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The bedroom tax

Author

Listed:
  • Stephen Gibbons
  • Olmo Silva
  • Maria Sánchez-Vidal

Abstract

Housing subsidies for low income households are a central pillar of many welfare systems, but an expensive one. This paper investigates the consequences of an unusual policy aimed at reducing the burden of these subsidies by rationing tenants' use of space. Specifically, we study a policy introduced by the UK Government in 2013 which substantially cut housing benefits for tenants deemed to have a 'spare' bedroom - based on specific criteria related to household composition. Our study is the first to evaluate the impacts of the policy on its target group considering a range of outcomes. To do so, we use a difference-in-difference methodology that compares the observed behaviour of the treated households relative to a control group determined from the details of the policy rules. We find that - as expected - the treated group experienced losses to housing benefit and overall income. Although the policy was not successful in encouraging residential moves, it did incentivise people who moved to downsize - suggesting some success in terms of one of the policy goals, namely reducing 'under-occupancy' in the long run. We find no statistically significant effects on households' food consumption, savings or employment outcomes, despite the associated income reductions. Finally, we find some evidence of a reduction in self-reported satisfaction though this effect is not precisely estimated.

Suggested Citation

  • Stephen Gibbons & Olmo Silva & Maria Sánchez-Vidal, 2018. "The bedroom tax," CEP Discussion Papers dp1537, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp1537
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    References listed on IDEAS

    as
    1. Gibbons, Stephen & Silva, Olmo & Weinhardt, Felix, 2017. "Neighbourhood Turnover and Teenage Attainment," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 746-783.
    2. Fack, Gabrielle, 2006. "Are housing benefit an effective way to redistribute income? Evidence from a natural experiment in France," Labour Economics, Elsevier, vol. 13(6), pages 747-771, December.
    3. Gibbons, Stephen & Manning, Alan, 2006. "The incidence of UK housing benefit: Evidence from the 1990s reforms," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 799-822, May.
    4. Aki Kangasharju, 2010. "Housing Allowance and the Rent of Low‐income Households," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(3), pages 595-617, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    social housing; social rents; bedroom tax; housing benefits;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R28 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Government Policy

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