Spare Room Shortage

A think piece by Kerry Parr kerry.parr@thhp.co.uk

The author and Times columnist Caitlin Moran wrote an impassioned article criticising the ‘bedroom tax’. Her main conclusion being that it undermined the important relationships between people in social housing. I found myself agreeing with her every word, as I often do with Caitlin Moran. It is a very convincing article, but it is really only part of the story. The tug of war over spare bedrooms is a more complex and deep rooted issue than has been portrayed by the often partial accounts in the media.

It is about more than just taking away £14 a week from working age people in social housing with a spare bedroom. At the root of the bedroom problem is a deep unfairness with our housing system. The unfairness is the vast shortage of housing. It is this that causes it to be rationed. It is this that has allowed a complex bureaucracy in charge of that rationing process to develop. There is inevitable hardship that arises when there is not enough to go around and hence ridiculous arguments about spare rooms. It also ignores the fact that one third of those on housing benefit live in the private rented sector and they do not benefit from a ‘spare room subsidy’ – or you could argue they are already subject to the ‘bedroom tax’. There is deep inequality between those in the social and private rented sectors.

Part of the argument over spare rooms has been over the apparent unfairness of under occupancy in social housing in the face of overcrowding.

39% of social rented homes are under-occupied – 11% have 2 or more bedrooms than they need and 28% have 1 more bedroom than they need, according to the official measure known as the bedroom standard. And ‘bedrooms’ could include rooms which would typically be considered reception rooms in the owner occupied sector. This is a curious concept anyway. In the market sector under occupation is the norm. Households generally have more space than they strictly need and this is especially true of older households who have stayed in the family home after children have grown up and left or couples who buy a house with the expectation of having a family.

There is a whole other debate about the measure used to judge under occupation and overcrowding. For example, on this measure a family with 2 children under the age of 10 are judged to need only 2 bedrooms. It is assumed that two young children can share a bedroom up to the age of 10. If they are the same sex they can go on sharing up to the age of 20. Under this measure, a family living in social housing with 3 bedrooms would be deemed to be under-occupying their home. Imagine two parents and two teenagers with just two bedrooms. What about space for home work? Similarly, imagine two young children with different sleeping patterns or a baby that wakes in the night and disturbs his sibling. These are not rare examples. I know because I have spent weeks analysing local authority waiting lists. There are hundreds and sometimes thousands of these families in each local authority in the country who are only entitled to two bedrooms. The bedroom standard is far from generous. But it is a consequence of shortage. If we had more housing, people could have more space. Enough space.

Overcrowding in social housing is an issue. 9% of households in social housing have 1 or more too few bedrooms. There are again hundreds, sometimes thousands of households in each local authority across the country who do not have enough bedrooms for their family. It is easy to see how it happens. A family with two children of different sexes that are allocated 2 bedrooms when the children are young and then need separate bedrooms for those children when they reach 10 years old. As larger properties become available for re-let infrequently, and overcrowding on its own is rarely enough to propel a family to the top of the waiting list, these households can wait years to be rehoused, if ever. Meanwhile, they continue to live in overcrowded conditions. The turnover or re-letting of the social housing stock is very low. Social housing properties have a similar turnover to owner occupied housing – around 5-10% a year. This is in stark contrast to the private rented sector where the turnover is 35-50% a year. This is because people in social housing have secure tenancies. In social housing, tenancy duration is not reviewed as circumstances change.

It is important to note that overcrowding is not just a problem in social housing. People in the private rented sector are also over-crowded (9% of all households). Largely because they can’t afford the higher rents needed for an appropriate sized property, even with housing benefit, and are forced to overcrowd. This is particularly true in markets where prices and rents are highest and housing shortages greatest.

The twin problems of overcrowding and under occupancy in social housing provide justification for policies that encourage people to move if they have more space than they need. Most of those who are under occupying social housing are actually older people however. And the ‘bedroom tax’ does not apply to them. There are other schemes in place in most local authorities to provide older people with incentives to move eg help with removal costs, offer of newly developed sheltered housing, sometimes lump sums (£1,000s) in cash. No one can be forced to move because tenants have secure tenancies. And government is not proposing to reduce the housing benefit payments to older people with spare rooms because they are typically on fixed incomes and have less prospect to increase their income by working. No government wants to be seen to be forcing elderly people out of their homes.

