Escaping the bedroom tax

How much do you really need to earn to escape the 'Bedroom tax'?

Hilary Burkitt, Head of Strategic Research

There’s just two months to go until what has become known as the 'bedroom tax' comes into force, and more questions are being asked about how those hit are going to cope.

DWP minister Steve Webb has been addressing some of these questions this week, both in the media and in the Commons.  He suggests that one solution is for people to find work, saying in response to a parliamentary question that “just two or three extra hours on the minimum wage would cover this deduction”.

Is it true that just a few hours of work would save people from the bedroom tax?

First of all someone in the household must be available to work.  Many of those affected are disabled themselves or are caring for someone who is, or are looking after young children in the home.  Research we carried out last year as part of the Housing Futures Network indicated that only 19% of households hit by the bedroom tax included someone who was already in employment, whilst 16% of households had someone claiming Job Seekers Allowance.  Secondly they have to be able to find work: with unemployment and underemployment both on-going problems, many will struggle.

For those fortunate enough to be able to work and to start a job or increase their hours, are the minister's claims true that only 2-3 hours minimum wage work are needed to cover the bedroom tax deduction?  Unfortunately this doesn't stack up.

Let's take a simple example.  A young woman leaving care, who was allocated a two bedroom flat costing £100 a week as there were no one bedroom flats available in her area, faces a deduction of £14 a week from her housing benefit. .  She is already working 16 hours a week at the minimum wage.  Working an extra three hours a week will net her less than £3 because her housing and council tax benefit will be reduced because of the additional hours: nowhere near enough to make up for the bedroom tax deduction.  To earn an additional £14 a week, enough to pay for the bedroom tax, she will need to work 28 hours: a whole 12 hours more.  However this doesn't mean she has escaped the bedroom tax: in fact she will still face the full £14 being taken from her remaining housing benefit.  To completely escape she must work a total of 48 hours a week at the minimum wage – three times her current working hours.

Someone facing a larger deduction must work longer hours still to escape the bedroom tax.  For example, a divorced father of two whose 10-year-old son and 16 year-old daughter stay with him at weekends in his three bedroom home.  If his home is rented at £180 per week, and he is already working full-time (35 hours) at the minimum wage, he faces a loss of housing benefit of £45 a week when the bedroom tax is introduced. This will cost him over a third of the income he currently has left after paying his rent.  To earn enough to cover the deduction he would have to work as much as 63 hours a week.  And to escape the bedroom tax altogether he would have to work 76 hours a week: the equivalent of more than two full-time jobs.

Unfortunately for most of those affected by the bedroom tax, the 2-3 hours extra minimum wage work advocated by Steve Webb wouldn’t get close to helping them escape the bedroom tax.  Those on the lowest wages will face a huge challenge to pay their rent when the deductions come into affect in April.

At Affinity Sutton we expect more than 10% of our tenants to be hit by the bedroom tax.  We’re helping those affected to think about their options, downsize to smaller properties, find work and providing guidance about taking in lodgers.  If you think you might be affected by any of the forthcoming benefit changes you can find more information here.

Note on figures: benefits entitlements calculated using Turn2Us Benefits Calculator based on a single person with £700 annual council tax.