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Bedroom Tax A New Source Of Debt Problems

23rd September 2013

The TUC recently set out to establish how many tenants have fallen into rent arrears since they became affected by the bedroom tax in April of this year. The Government prefers to describe the bedroom tax as being a removal of a previous spare room subsidy.

The data provided by councils across the UK confirms that around 50,000 council tenants have fallen into arrears since being subject to the bedroom tax. A different set of data adds a further 11,000 housing association tenants (a quarter of the total of the sample) to these figures. These represent only tenants that have fallen into rent arrears since they were specifically affected by the imposition of the bedroom tax. Few experts dispute that there are too few smaller homes available for all of those affected to move into homes that will leave them outside of the reach of this tax or subsidy removal.

In Barrow (Cumbria) more than 75% of affected council tenants have fallen into arrears since April. More than 50% of tenants have been similarly affected in South Kesteven, Tamworth and Clackmannanshire. The effects may yet worsen as the funds allocated to councils to deal with rent payment problems begin to dry up.

If you have fallen into rent arrears since the imposition of the bedroom tax what should you do? You should certainly prioritise paying as much as you can afford towards your rent and the arrears, this will help to prevent the problem from escalating uncontrollably in many circumstances. Being prepared to communicate with your council or housing association landlord is also important. Most importantly you need to seek debt and budgeting advice from a suitably qualified adviser very quickly.

If you have no other debts (apart from rent arrears) the key needs are to draw up a budget to identify how best to keep paying the rent and to tackle the arrears. An adviser at the CAB would be able to help with this. They’ll be looking to see whether they can help you to budget to pay your rent and also to create a plan to tackle any arrears that have developed in an affordable and sustainable way. They may also become a useful liaison point that sits between you and your landlord to find a mutually acceptable and manageable solution.

How about if you have other debts as well? Unsecured debts included bank loans, overdrafts, credit cards, store cards, payday loans and catalogues. Debt professionals consider these to be non-priority debts; debts that should only be paid once priority debts have been covered. Rent and rent arrears are both considered priority debts; debts that should be tackled before worrying about the payment of unsecured debts.

What happens if you cannot afford to pay your priority debts and your non-priority unsecured debts at the same time? The debt adviser will help you to manage the priority debts and then present the options that you have to deal with the unsecured non-priority debts. The solutions might include a debt management plan (DMP), debt relief order (DRO), individual voluntary arrangement (IVA) or bankruptcy. Each of these options will be structured to help you deal with any rent arrears that have arisen since the bedroom tax was introduced. 

The risks associated with growing rent arrears are serious and urgent. If you’ve got into financial trouble since the arrival of the bedroom tax we strongly suggest that you don’t delay finding good professional debt help and advice.

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