So the ‘bedroom tax’ only applies to working age people. Their housing benefit will be reduced but they have options. They are working age so they could increase their earnings to top up the rent. This assumes there are jobs available or that they have the option to increase the number of hours they work and that childcare is available and affordable for those with children. Some will have to top up their rent with other benefits they receive – money that they would have spent on fuel or food. Some will fall into arrears and housing associations are experiencing increasing arrears as a result of a range of changes to housing benefit. Some will request to move to a small dwelling – one that is affordable on their reduced housing benefit.

This relies on there being sufficient numbers of smaller properties to let to those who are downsizing. Some Councils and housing associations are claiming a shortage of 1 bedroom properties to deal with this. I find this hard to believe as when you analyse data on social housing stock and lettings it is dominated by smaller properties. But it may be something to do with the priority given to these downsizers on waiting lists – they will be a lower priority for rehousing than the homeless and urgent housing need cases – which may mean that they are not really being considered a priority for the smaller properties that become available.

The real alternative for these households is to move into the private rented sector. The implication for the tenant is that it will mean a move to a less secure and possibly very insecure tenancy, like others in the PRS. The rent will also be considerably higher but – if eligible for housing benefit – they will be able to claim higher housing benefit. Not good news for the housing benefit bill.

This leads us on to the often ignored component of this story. The private rented sector and the fortunes of those accommodated on housing benefit in this sector has been largely ignored in the entrenched debate about social housing tenants losing part of their housing benefit if they have a spare bedroom. One third of those who receive housing benefit – one third of those in housing need – live in the private rented sector (1.5 of the 4.3 million housing benefit claimants in England) . The private rented sector has become an extension of the social housing sector. It is also growing, unlike the social sector. But there is serious inequality between the two sectors.

Private rented tenants do not have spare bedrooms. At least not those funded by housing benefit. In the private rented sector your housing benefit is calculated on the size of home your household needs and as household circumstances change e.g. family grows or children leave home, the benefit adjusts up or down accordingly. These tenants are expected to make up any shortfall in rent with their own income or move to a different property to reduce their rent. They are typically on 6 month assured short hold tenancies and therefore do not have security of tenure like those in the social housing sector. Moreover, housing benefit is paid directly to the tenant who pays the landlord (with some exceptions). They have to manage their own budgets.

In the social housing sector, housing benefit is initially based on the household’s entitlement according to their household size. However, once a home is secured there is rarely any re-evaluation of housing benefit payments if a household’s size changes. The benefit is linked to the house rather than the household. Benefit is paid directly to the landlord (local authority or housing association) so some tenants are not even aware of the size of the subsidy they receive. If their savings reach a certain threshold, like PRS tenants, they are no longer entitled to housing benefit. But social rents are also very low. About two third and sometimes half the level of the private rented sector for some property sizes. They are subsidised by the grant that Government has paid to social landlords in the past to allow them to build affordable homes and various rent controls that regulate how much rents can increase over time. And as the vast majority of tenants in social housing have secure tenancies they can stay in their homes forever, providing they pay the rent. There is no review of tenancies as household income changes or if children leave home.

Although 30% of social housing tenants do not receive housing benefit, in practice, few tenants have incomes sufficient to afford market housing. I know this because I have spent many, many hours looking at data from numerous local authority housing registers and the income of applicants and existing tenants. However a proportion (I estimate 5-10%) of social tenants could afford to either rent or buy in the market but there is little incentive for them to move because they benefit from such low rents and would be significantly worse off in the private sector in terms of cost and security of tenure. But no worse off than the 1.5 million households who already live there.

In some ways, private rented tenants on housing benefit are the poor cousins of tenants in social housing. They have the same needs, they are probably on the local authority waiting list, but because of the shortage of social housing and the low turnover of properties they are unlikely to be housed. However, housing benefit allows them to access a home in the private rented sector.

