LOCAL HOUSING ALLOWANCE - THE FACTS FOR LANDLORDS FROM LETTINGFOCUS.COM
LettingFocus.com property expert David Lawrenson explains how Local Housing Allowance (LHA) works. Ask us for advice with your buy to let and property investments.
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 circs 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 landlords obligations are and what rights of appeal exist."
Local Housing Allowance
Local Housing Allowance is a government reform to supposedly make the housing benefit system work better.
It is a flat rate benefit for private tenants 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.
Under the LHA system, the tenant can choose a home with a higher rent and make up the shortfall or pay a lower rent and keep the difference (up to £15 per weeek).
According to the government, giving the tenant this choice encourages and engenders financial responsibility.
The main difference is that it is normally paid to the tenant unlike the old Housing Benefit which could be paid direct to the landlord.
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.
LHA Payments
The Allowance is normally paid for a year unless the tenants’ circumstances change.
To receive the allowance the tenant must have a bank account (again, this goes back to the govt idea of encouraging financial responsibility.)
How to get LHA Paid Direct
Only if the tenants is classed as vulnerable can the landlord then be paid direct – examples might be people with learning difficulties, lack of English, debt, alcohol, drug or gambling problems, though the local authority will consider other reasons too.
Other bodies such as social services and doctors may also suggest to the local authority that the tenant is vulnerable and landlords with possibly vulnerable tenants ought to facilitate and encourage the tenant to get letter in support of such a classification - that way they will be paid direct!
The local authority does not advise the landlord when a payment has been made so it’s good practice to check directly with the authority’s Housing Benefit section if a cheque or other payment was expected but has not been received.
If arrears amount to over 8 weeks the Local Housing Allowance can be paid direct to the landlord. Landlords should report to the local authority any arrears of rent as soon as they emerge.
Local Housing Allowance 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 the case also under the old Housing Benefit system but it seems to be being enforced more strictly now.
However, now there is no automatic right to the local authority to claw back LHA paid to the tenant 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 tenants 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.
In June 2010 the new Coalition government set limits (or caps) to the amount of Local Housing Allowance that could be paid for different sizes of property. The new rates are expected to have particular ramifications for landlords letting property in London. See our LANDLORD BLOG for more on this.
Read also: Housing Benefit and Fraud in our blog page.
About David Lawrenson and Lettingfocus.com
This is just a rough guide to Local Housing Allowance. If you need more advice on local housing allowance or letting to people on housing benefit please send me an email. I’m David Lawrenson from property mentors lettingfocus.com.
In our corporate consultancy we provide extensive consulting help to local authorities and RSLs, especially about how to make the private rented sector more attractive to their tenants. We also advise about PRS Access Schemes.
I’m author of the buy to let book “Successful Property Letting - How to Make Money in Buy to Let” which is the UK’s top selling property title. Click here for buy to let book.
What’s unique about us is that we offer unbiased property coaching because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, estate agent or bridging loan financier.
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Copyright 2010 David Lawrenson. This article must not be copied or re-used without the author and copyright owner’s prior permission but if you found this article useful do feel free to link to it.
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