1 February 2012 | By Tom Lloyd, Inside Housing

Proposed cuts to housing benefit for under occupation would cause severe hardship for tenants and not deliver the expected savings, analysis has found.

The University of Cambridge report for the Housing Futures Network looked at how the proposal to cut benefits from claimants who have larger homes than they are deemed to require would affect HFN members’ tenants in four neighbourhoods: Lee, Lewisham; Clayton Brook, Chorley; Tranmere and Rock Ferry, Wirral; and Low Ford, Sunderland.

It found a shortage of one-bedroom properties outside London would leave tenants with little option but to live off less money, resulting in ‘severe financial difficulties’ for many.

Hugh Owen, director of policy and communications at Riverside, which has homes in the Tranmere and Rock Ferry area, said: ‘It would take us six years to downsize our tenants to our available one-bedroom properties. In the mean time they would face crippling cuts to their income.’

Even where smaller properties are available the research found that downsizing might not result in cuts to housing benefit, as the smaller homes might be let at higher rates due to the introduction of the affordable rent product. This allows rents to be set at up to 80 per cent of market rate, and higher rates are generally being set for smaller properties.

The study also warns social tenants who are forced to downsize could end up moving into the private rented sector, where rents are higher, increasing the housing benefit bill.

What savings there are could come at the expense of housing association finances. The research found the cost in lost rental income due to arrears in the four areas would range from £12,000 to £61,000, and the cost of evicting even a third of tenants who could not pay their rent would amount to £420,000 across the four areas.

The government’s proposals on under occupation are contained in the Welfare Reform Bill, which returns to the House of Commons today. During the Bill’s passage through the Lords peers introduced an amendment to lessen the impact of the under occupation cut, but the government has pledged to reverse this before the plans become law.