How do the housing benefit changes work?

London council block Half a million council tenants saw their housing benefit cut in April

A change in housing benefit rules, introduced in April 2013, has been dubbed the "bedroom tax" by Labour and, for many, the name has stuck.

Strictly speaking, though, it is not a tax at all.

The government says it is simply removing the "spare room subsidy" which put social sector tenants in a better position than those in the private rental sector.

Ministers argue the changes will encourage people to downsize to smaller properties, and in doing so, help cut the £23bn annual bill for housing benefit, free up living space for overcrowded families, and encourage people to get jobs.

But housing charities have warned that the result will be higher levels of rent arrears and greater homelessness.

The government estimates that over half a million tenants are affected by the new rules, which took effect in April this year.

More than half of those affected have a disability causing them "significant difficulty in one or more areas of the individual's life", the Department for Work and Pensions has said.

The government predicts that savings to the taxpayer will amount to £505m in 2013-14, and £540m in the year after.

What has changed?

The new rules affect housing benefit, which is paid to less well-off tenants to help with rent. Typically claimants receive between £50 and £100 a week.

But since April 2013 families deemed to have too much living space by their local authorities receive a reduced payment. Under the government's so-called "size criteria", families are assessed for the number of bedrooms they actually need.

Who is affected?

This change affects council tenants, and those who rent from housing associations, who are housing benefit claimants. It does not affect private sector tenants who are already subject to certain rules.

The government estimates that 660,000 households will have their benefit cut, roughly a third of social sector claimants. Only those of working age will see reduced payments.

But there are some other exemptions too.

Work and Pensions Secretary Iain Duncan Smith said the 5,000 approved foster carers in the UK would continue to receive rent payments towards an "additional room" as long as they have fostered a child or become an approved foster carer in the previous 12 months.

And families with adult children serving in the armed forces will also be exempt from the changes, even when they are on overseas deployment. They will be treated as if they were continuing to live at home.

How much have people lost?

If tenants are deemed to have one spare room, the amount of rent eligible for housing benefit will be cut by 14%. If they have two or more spare rooms, the cut will be 25%.

The government says that means an average loss of about £14 a week for council tenants. Those who rent from housing associations are facing an average loss of about £16 a week.

Tenants can downsize, but problems have arisen in some areas where there is a shortage of smaller homes. Campaigners say those affected face being forced to move long distances to find a property, or move into the private sector, where rents could be higher.

How many bedrooms are you allowed?

The new rules allow one bedroom for each adult or couple. Children under the age of 16 are expected to share, if they are the same gender, and those under 10 are expected to share whatever their gender.

Following a legal challenge, the government said severely disabled children unable to share a room would be exempt - although campaigners say there is still uncertainty about this.

Disabled tenants will be allowed a bedroom for full-time live-in or overnight carers. If a full-time carer is a husband, wife or partner, then they will be expected to share a room. However, they can apply for a discretionary housing payment from their local authority if the disability means the partner needs to sleep in another room.

Discretionary support should remain in place for "priority groups" such as disabled people whose homes have had to be significantly adapted and those with long-term medical conditions which create difficulties in sharing a bedroom.

The number of bedrooms in the property will be determined by the landlord's tenancy agreement, so you cannot claim a bedroom is actually a living room.

A group of disabled families challenged the rules in the High Court. What was their argument?

The families believe the new rules break the law by discriminating against disabled people in social housing because they fail to allow for extra space needed for individuals who cannot share a bedroom because of the nature of their disability.

They also argued that they need extra space to store their mobility equipment, such as wheelchairs.

The court ruled on 30 July 2013 that there was no discrimination, but the families plan to appeal against this.

Can I keep a spare bedroom?

Not without losing benefit. Parents who are separated are not allowed to keep a vacant bedroom for a child who visits.

Bereaved families will be given a year's exemption to rearrange their housing affairs.

What about students?

Since April, parents are not penalised if a student is away, as long as he or she sleeps at home for at least two weeks a year. But when universal credit comes in from this autumn, students will need to be at home for at least six months to avoid a benefit cut.

What about lodgers?

As of April, claimants with a paying lodger are allowed to keep the first £20 of weekly rent. But housing benefit will be then be cut, pound for pound, on the rest of the rent they receive.

After universal credit is established, housing benefit will be cut, but tenants will be allowed to keep all the rental income (although only the first £4,250 of annual rent is free of income tax).

Are pensioners exempt?

If either one of a couple is of pensionable age, their housing benefit does not get cut.

Under universal credit, both will need to be over pensionable age, or one will need to be in receipt of pension credit, in order to qualify for the maximum benefit.

What is the situation for tenants of private landlords?

Councils calculate housing benefit for private tenants using the Local Housing Allowance. This is based on typical rent prices in an area and the number of bedrooms deemed necessary for a household. The latter is worked out along broadly similar lines to those now in place for social housing tenants.

