The measure will hit 670,000 council and housing association tenants – a third of all working-age housing benefit claimants in the social rented sector across Great Britain.
Each claimant is expected to lose an average of £13 a week if the Government succeeds in introducing the measure in 2013.
The DWP has suggested that households seeing their benefit reduced – by up to 15% for those with one "spare" room and up to 25% for two or more "spare" rooms – should "move to accommodation which better reflects the size and composition of their household" – or make up the shortfall from other income sources.
But National Housing Federation research shows that while about 180,000 social tenants in England are "under-occupying" two-bedroom homes, and will therefore come under pressure to downsize to one-beds, just 68,000 one-bed social homes became available for letting in a single year (2009/10).
The significant shortfall in available properties, which are also in high demand from people on housing waiting lists, suggests many families will struggle to move within the social sector.
The DWP’s own impact assessment admits there is a "mismatch" between properties in the social sector and household size – suggesting many people would see a cut in their housing benefit with no prospect of being able to move to a smaller home.
The assessment says: "In many areas this mismatch could mean that there are insufficient properties to enable tenants to move to accommodation of an appropriate size even if tenants wished to move and landlords were able to facilitate this movement."
It adds that people facing benefit cuts but unable to move to a smaller property in their neighbourhood "may have to look further afield… or move to the private sector".
But every tenant moving to the private rented sector will cost the taxpayer more in additional housing benefit.
Housing associations up and down the country are already making efforts to help people in larger properties who want to move to a smaller home to do so.
But this measure is punitive, very poorly targeted and would unfairly punish tenants whose children have grown up and left home, according to the Federation.
It risks uprooting people from the places where they have family and friends, and could lead to public money being wasted as some 108,000 households living in properties adapted for people with disabilities are faced with moving and requiring fresh adaptations to their new properties.
Federation chief executive David Orr said: "The cuts to housing benefit for households deemed by the Government to be ‘under-occupying’ are extremely harsh and could effectively compel thousands of people to lose their homes.
"As a result of these changes, thousands of couples are no longer able to offer their grown-up children a room to stay in should their circumstances change, and many single parents will be pushed away from friends, relatives and support networks.
"Of course ‘under-occupation’ in the social housing sector should be tackled. But slashing people’s housing benefit and pushing them into poverty is not the answer."
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