Spare room loophole sees 3,000 eligible for rebate in West Midlands

A loophole relating to the spare room subsidy – or ‘bedroom tax' as critics have dubbed it – has left at least 3,000 tenants eligible for rebates in the West Midlands alone, it has been claimed.

The problem applies to those who have been social housing tenants in the same property since at least 1996.

Regulations affecting them were not updated by the Department for Work & Pensions to reflect the impact of the tax.

Figures obtained by the BBC show rebates worth about £600 per household are due to 3,000 tenants in the region, despite the DWP having said that only some 5,000 are affected nationally.

The Government has announced that it plans to close the loophole in March.

But councils must find the affected tenants and compensate them and the Local Government Association has voiced concern at the cost of going through records – some of them pre-internet – to find those concerned.

Meanwhile, a report by financial adviser Grant Thornton has found that local authorities and housing associations have yet to grapple with the full impact of welfare reform.

The report Reaping the benefits? First impressions of the impact of welfare reform found councils and housing associations had so far managed the financial constraints of welfare reform, but “early signs of distress could further intensify pressures and the direct and indirect impact of reform needs to be closely monitored”.

Problems could include a rise in arrears, tenants using benefits paid to them directly under Universal Credit for other purposes than rent, and “a lack of evidence that bedroom subsidy reform has brought about a significant movement to smaller properties, compounded by the lack of alternative housing in some areas, and therefore adding to household financial pressures”.

Paul Dossett, Grant Thornton’s head of local government, said: “This could be the calm before the storm.

“Some worrying signs are emerging, particularly around rising rental arrears, homelessness and reliance on food banks, which may be linked to the reforms and could put further pressure on authorities as the reforms are phased in.”