The private rented sector really is the silent partner in meeting housing need in the UK. It receives no grant funding from Government but it costs HM Treasury a significant amount in housing benefit because it is essentially paying market rate for rents. And tenancies are insecure – there is no guarantee tenants can stay longer than 6 months. Although it is generally not in landlords’ interests to end a tenancy unless a tenant is not paying rent, in areas of very high/rising rents eg London, landlords take the opportunity to sell or re-let their properties at a higher rate and tenants are given notice as a result.

The PRS also doesn’t add value in the same way that many social landlords do – providing tenants help with access to work, money advice or help to staircase up to home ownership and managing neighbourhoods. But it is growing in size and importance. In contrast to the social housing sector which has declined as a proportion of all housing over the last decade. It is also important to highlight that most poor condition properties are in the private rented sector – properties that are cold, damp and hazardous to health – all paid for by the public purse. In the context of a housing shortage there is little incentive to improve them. It is unsurprising that the most vulnerable people end up in the poorest stock. The issue of conditions and related fuel poverty, cold and impact on health is a whole other debate.

The reduction in housing benefit to those living in social housing with a spare bedroom is meant to save money. But because of the severe shortage of housing overall, the public purse will end up footing the bill one way or another. A significant proportion of those choosing to move will be unable to secure a small property in the social sector and will need to rent privately. This will increase not reduce the housing benefit bill. In extreme cases where households get into arrears in the social sector and this results in eviction they may well find themselves homeless and accommodated in temporary accommodation. This is the most expensive outcome for the public purse and the least desirable in terms of outcomes for the people involved, particularly children.

Of course this discussion ignores some of the objectives of social housing. It is not just about subsidising those in need. It is about creating security for families, building stable communities as Caitlin Moran argues, and therefore it would not necessarily be desirable to encourage or force people to move on from social housing just because their financial or family circumstance change. Or is it? I am just assuming there are these aims but they seem to be aspirations of the past, when social housing was first promoted following WWII. Government doesn’t seem to have any obvious objectives for social housing, or any kind of real housing strategy. Furthermore, the costs, benefits and values of different tenures have not been set out by government. If they were, perhaps we could judge the debate on bedrooms against them. For example, the £14 a week subsidy for a spare bedroom might be money well spent if that allows a father to look after his children every other weekend and provide a stable father figure in the event of parental separation. Or £14 per week subsidy might not be money well spent if it prevents the release of a social home to a family who instead have to rent in the private rented sector (funded by housing benefit). It really depends what your objectives are and what trade-offs you are prepared to accept in pursuing them.

The focus of the bitter debate about spare bedrooms misses the point. The problem is a shortage of housing in the UK. People are not getting upset about spare bedrooms or £14 a week; what is at the heart of their fears is that there is just not enough housing to go around. The problem is so severe that a huge amount of time and money is spend trying to ration it fairly. It is clearly not fair that those in social housing on housing benefit currently continue to receive subsidy to live in a home that is bigger than they need – but I would argue for changes to the bedroom standard first to give children, in particular, more space. If there were enough homes to go around we wouldn’t have to ration space so severely. Children could have their own bedrooms. Working people could use the box room as an office to start a business or work from home. Just like the rest of us do.

But a real unfairness exists for the third of those on housing benefit who live in private rented homes, where space is tightly rationed according to housing benefit, tenancies are insecure and tenants at higher risk of being accommodated in poor condition properties. A significant number of the people with urgent needs are on waiting lists for social housing but that housing rarely becomes available to accommodate their needs. It is worth stating that it should not be our objective to make social housing more like this, notwithstanding the need for better review mechanisms for tenancies when incomes and life circumstances change.

At the root of this there is also an issue of tenure. There needs to be more clarity on what the costs and benefits of different options are to the public purse and to the values and objectives we hold as a society. There has been a casual drift into using the PRS to accommodate those in need but it doesn’t provide security and stability and it involves HM Treasury paying market rents to some properties that are in poor condition and badly managed. There is serious inequality between those accommodated in the social housing sector and those in the PRS but no obvious guiding strategy to grow a particular sector or to make the two tenures more equal.

The ‘bedroom tax’ is the least of our worries.

If you have any thoughts or comments, please get in touch kerry.parr@thhp.co.uk