The Department of Work and Pensions has issued a circular removing the Spare Room Subsidy for housing benefits claimants who have been continuously claiming benefits since 1996 so long as they have remained in the same property. The circular has been made necessary by a drafting oversight at the same time the Spare Room Subsidy was bought into effect on 1 April 2013 and because the 1996 Housing Benefit Regulations were not amended.
The Government are seeking to re-legislate to remove this loophole as soon as possible – but in the meantime some under-occupying tenants will enjoy a period without the subsidy applying.
The Department of Work and Pensions has stated that they expect that roughly 5,000 tenants have had their housing benefit wrongly deducted of bedroom tax. Other reports suggest that this figure is an underestimate and that up to 40,000 tenants are affected. The circular directs Local Authorities to consider whether they are "reasonably able to identify potentially affected claimants" from their records. Local Authorities are then to re-calculate housing benefit having removed the under-occupancy reduction right back to the subsidy coming into effect on 1 April 2013.
There is already much concern over the time it will take to review individual cases and the knock-on effect this will have for social landlords in pursuing rent cases through the Courts. Undoubtedly, Courts will not be in a good position to grant a possession order where there is any possibility of a tenant being erroneously deducted housing benefit due to this error.
It is believed that affected tenants who have received Discretionary Housing Payments to help them with any rent shortfall will not be required to pay this back, thereby providing a number of tenants with a cash windfall.
Responding to a question in the House of Lords on 14 January, Lord Freud confirmed that "The Housing Benefit Regulations will be amended in March 2014 to ensure that all working-age social sector tenants who under occupy their homes are subject to a reduction in their eligible rent, regardless of the length of their tenancy, unless they fall within one of the limited exceptions."
