Own two homes or using equity release? new DWP rules could cut your Pension Credit — are you at risk

Rising house prices, tight public finances and changing retirements collide. Older homeowners now face tougher questions about how property wealth fits with benefits.

The Department for Work and Pensions has confirmed a stricter line on how property is treated for means-tested support. Second homes, inherited houses and shared ownership stakes will face closer scrutiny, with Pension Credit and housing help most in focus.

What has changed

Owning the roof over your head still carries some protection. The shake-up bites when you hold housing wealth beyond your main home, or you unlock value from it. Expect closer checks, more frequent reassessments and a firmer view on what counts as capital.

• Additional homes now weigh more heavily in benefit calculations, even if empty or used rarely.
• Property values feed into capital assessments with less leeway, especially where combined assets push you over thresholds.
• Downsizing, selling, gifting or inheriting a property creates an event you must report without delay.
• Shared ownership and equity release are considered capital-bearing arrangements for your share or funds accessed.
• Main residences retain favourable treatment, but that can change if you move out, sublet, or go into care.

Second properties and newly inherited homes now sit squarely in the DWP’s line of sight for means‑tested benefits.

Who feels the impact

Most pensioners living in a single owner‑occupied home see little change. The pressure falls on people with more complex set‑ups.

• Owners of a holiday home, a buy‑to‑let or a retained former residence.
• Those who inherit a property while staying put in their current home.
• People using equity release or part‑rent/part‑buy schemes.
• Anyone moving into a care home while keeping ownership of their house.

How property is now assessed

Additional homes

Where you own more than one property, the non‑main home is treated as capital. A reassessment may follow, and entitlement to Pension Credit or related support can fall if your overall capital rises.

Shared ownership and equity release

With shared ownership, the value of your stake is assessed much like outright ownership of that portion. Equity release raises separate issues: cash released from your home usually counts as capital, which may depress entitlement during periods when the funds sit in your name.

Main residence caveats

Your principal home remains broadly ignored for capital tests while you live in it. That treatment can change if you rent it out, leave it empty long‑term, or leave to live elsewhere. A move to residential care is a key trigger for reassessment.

Reporting changes

Sales, gifts, new purchases, inheritance, subletting, moving into care or changing usage all require prompt notification. That helps you avoid overpayments, penalties or a sudden suspension.

Report property changes as soon as they happen. Silence risks overpayments, penalties and a long wait for reinstatement.

Typical situations and likely effects

What you should do now

• List every property: main home, second homes, inherited, shared ownership, empty dwellings.
• Note rough market values and current use: occupied, rented, on the market or vacant.
• Add other capital such as savings and investments to build a full picture.
• Tell the DWP or your council promptly about sales, inheritances, changes in occupancy or equity release.
• If you plan to downsize or gift a share to family, seek regulated advice first.

Why the DWP says it is tightening the rules

The department wants to aim support at people in genuine financial need rather than those holding substantial housing wealth. As property values outpace wages and savings rates, the policy seeks to modernise assessments and plug gaps where second homes or unreported inheritances sit outside capital checks.

Risks to watch

• Capital thresholds move over time, and methods for valuing a share can vary by case.
• Not every homeowner will lose entitlement; outcomes hinge on the mix of assets and income.
• Failing to report a change can create overpayments, which you may have to repay.
• Transferring property to relatives to keep benefits can be treated as deliberate deprivation of assets.

How downsizing, inheritance and equity release can play out

Downsizing

Selling a larger property may reduce running costs. The sale proceeds can count as capital once received, which can lower entitlement until money is spent on eligible purposes or a replacement home. Timing and documentation matter; keep evidence of sale, searches, fees and transfers.

Inheritance

Inheriting a house while living elsewhere usually triggers a reassessment. If you plan to sell, you may be asked for clear steps and timelines. Reasonable attempts to sell, realistic pricing and proof of marketing help demonstrate intent and avoid lengthy disputes.

Equity release

Lump sums or drawdown facilities convert home equity into cash. While this can ease short‑term pressure, the funds commonly count as capital for benefits. Consider whether smaller staged withdrawals, debt repayment or essential adaptations give better value than holding large balances in cash.

Practical checklist for your records

• Title deeds or proof of ownership for every property.
• Latest valuations or estate agent appraisals, plus rental statements if let.
• Completion statements for any sale or purchase, and evidence of how proceeds were used.
• Details of equity release products, withdrawals and current balances.
• Written notes of when you informed the DWP or council, and any reference numbers.

Key terms, made simple

• Means‑tested benefit: support that depends on your income and capital, such as Pension Credit.
• Main residence: the home you live in as your normal address; usually ignored in capital tests while occupied by you.
• Capital: savings, investments and property you own that is not your protected main home.
• Shared ownership: you own a percentage of a property and pay rent on the remainder.
• Equity release: products that let you unlock cash from your home, typically repaid when you sell or die.

Ways to pressure‑test your position

Sketch two or three “what‑if” scenarios. For example, keep a second home, sell it immediately, or sell after modest improvements. For each scenario, note the likely capital at each stage, how long you will hold cash, and which benefits might be affected. This exercise helps you weigh trade‑offs between ongoing costs, potential rent, and benefit entitlement.

If your affairs look complicated — multiple titles, part‑ownerships, or a move into care — prepare a one‑page summary and gather the documents listed above. A regulated adviser or welfare rights specialist can then give targeted guidance without delay, saving you both time and money.