The Local Housing Allowance was introduced just over a year ago, on the 7th of April 2008 by the Government in a 'fanfare of political rhetoric' and ‘bureau-speak’.
This policy was going to put the power back into the hands of tenants. Hurray! With it's aim to educate benefit receiving tenants on how to budget, to deliver social justice and at the same time, slash Housing Benefit costs. All in one fowl swoop, miracles do happen!
Landlord insurance – professional rates – discounted prices
Despite warnings from all parts of the landlord community that in reality, it would result in higher rates of rental arrears and ultimately a reduction in the number of landlords prepared to let to tenants on benefits; the politicians and their faithful, Whitehall whipping boys pressed on with the policy.
Labour politicians, buoyed up with their own claims of social justice and treating tenants as ‘human beings’…..blah, blah, blah, and the Housing Minister being well aware that the rapid turnover in Labour Housing Ministers meant that they were very unlikely be in the same post once the fall out from the policy ‘hit the fan’ meant that the career politicians sailed merrily on with implementation.
The latest research
A year and a half on,... and the resulting impact of the LHA is becoming apparent.
Research published this week by the National Landlords Association (NLA) confirms what many landlords have known for some time. Many tenants have failed to pass on the allowance to their landlord, (oops!), who are now suffering average local authority arrears of £4,400. The study, based on nearly 1,000 landlords and 13,000 tenants receiving LHA, found that these landlords are experiencing rent arrears of £4.4 million.
Steve Hilton, a spokesman for the NLA, says: "If this is extrapolated out to cover the 675,000 tenancies operating under LHA, the total rent arrears for all LHA landlords could be in excess of £220 million."
This research by the NLA is backed up by other research carried out by the housing charity Shelter. This shows that in their survey carried out with 450 individuals claiming Local Housing Allowance from 9 councils, more than a quarter had fallen behind with rent payments. Whilst those tenants that would have elected for direct payment of their rent, 95% were struggling to manage their finances.
Almost half of those tenants, who had experienced both forms of payment believed that payments direct to the landlord helped them to manage their rent and household budget better.
These bits of research are interesting in that they are findings from opposite sides of the housing fence. One organisation represents the interests of the landlord, and the other coming from those intent on protecting tenants and their welfare.
In both cases the evidence points to the fact that the system is failing the interests of landlords and tenants alike.
Government policy 'backfiring'
The new rules have not only failed landlords but also backfired on tenants, according to Paul Shamplina, director of Landlord Action, a company that specialises in tenant eviction. He says: "We have seen Local Housing Allowance evictions rise by 20% in the last year, and councils are not obliged to re-house these evicted tenants." The term, 'give them enough rope to hang themselves' comes to mind.
Jamie Moodie, a professional landlord with 36 properties throughout England rented to LHA tenants, and is now owed rental arrears of between £40,000 and £60,000. Jamie's problems started as soon as the rules changed last year. I've had 10 runaways so far this year and one property in Thorpe Arch near Leeds has had three non-paying tenants in a row, costing £16,000. And it's not just the arrears: tenants sometimes steal fridges and washing machines, and soil the carpets."
Landlords can complain to the local authority once a tenant is two months in arrears, but landlords report that authorities vary considerably on their responsiveness, with complaints often taking three or more months to investigate.
Moodie says: "One council will stop LHA payments as soon as we complain and investigate the problem straight away. Another refuses to discuss the issue with us, citing data protection. We haven't got a chance of getting any of that missing money."
Moodie’s problems reflect the reaction that we have received from many of the readers of Property Hawk. To see the strength of feeling of many landlords against the Local Housing Allowance you just need to read some of the comments posted to our recent article about the LHA.
The article highlighted the injustice of the LHA, which only applies to private sector landlords and NOT social landlords such as housing associations. A reflection that the Government as landlords weren’t very confident that the system was going to work, and didn’t want the risk of themselves, (in the guise of housing associations) not receiving THEIR rents!
The response so far from the Government has been typical.
First of all they claimed that the system is working wonderfully well. Kitty Ussher (Parliamentary Under-Secretary, Department for Work and Pensions; Burnley, Labour) responded to a written question in Parliament in June by stating:
“Despite landlords' initial fears, there is overwhelming evidence that customers have responded extremely well to the responsibility of managing their rent payments. Evidence from the evaluation has shown that customers regard paying the rent as a matter of prime importance and that most would prioritise this above all other payments.”
Sorry Kitty, which planetary system do you reside in?! ‘Most’ constitutes 51%; not a great incentive for a landlord thinking about letting to a tenant on benefit to take, a one in two chance of not receiving rent!
The Government response so far to the mass cries of: “the system ain’t working,” have been to adopt the anl ostrich stance. Problem – what problem? They have followed up by withdrawing the one aspect that could be seen to be a positive about the LHA. The ability for tenants to keep up to £15 extra in rent per week where they managed to secure a rent below the allowance based on the BRMA rent for their area. This aspect of the system did actually give a tenant real choice and an incentive to use and develop budgeting skills.
The latest from the Government is the announcement of an enquiry which will inevitably tell them what landlords and landlord groups have been telling them from the start.
"A system based around non-direct payment of rents won’t work!"
Tories show some common sense
Into all this mayhem and confusion step the Tories, in the shape of the youthful and enthusiastic Shadow Housing Minister Grant Shapps. Imagine a young Tony Blair but with principles. I know difficult.
Shapps announced yesterday at the Crisis national conference in Birmingham that a Conservative government will revert to the way housing benefits were handled before the introduction of the LHA. In other words allowing direct benefits payments to landlords.
In his speech Shapps said that the current system is deterring landlords from renting property to tenants receiving LHA: "Fearful that rent money may never be paid, some landlords routinely include the words "No HB" in their ads, further restricting the supply of housing for affordable rent. At the same time some of the most chaotic tenants have struggled to manage their finances, meaning that the cash is already spent by rent pay day.”
"It strikes me that the current situation is bad for everyone and I can see no reason why people on local housing allowance shouldn't enjoy the freedom to have their housing benefit paid direct to their landlord. Our proposal will destigmatise the system and increase the amount of affordable homes available."
A welcome dose of reality.
We welcome the Tories application of ‘common sense’ on this issue. What this whole debacle illustrates is how; out of touch politicians living in ideological middle class ivory towers can start to believe their own spin and PC diatribe. However, when that policy is tested in the real world the vacuousness of the underlying political rhetoric is rudely exposed in the probing light of reality.
In ending this piece I thought long and hard and then decided to finish with this quote left on the Guardian website in response to the whole LHA debacle. I hasten to add that it is not my view; but sometimes you think that politicians, landlords, ... all of us, have lost site of the gritty reality in this PC, tree hugging, media friendly world.
The comment simply reads:
“What idiot couldn’t see this coming. Give people cash and of course they prioritise spending as they see fit. Obviously, food, beer and fags come before a landlord.”