a jump in building which would include some larger developments, nearly 20% of those new builds could come from small sites. If larger developments are held up due to their locations, that proportion would naturally rise in the interim. Small developers and small developments matter.

    Different people have different interests, concerns, writing styles and audiences in mind when they blog. I have mine. If someone’s inspired to comment on related issues as a result of reading something here, great but how they go about it can affect the response they can expect. I don’t know if this particular person cares one way or the other if I read what she has to say. Somehow I doubt she does because the initial comments and gender mix up left me thinking “obnoxious tit. Why should I wade through this?” So, a tip. If you care whether I read your stuff, take you seriously, share it myself or reply, subject it to a quick test for obnoxious tittery first.

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