Last week the Centre for Housing Policy at York University produced a report – sponsored by four housing associations – criticising the cut in spare room subsidy. It suggested the savings would be lower than estimated by the Government – perhaps £160 million below the projected £480 million for this year. The report duly received deferential coverage on the BBC, including a slot on Radio 4’s World at One. Naturally enough The Independent joined in as did The Guardian.
The crux of the story was that the Centre refered to “flaws” in the Department of Work and Pensions model, these being failing to account for behaviourial change.
The report noted:
“This estimate of savings was calculated by multiplying the average estimated penalty reduction in Housing Benefit by the estimated number of affected households. For example, for 2013/14, the calculation was £14 a week x 52 weeks x 666,000 affected households = £480m.”
“If affected tenants respond to the policy by entering work or gaining additional hours of work, or by increasing their income in other ways, the DWP saving is maintained. The saving may even increase, if the total number of tenants on full benefit and/or the size of partial benefit falls. However, if tenants respond by moving home, to homes with fewer rooms and/or different rent, the impact on Housing Benefit savings becomes complicated.
Many tenants may try to downsize so that they are no longer underoccupying, and so avoid the penalty. They may take other actions to get out of underoccupation such as taking in a lodger (if their tenancy allows it). Any responses that result in lower numbers and proportions of tenants claiming Housing Benefit being affected by the size criteria will reduce the overall saving resulting from the policy.
Some responses could actually add to a household’s Housing Benefit costs, thus also reducing net savings from the policy. For example, some affected tenants might downsize by moving to correctly-sized but higher rent homes in the private rented sector. Some moves within the social rented sector could also have this effect, as many social landlords are now letting homes at ‘Affordable Rents’ which are up to 80% of market value.”
It is true that the Department of Work and Pensions uses static rather dynamic modelling for these sort of changes (as does The Treasury for tax changes). That is the way Whitehall does it. Certainly in the real world behaviour changes as benefits or taxes change. The howler made by this report is assuming that such change will only be deleterious to the Government’s coffers. Why beholdest the mote that is in the DWP’s eye, but considerest not the beam that is in the Centre for Housing Policy’s own eye?
On Monday I offered the heartening results of FOI requests showing that for many people the behavioural change involved getting a job and, for many, not merely reducing the level of benefits being claimed but a complete cold turkey – coming off benefits entirely. Many more will have taken part-time work.
What of the alternatives to work? Downsizing by swapping with an overcrowded family in social housing who are also on Housing Benefit would not result in any saving. That is true. However most of us would still regard that as an advance. How could anyone who is aware of some of the miserably squashed living conditions many families suffer, think otherwise. Does the Labour Party think that causing more of such swaps is a bad thing?
Quick as a flash comes the retort: “Some might downsize to a private landlord with a smaller property but a higher rent and thus pay higher Housing Benefit. The vacated property could be filled by a family suffering overcrowding already in social housing. So the total bill goes up.” But who then who will fill the newly vacated property? It is not as if the number of homes in social housing is being cut. Somewhere along the line someone will come out of an expensive Housing Benefit private sector rental and into social housing. They might be on affordable rent rather than social rent. But where does that extra rent go? What does it finance? It is going into Government coffers.
Even more odd is the objection that someone taking a lodger will avoid being penalised. If you are affected by the spare room subsidy cut and you respond by taking a lodger that means a much greater reduction in the benefits bill. The first £20 of rent can be kept – enough to recoup the loss of the spare room subsidy – the rest of the income that comes in means lower Housing Benefit.
Last year between July and December the Riverside Housing Association (one of the four who contributed tho this report) had contact with 4,771 tenants affected by the spare room subsidy cut. The responses they had were as follows:
3,308 (69 per cent) said they were planning to stay and pay.
1,019 (21 per cent) said they were planning to downsize.
444 (9 per cent) said they didn’t know what their plans would be.
Paying to stay or downsizing are the two choice. They are certainly tough choices, but it is false kindness to tell tenants affected to postpone them by building up debt or running into rent arrears. Either choice helps makes our country fairer, as welfare addiction and the squalor of overcrowding are beaten back, and more have the chance to live independently and with dignity.