Comparisons based on housing costs
How the current & reformed CSA schemes treat housing costs
The current scheme recognises the NRP's own housing costs in the formula. It accepts housing costs up to a maximum, then ignores higher housing costs. The maximum housing cost that it accepts in most cases is the higher of "half the net income" and "£80 per week". (So with a net income below £160 it accepts up to £80, and with a net income above £160 it accepts up to half the net income. In some cases, it doesn't apply this maximum, so recognises even higher housing costs). The housing costs reduce the child support liability.
The reformed scheme ignores housing costs entirely. (This is not an accidental omission - there are plausible reasons for it, although whether you think they are good ones may depend on whether you are a winner or loser!)
The result is that the amount that an NRP spends on housing is one of the biggest factors in whether the NRP will pay more or less under the reformed scheme. Typically, those with high housing costs are likely (but not always) to pay more under the new scheme, while those with low housing costs are likely (but not always) to pay less under the reformed scheme.
Comparison of the effects of high and low housing costs in the current scheme
Circumstances: all children young, no other complications. Plots of both low housing cost (£50) and high housing costs (the maximum recognised by the current scheme).
The purpose of this graph is to show the effects in the current scheme of low and high housing costs. Plots for 1, 2 & 3 children are shown for both high and low housing costs - current scheme only.
The plots show that high housing costs have 2 important effects in the current scheme:
the liability stays close to the minimum amount up to a much higher net income (in this case, it stays below £10 per week up to a net income of £250)
the liability never peaks at about 30% of net income (in this case, it barely exceeds 20%, and that is for 3 children at about £600 net income, which only impacts a tiny proportion of NRPs)
Obviously, PWCs see this as a disadvantage! To them, an NRP spending a lot on housing "diverts" child support money into an asset for the NRP.
Comparison of the effect of high housing costs in both schemes
Circumstances: all children young, no other complications. High housing costs (the maximum recognised by the current scheme).
The purpose of this graph is to show the impact of the reformed scheme for NRPs with high housing costs.
NRPs with 3 or more qualifying children and high housing costs will typically feel zapped by the reformed scheme. (Or at least the half of them who will be assessed above the minimum will). Three effects are shown here:
the rise in liability above the minimum at low net incomes
the higher maximum
the way that the reformed scheme distinguishes according to the number of qualifying children
NRPs with high housing costs are probably the group most likely to benefit from the phasing-in feature of the reformed scheme (where they will not switch immediately to the new calculation, but will move closer to it over possibly a number of years). They are not only among the losers in the reformed scheme, but high housing costs can be hard to cater for quickly.
Which, of course, means that the corresponding PWCs will be among those waiting longest for their advantages from the reformed scheme!
Exceptions to the limit on NRPs' housing costs
There are various reasons why the allowance for an NRP's housing costs may sometimes not be capped under the current scheme. See Decision Maker's Guide, part 5, section 5910.
Reasons include (in summary - there are qualifications):
- NRP has children in the house.
- NRP is living in the original house.
- NRP is claiming certain benefits.
- The house price has risen from the uncapped amount.
- The PWC is living in their original house and the NRP can't realise his share and as a result is paying extra for housing.
Reasons for ignoring housing costs in the reformed scheme
- There is an overwhelming intention to have a simple scheme.
- While housing costs are a significant issue for urban dwellers, if they were allowed there may need to be an equivalent allowance for rural dwellers, such as allowing transport costs.
- If housing costs are allowed, then the question of how much the NRP is paying towards them matters. This requires evidence of any NRP's new partner, which is both intrusive and an extra administrative overhead.