The ‘Bedroom Tax’ – Under Occupancy Ruling
Changes will be made to Housing Benefit under the UK Government’s Welfare reforms which will come into effect from 1 April 2013 which will mean tenants claiming benefits will receive less benefit towards the cost of the rent.
If there is one spare bedroom in the rental property then the Housing Benefit will be cut by 14% of the cost of the rent. If there are 2 spare bedrooms then the Housing Benefit will be cut by 25% of the cost of the rent.
The new bedroom tax rules mean that tenants in social housing will see their benefit cut if they have spare rooms. These rules even apply to those not on benefit, they will now face charges of around £13 for one spare room and £22 for 2 rooms.
Under the new government rules, one bedroom is allocated for:
- A couple.
- A person who is not a child (aged 16 and over).
- 2 children of the same sex up to the age of 16.
- 2 children who are under 10.
- Any other child, (other than a foster child or child whose main home is elsewhere).
- A carer (or group of carers) providing overnight care.
What it could mean for your tenants
If your tenants are affected by these changes and their Housing Benefit doesn’t cover the cost of the rent, the tenant is expected and legally obliged to pay their landlord the balance.
These welfare reforms will instantly affect social housing tenants, however, private rental sector (PRS) tenants won’t be affected by this change at the present time, but it will happen.
Use the link to the welfare reform calculator to see how your tenants could be affected – Welfare reform calculator
Preparing your tenants for the changes
As a landlord you may wish for your tenants to consider:
- Talking to you – Re-negotiate a rent reduction to a level which is more affordable
- Opening a Credit Union account so that rental payments can be made automatically without the tenant having full access to the whole proportion of their benefit payments.
- Get a job to replace their benefit income.
Housing Benefit will be paid direct to people of working age through Universal Credit. This means that they will have to make arrangements to pay the full rent on time every month directly to their landlord.
This will start in October 2013 for all new claims, with existing claimants being moved onto ‘Universal Credit’ from April 2014.
Universal Credit is a new means-test benefit for working age people. It will be a monthly payment paid into a household bank account that will be generally phased in from October 2013, however this will be trialed by certain local authorities including the City of Salford from April 1st 2013. It will first be introduced for new claimants and for people whose circumstances have changed resulting in a change to their benefits.
It will replace lots of benefits that your tenants may currently receive, including: Housing Benefit, Local Housing Allowance, Working Tax Credit, Child Tax Credit, Income Support, Income based Jobseeker’s Allowance and Income-related Employment and Support Allowance.
How It Will Affect Your Tenants
When the changes affect your tenants:
- Tenants may receive less benefits resulting in a shortfall in income leading to financial struggles.
- Tenants will be paid benefits on a monthly basis, direct to their bank account.
- Universal Credit payments will include the Housing Benefit payment which will be paid directly to them even if they are still in rent arrears or are considered vulnerable
- There may be a risk of tenant rent default and this needs to be watched out for and action should be taken to recover the rent immediately.
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