The maximum amount of housing benefit someone can receive as a private tenant is capped at £250 per week for a one bedroom property, £290 for two bedrooms, £340 for three bedrooms and £400 for four bedrooms.

More Business stories

RSS

Business Live

  1.  
    11:12: Irish mortgage arrears

    Ireland's slow recovery in the property market continues to trundle along. The number of Irish households in mortgage arrears for more than 90 days fell to 10.4% the three months to December, down from 11.2% in the previous quarter, Ireland's central bank has said. That's the lowest level since March 2012.

     
  2.  
    10:48: Co-op hires Wilko's Ellis

    The Co-operative Group has announced it has hired Ian Ellis as group chief financial officer (CFO). He joins from retailer Wilko where he is currently the CFO.

     
  3.  
    10:32: Currencies

    Sterling slipped against the dollar ahead of the monthly US unemployment figures out at 1330 GMT, down 0.2% to $1.5208. Richard Falkenhall, currency strategist at SEB, said: "This election is very uncertain ... we think the uncertainty created will see sterling lose ground and forecast sterling/dollar to drop below $1.50 in coming months."

     
  4.  
    10:17: Eurozone economy
    euros

    The eurozone economy gathered pace in the last three months of 2014, with Eurostat confirming its earlier estimate of 0.3% growth compared with the three months to September 30 and a 0.9% expansion compared with the same period in 2013. Germany's economy grew by 0.7% quarter-on-quarter, while France managed just 0.1%.

     
  5.  
    10:04: Mike Ashley
    Mike Ashley

    Mike Ashley is a very busy man. Too busy for the entire month of March, it seems, to appear before MPs on the Scottish Affairs committee, who want to ask Mr Ashley about the treatment of workers at the USC fashion chain owned by his Sports Direct. Fortunately chairman Keith Hellawell is able to make the time, though. The MPs would still like to know why Mr Ashley is unavailable during March.

     
  6.  
    09:43: Japan shares

    Japan's Nikkei 225 shares index closed at a 15-year high earlier on the ECB's upward revision for eurozone economic growth and the announcement that it would begin bond buying on Monday. The index rose 1.2% to close at 18,971.

     
  7.  
    09:26: Greece
    Athens

    Greece has paid the first €310m (£223m) instalment of an International Monetary Fund (IMF) loan that falls due this month. The government must pay a total of €1.5bn to the IMF this month over two weeks starting today. Prime minister Alexis Tsipras is reported to have asked for a meeting with European Commission chief Jean-Claude Juncker about the payments.

     
  8.  
    09:09: Eurozone bonds

    Government bond yields in Portugal, Italy and Spain fell to new record lows on Friday, a day after the ECB gave details of its bond-buying plans. Portuguese 10-year yields fell 12 basis points to 1.7%, while Italian and Spanish equivalents fell 5 points to 1.28% and 1.19% respectively. The ECB starts buying government bonds on Monday in a bid to boost growth in the eurozone.

     
  9.  
    Thomas Cook Via Twitter

    Dominic Walsh of The Times tweets: Question is whether, as with Club Med, Fosun has longer-term aim to use minority stake in Thomas Cook as basis for eventual full bid @walshdominic

     
  10.  
    08:47: Market update

    The FTSE 100 Index is 8 points lower at 6,953. Shares in Weir Group are the biggest riser this morning on speculation that the engineering firm may be a bid target following a recent slump in its share price.

     
  11.  
    08:31: Thomas Cook
    Thomas Cook

    Fosun, a Chinese investment firm, has bought a 5% stake in Thomas Cook for £91.9m and plans to increase its holding further. The move follows its purchase of French resort operator Club Med last month. Shares in Thomas Cook have soared 16% higher to 140p.

     
  12.  
    08:17: RBS shares

    Just worth point out that RBS shares are trading at 376.9p and the government needs to sell its stake at an average of 455p per share just to break even on the money it pumped into the bank in 2008 and 2009. Also worth mentioning: Mr Osborne may not be Chancellor after May.

     
  13.  
    08:03: RBS shares
    RBS

    George Osborne has told the Financial Times he made a mistake in not radically restructuring taxpayer-owned Royal Bank of Scotland soon after he came to office in 2010. But the chancellor says he would like to proceed "as quickly as we can to get rid of it" after the general election.

     
  14.  
    07:50: AGA profits

    AGA says operating profit stood at £9.6m, but it booked £4.1m in pensions charges, £3.3m in fair value costs relating to its stake in Fired Earth - its tiles business - leaving it with £2.2m. But that's before £1.5m in net interest charges on its pensions deficit, which doubled in the year from £35m to £72m. That brought pre-tax profits down to just £700,000, and left AGA in no position to pay a dividend. But the company does expect market conditions to improve this year.

