The letter in full.

Dear Iain,

Thank you for your letter of 20 January to the Secretary of State on behalf of Mrs Julie Bell regarding Housing Benefit. I am replying as the Minister responsible for this issue.

I was sorry to read of Mr and Mrs Bell’s loss and I fully sympathise with their desire to remain in a home that holds many memories for them.

Currently, those who live in the social rented sector generally have their rents met in full from Housing Benefit and their entitlement is not affected by whether or not they under occupy their homes.

However, while I have every sympathy for Mr and Mrs Bell’s situation, this is no longer considered sustainable and from this April, Housing Benefit for working age tenants in the social rented sector will be restricted.

These restrictions will apply where people live in a property that is too large for their needs. As well as helping to contain growing Housing Benefit expenditure, this change should encourage mobility within the social rented sector; strengthen work incentives and make better use of available social housing.

We need to improve the way we use our social housing stock. There are widespread mismatches between household size and the size of accommodation occupied by these households; we are paying for nearly one million extra bedrooms for those under occupying their accommodation. There are also over a quarter of a million households living in overcrowded conditions in the social rented sector in England as well as 1.8 million households on the waiting list for social housing in England alone.

This is sharp contrast to what happens in the private rented sector where tenants are more likely to consider what is affordable in terms of accommodation size and downsize when necessary as their circumstances change.

We have to encourage social landlords to make best use of their housing stock. There are examples of social sector landlords already doing just that, demonstrating that they have the ability to take on the economic realities and come up with innovative solutions to longstanding problems.

It is estimated that approximately one in five tenants living in the social rented sector and in receipt of Housing Benefit will be affected by the change. Over 80 per cent of those affected will be under occupying their home by just one bedroom and are likely to have an average reduction in Housing Benefit of around £12 per week. The deductions will be made from the eligible components of the claimant’s actual rent. There will be a 14 per cent reduction for those with one extra bedroom and a 25 per cent reduction for those with two or more extra bedrooms.

When working out the size of property for Housing Benefit purposes the criteria used take account of the number of people who occupy the dwelling as their home, their ages and the composition of the household. These size criteria provide for a bedroom for a couple, a single person aged 16 or over, two children of the same sex under the age of 16, two children of the same or opposite sexes under the age of 10 and a sole or remaining child.

The criteria for appropriate accommodation size is consistent with the criteria applied to Housing Benefit claimants living in the private rented sector. It would be difficult to justify that claimants living in the social rented sector would have the cost of an additional room met by Housing Benefit whilst their counterparts in the private rented sector would not.

The size criteria will apply to new and existing claims from April 1. This means that existing claimants will have time to consider their options well in advance. Subsequent changes in the household make up will take immediate effect except where a relative living in the home dies. Legislation will allow a 12 month period where the rent is either met in full or continues to be met at the previous level.

It is too early to say what the impact of these changes will be and what choices claimants might make. Individuals may choose to remain where they are in housing that is larger than they need and fund any shortfall themselves. Some may increase their hours of work or find work, take in a lodger, or seek their landlord’s permission to sublet part of their property without needing to move.

Others may choose to rent in the private sector or downsize to a more appropriately sized property within the social sector.

Throughout our discussions on the Welfare Reform Act we referred to the need to avoid introducing overly complex rules, particularly within Universal Credit. However, we looked very carefully at the feasibility of developing specific exemptions that have been requested for a variety of groups. It has simply not been possible to design exemptions that can be defined narrowly enough to be both affordable and simple to administer.

We are aware of the impact that this is likely to have on some groups; that is why we announced that we would add an additional £30 million to the Discretionary Housing Payment budget from 2013-14.

This additional funding is aimed specifically at helping two groups – disabled people who live in significantly adapted accommodation to enable them to remain in their existing homes; and foster carers, including those who need to keep an extra room when they are in between fostering.

This comes on top of the £190 million already set aside over the Spending Review period to help local authorities implement the Housing Benefit reforms, which included an extra £130 million for Discretionary Housing Payments.

We will be updating the Discretionary Housing Payments guidance to local authorities in the run up to these changes being introduced. Local decision makers are better placed to make informed judgements about relative priorities and needs and to target limited resources more effectively.

Implementation work is now underway. Local authorities, who will deliver this measure, have already started to publicise the changes and to contact those likely to be affected.

We also know that landlords are providing information and support to their tenants. These activities, combined with the information that we have provided on our website for advice organisations, should mean claimants are starting to get the right level of information so that they can start to think about the choices open to them.

Yours sincerely,

Lord Freud.

Minister for Welfare Reform