The Bedroom Tax: Will it affect you?

Piggy Bank with BeltThe much-talked about bedroom tax will come into effect this April. Those against it say that it will leave already struggling families homeless or in debt. Those in favour of it say that it is necessary if we are to reduce the housing benefit bill to a more manageable level than it is now.

Whatever the rights and wrongs though, it has the potential to hugely affect landlords renting to tenants on housing benefit. In some cases, you may not realise that you tenants are claiming: if their circumstances have changed since they took on your tenancy, they could be using housing benefit to pay their rent without them informing you.

Bedroom tax guide

The bedroom ‘tax’ is not actually a tax, but a cut in housing benefit for those deemed to be under-occupying their homes. The rules state that people are allowed one bedroom per single adult or couple aged over 16, one bedroom per two children of the same gender under 16, and one bedroom per two children under ten, regardless of their gender. People with one extra bedroom will lose 14% of their housing benefit, and those with two will lose 25%. It does not apply to pensioners.

What can I do about the bedroom tax?

If you have under-occupying tenants, then there are three options. You could accept a lower rent, the tenants have to move, or they have to find the extra money.

There is no easy answer to this one. Most landlords will, naturally, want to maintain their rent at current levels. However, depending on your mortgage, landlords insurance and other costs, it may be worth considering doing so. Losing good tenants at a time when there is considerable change happening in social lettings, and arrears already being high, could end up costing you more. Asking tenants to find the extra money may push them into debt and then into future arrears.

Each situation is different. The average cost of the bedroom tax is estimated at £14 per week, or £676 per year. That could be less than the cost of a void period of eviction as a result of arrears. At the same time, it is a lot of money to have to subsidise tenants with on a long-term basis. For many landlords, there may be a compromise option of a temporary lowering of rent while tenants look for a new property. As ever when there is a risk of arrears, it is worth talking to tenants to find out more about their situation.

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