     
  15.  
    07:39: Vodafone
    The Hoff

    Vodafone has announced a plan to introduce a mandatory minimum maternity policy in all 30 countries in which it operates. By the end of 2015, all female employees will be offered at least 16 weeks fully paid maternity leave, as well as full pay for a 30-hour week for the first six months after they return to work. David Hasselhoff, however, will not be eligible.

     
  16.  
    07:27: AGA profits
    AGA Rangemaster

    AGA Rangemaster has reported a slight fall in an annual pre-tax profit to £700,000, compared with £1.1m a year earlier. It has also announced it will not be paying a dividend to shareholders.

     
  17.  
    DFS shares Via Twitter

    Retail analyst Nick Bubb tweets: The Chairman of DFS trumpets that it stands for "Dedication, Family and Success". Or Dull Furniture Sale? ;-) @NickBubb1

     
  18.  
    07:15: DFS shares
    DFS

    Buy one, get one half price! Furniture retailer DFS has priced shares at 255p - at the lower end of expectations. The stock starts trading at 0800 today and means the company will be valued at close to £550m.

     
  19.  
    07:02: Eurozone outlook BBC Radio 4

    One thing that may help the eurozone economy is a small but significant accomplishment by the ECB that appears to have gone largely unnoticed. That was last Autumn's asset quality review of the banks, by the ECB which "gave pretty much everybody a clean bill of help", says Mr Cameron Watt. "And that's allowing banks to sell assets off their balance sheets."

     
  20.  
    Greek economy Via Twitter Adam Parsons Business Correspondent

    Former Greek shipping minister @MVarvitsiotis tells #WUTM "we'll do whatever it takes...to stay in Eurozone...leaving would be a disaster" @AdamParsons1

     
  21.  
    06:47: Eurozone outlook BBC Radio 4
    Draghi

    Mr Cameron Watt tells Today: "There is a following wind which is the lower oil price and the material decline in the currency [euro] against the dollar". He says those factors should help boost the eurozone economy, although he he sceptical that it will do as well as ECB president Mario Draghi (pictured) suggested at his press conference on Thursday.

     
  22.  
    06:35: ECB bond buying BBC Radio 4
    The EURO logo is pictured in front of the former headquarter of the European Central Bank

    We're talking quantitative easing (QE) on the Today programme and why it pushes up stock markets. And Ewan Cameron Watt, global chief investment strategist at BlackRock, explains in the most clear terms. It is all about portfolio substitution, of course. "If I buy a whole lot of bonds and give you cash, you have now have to invest that cash," he says. "You don't want to buy bonds because of [current] negative yields, so it forces you to buy riskier assets, which inflates the prices of things like equities." Simples.

     
  23.  
    06:25: Alpacas! Radio 5 live
    Alpacas

    Let's face it - alpacas are a bit weird. But farming the cuddly critters appears to appeal to some who want to escape the rat race, alpaca farmer Mary-Jo Smith tells Wake Up to Money. She says alpaca wool is strong, luxurious and "just amazing to wear". The British Alpaca Society holds its annual show in Telford this weekend.

     
  24.  
    06:15: Insurers v banks Radio 5 live

    Aviva shares ended 7% higher yesterday and Ewen Cameron Watt, chief investment strategist at BlackRock, tells Wake Up to Money it is no surprise that insurers are doing better than banks. He says operating conditions for banks are getting tougher, but some insurers are opting to join forces.

     
  25.  
    06:05: Rangers FC
    A general view of the Ibrox Stadium, in Glasgow,

    It's a big day for Rangers FC as the club holds an emergency meeting where Dave King hopes to oust the board. However, there are question marks over King - who wants to become chairman - because of his convictions in South Africa for tax offences.

     
  26.  
    06:03: Matthew West Business Reporter

    Happy Friday everyone. Don't forget you can get in touch by email at bizlivepage@bbc.co.uk or via twitter @bbcbusiness.

     
  27.  
    06:00: It's Friday Chris Johnston Business Reporter

    Good morning and welcome to the last day of the working week. US unemployment figures are set to dominate the day and are out at 13:30. We'll bring you the reaction to those numbers and all the day's other business news as well.

     

Features

  • Cartoon of women chatting on the metroChat wagon

    The interesting things you hear in a women-only carriage


  • Replica of a cargo boxSpecial delivery

    The man who posted himself to the other side of the world


  • Woman wearing a niqab in Raqqa (31 March 2014)'Run for your life'

    How IS fighter's tip-off led to narrow escape for Syrian woman


  • Target practice for Lithuanian troopsBaltic shiver

    Europe editor Katya Adler on the alarm at Russian muscle-flexing


From BBC Capital

Programmes

  • A cyborg cockroachClick Watch

    The cyborg cockroach – why has a computer been attached to this insect’s nervous system?

Try our new site and tell us what you think. Learn more
Take me there

Copyright © 2015 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.