LOCAL HOUSING ALLOWANCE - THE FACTS FOR LANDLORDS FROM LETTINGFOCUS.COM
LettingFocus.com property expert David Lawrenson explains how Local Housing Allowance (LHA) works and what landlords need to know to make lets to people dependent on benefit work for them.
Landlord expert and advisor David Lawrenson of www.LettingFocus.com says, "It is important for landlords to understand how Local Housing Allowance works, how it is paid, how long it is paid for, under what circumstances it can be paid direct to the landlord (and how landlords can get it paid direct to them from the word go), what happens if arrears build up, what the landlord's obligations are and what rights of appeal exist."
LOCAL HOUSING ALLOWANCE
Local Housing Allowance is a flat rate benefit for tenants of private landlords that is based on what the tenant and their family needs in terms of size of accommodation and is calculated according to household size (i.e. the number of people in the family) and location.
It is paid on a 4 weekly cycle and in arrears (unlike most private lets which are paid in advance.)
When it was brought in the main difference was that the benefit would normally be paid to the tenant unlike the old system where it could be paid direct to the landlord. This change was not popular with landlords.
It is possible for a landlord to find out what the tenants will receive because this depends on size of property (which is linked to size of family) and because average rent values for different sized properties in the local “Broad Rental Market Area” or BRMA are worked out by the Rent Service. You can easily find out the rent for any area by calling the Housing Department of your local authority or looking it up online.
The Allowance is normally paid for a year unless the tenants’ circumstances change.
To receive the allowance the tenant must have a bank account and there are a lot of forms for the tenant to fill in.
If the tenants is classed as "vulnerable" the landlord can still be paid direct examples might be people with learning difficulties, lack of English, debt, alcohol, drug or gambling problems, though local authorities will consider other reasons too. Also, it can usually be paid direct by some boroughs and in some circumstances if the person is at risk of homelessness.
Other bodies such as social services and doctors may also suggest to the local authority that the tenant is vulnerable and landlords with potentially vulnerable tenants ought to facilitate and encourage the tenant to get a letter in support of such a classification - thus allowing the landlord to be paid direct.
The local authority does not advise the landlord when a payment has been made so it’s good practice for landlords to check directly with the authority’s Housing Benefit section if a cheque or other payment was expected but has not been received.
Where tenants (not the landlord) receive the LHA, there is a risk they could spend the money on something else other than rent. If arrears start to amount to over 8 weeks (less in some councils) the Local Housing Allowance can arrange for the LHA to be paid direct to the landlord.
Landlords should report to the local authority any arrears of rent as soon as they emerge (there is no need to wait for 8 weeks arrears) to ensure payment can be made direct without further delays.
Some local authorities pay incentives to landlords to help house vulnerable or other tenants with special needs.
LOCAL HOUSING ALLOWANCE AND FRAUD
Landlords must inform the local authority if they know of a change in the tenants’ circumstances and it is an offence not to do so.
This was also the case under the old Housing Benefit system but it seems to be being enforced more strictly now.
However, there is no automatic right to the local authority to claw back LHA paid to the landlord if it later turns out that the tenant has been acting fraudulently in receiving the Allowance unless the local authority could show that the landlord knew about the change in the tenant's circumstances and declined to notify them.
It is always worth landlords getting the tenant to give the local authority permission to discuss the claim with the landlord, so you are kept in the information loop and can progress claims. It is also best to be involved with the tenant in submitting the paperwork for the claim in order to make sure it is done correctly as delays caused by incorrect or missing documentation can be very lengthy.
In June 2010, the Coalition government, reacting to public and media pressure about the growing Housing Benefits bill, introduced major changes to LHA.
They set lower limits (or caps) on the amount of Local Housing Allowance that could be paid for different sizes of property along with a number of other changes to how the rates would be set in future and the qualification criteria.
The new rates are having particular ramifications for landlords letting property to tenants on LHA in London and some experts predicted private landlords would exit the market in droves.
Although the worst fears do not seem to have been realised yet, as we enter 2014, the situation could still change.
STILL MORE CHANGES
Recent chnages have ameliorated some of the more serious concerns housing experts had and some councils have also been innovative in creating a number of useful "work arounds" to negate the worst effects of the LHA caps, including finding ways to pay LHA to landlords direct and offering landlords other incentives.
As 2014 dawns, Local Housing Allowance continues to be subject to change, and it will be much affected by the gradual introduction of the new delay-ridden Universal Credit scheme (in which most benefits are rolled up into a single payment).
The Universal Credit initially meant that, once more, landlords would not normally be paid LHA direct, instead it would be paid to tenants direct as a default option.
In effect, this would put us back to where we were in 2008 and create the same problems encountered then - i.e. landlords leaving the market in droves.
The only difference to 2008 is that today, there is a bigger and booming private rental market alternative, so we expect the problems of landlord withdrawals from the "LHA market" to be magnified.
The situation on Universal Credit keeps changing though and it looks like more landlords may be able to receive the housing element direct, after all.
To find out the very latest position, please refer to our blog and look for the section on Local Housing Allowance.
In our consultancy work we work closely with local authorities and housing associations to help them deal with LHA and Universal Credit changes better and show them how to improve their strategies with respect to private landlords and the private rented sector. See the links below or contact us to find out how we can help.
ABOUT DAVID LAWRENSON AND LETTINGFOCUS
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Copyright 2011 David Lawrenson. This article must not be copied or re-used without the author and copyright owner’s prior permission.
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