How will the ‘bedroom tax’ work?

A forthcoming change in housing benefit rules has been dubbed the “bedroom tax”, and the name has stuck.

The government argues the changes will help cut the £23bn annual bill for housing benefit, free up more living space for overcrowded families, and encourage people to get jobs.

But housing charities are warning that the result will be higher levels of rent arrears, and greater homelessness.

The government estimates that over half a million tenants will be affected when the new rules take effect in April this year. It says the savings to the taxpayer will amount to £505m in 2012-13, and £540m in the year after.

What is changing?

The new rules will 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 from April 2013 families deemed to have too much living space by their local authorities will receive a reduced payment. Under the government’s so-called “size criteria”, families will be assessed for the number of bedrooms they actually need.

Who will be affected?

This change affects council tenants, and those who rent from housing associations. It does not affect private sector tenants.

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.

How much will people lose?

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 will mean 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.

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. Those under 10 are expected to share whatever their gender.

Disabled tenants will be allowed a bedroom for full-time carers. 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.

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. Foster children are not counted as permanent members of a household.

What about students?

From April, parents will not be 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?

From April, claimants with a paying lodger will be 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.

However, 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?

From April 2013, if either half of a couple are of pensionable age, they will not suffer reductions to housing benefit.

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.