ej_topmost
Property Hawk

LHA - train crash

I was contacted several weeks ago by one of our longstanding users.
Kevin wrote to highlight the very real impact that the Local Housing Allowance (LHA) changes
 are having on his younger tenants:

“This week I have had to speak to 2 of my under 35 tenants about the changes in January.  One has been with me since she was 19 for 9 years now, the other for 2 years and he is now 28. I had to tell them that as of January they will only be entitled to £66 pw and not the £105 they currently get.

 Both are excellent tenants and it's a real shame to be losing them through no faults of their own, but clearly they will not be able to afford the difference and so will be asked to leave as of course I'm not a charity either.”

This highlights the real dilemma experienced by landlords letting to young tenants claiming Local Housing Alowance.  For more details of how these proposals could affect your younger tenants have a look at this Shelter article.

Professional landlord insurance rates from Alan Boswell Group

What can landlords do?

Well the options seem pretty stark.  Landlords can try and maintain the existing rent but that would require the tenant to make up the new shortfall, which in my experience of tenants claiming benefit will be a slikely as finding a snowflake in June. This is particularly the case for younger tenants where the magnitude of the rental shortfall will be  so great.  For example in Kevin’s case the proposed reduction in rental support is in the order of 40% - a massive change.


Another alternative is to give the tenants notice and move them on and replace them with other tenants probably ones older than 35 to avoid this aspect of the LHA cap.  However, we all know how tough it is for the young at the moment.  No job, no money and now potentially no home. 

Commenting on the changes Kevin stated:


“I feel really bad about it of course but not half as bad as they do.  I could understand that the rule being applied in a forward fashion but to apply it in a retrospective way is going to do so much harm.”


Kevin’s view reflects many landlords predicament.  Many were prepared for a reduction but the savagery of the changes has caught many off guard.

Is it really going to save money?


Whilst I support the reduction in the profligate state spending that the previous government burdened us all with, I feel you have to question how much money will be saved by these changes. 

Kevin highlights in a recent letter to his MP the financial facts of his case:

“ as a result I have had to tell 2 of my tenants one of 9 years and another of 1 year that unless they can raise the difference they will be asked to leave, or I will have to evict them.  If I evict them they will then be deemed in need and TDC Housing Dept. will have a duty to house them which will mean B&B in a local hotel at a financial cost of around £368 per week. If, that is they can find any space.”

Professional landlord insurance rates from Alan Boswell Group

The good news

The good news for landlords is that because of the buoyancy of the rental market; replacing tenants now is not difficult.  However, whilst open market rents continue to move up those landlords reliant on public sector support will see a significant downward pressure on their rental income.  This is inevitably going to give these landlords a large financial incentive to move out of the subsidized sector.  Not all properties will be suitable for conversion or not all landlords will have the financial resources available to enable this to happen.  Landlords who have made investment decisions to buy and let property to tenants on LHA will now be faced with owning a property significantly under performing their original rental and investment expectations.  This could result in a significant hardship for both landlords and tenant.

Playing by the rules


In the case of Kevin he did what the local council was asking local landlords to do.

“Our local area Environmental Health Dept. had a push about 7-8 years ago to get as many Houses in Multiple Occupation turned into self contained flats which is what we did and many other local landlords did too.  The result is now there is a massive shortage of single shared rooms or bedsits to go to which is all that's going to be an option for the under 35's.”


Despite doing this Kevin is now faced with a dilemma of how to replace his younger tenants.

HMO youth ghettos

The logical conclusion for renters under 35 on LHA is that they need to move to cheaper accommodation in the form of a shared house.  To me this is not so terrible.  I spent many years as a student and then in my early working years renting a room.  Being part of a shared house can be an enjoyable and life enhancing experience.  However maybe the experience of sharing a fridge would not seem so great if I'd had to do it through to my thirties.The difference that I had from the current crop of ‘twenty somethings’ is I had a job, the affordability of housing and the availability of finance. It meant I could afford to buy my own property in my early twenties.  I wouldn’t fancy not having any prospect of having my own place until I was in my mid thirties.


Train crash unwinds


Landlords have known about these changes for some time but many landlords and tenants have been in denial that these massive cuts were really going to happen.  Now the train crash is unwinding before our eyes; I suspect many landlords are at a loss as to how not to get caught up in the wreckage.

Email your comments and views.

Get multiple landlord insurance quotes 

Professional landlord insurance rates from Alan Boswell Group


My standard text I have on this subject:
 
When taking someone under 35
 
This age limit used to be 25. And I had to tell loads of 23 year old lads 'I can't give u a flat yet, because u won't get enough rent. U will have to ask me again when u r 25. Now there are going to be lots of 33 year old grown men having to move back in with Mum or homeless, because the Govt won't pay for them till they are 34-I think it is actually 35. Absolutely bonkers. Where does the Govt think they are going to live?
 
 
Limiting LHA to £150 per week
When the Government started to pay sensible rent for large families, us landlords could go out & buy the house for these large families because we knew there would be enough rent coming in to cover the mortgage on these bigger more expensive houses. Because there are many people with 5/6/7 kids that are living in 2-3 bed houses. And the Council ain’t got anywhere for ‘em, so if the Government pay the correct rent, us Landlords will house them.
So I & many Landlords went out & bought some 4-5 bed houses for these families. The rent was £200ish, mortgage £170, bit of maintenance, bit of profit at the end of the year.
So now the Government want to cap the rent at £150pw (in Nottingham), where they gonna’ live Mr Thick Government? Der….. It’s going to be going back to the overcrowding that we hoped we could finally get them out of.
And what about us Landlords that have bought houses just for these families? We sell them, that then takes them out the market for these families, not available again for them to rent.
The Govt really are on another planet, they need to get on ground level where I am & the tenants are & see how they  are living & what is available. If there’s not enough rent to pay the mortgage, der…, where they gonna’ live?
You tell us one year, you’re paying this, we take a chance, buy them a house, next year, you say we’re now only paying this. You are treating vulnerable tenants like crap.
Don’t give ‘em Brucie Bonus on a plate, but at least pay enough rent, so they aren’t overcrowding & living in poverty.
 
Mick


Hi, After readng the very informative article, I realised that some councils are either doing different things with the new rules on the LHA or witholding information altogether! I am an agent for various landlords and a landlord myself. I read up on all the information our local council provided (Lewisham council) and they informed me all housing benefit cuts will apply none months after the change which happened in April this year and that there was to be a capping on all property types starting with rooms in shared houses to a maximum of a four bedroom house. There was no mention of age coming into it!!!!!!  I know that usualy a fully able mind and bodied young person under 25 would usualy get less allowance, but that was the only restriction on age as they would only pay for a room for under 25s.

I have had to inform some tenants I have that are claiming benefits that the change will affect them after December 2011 and they need to consider if they will be able to make up the difference in rent at that time or look for alternative accommodation.

Anyway im babling on a bit now, which im sure is boring! but, I thought I would mention the above as the article I read didnt seem to mention the LHA capping affects everyone on housing benefit, not just the under 25s. Or is it just Lewisham Council that is capping everyones benefit?

I  enjoy reading Property Hawk articles and have found some very interesting and needed information from the newsletter. Im just a bit confused with theis particular one. Keep up the good work!!

Many Regards
Carolyn


There is no way I would take on a LHA sharer.
I would rent out my spare room for £150pw plus food.
This means £150 x 52 weeks=£7800.00
Subtract £325.00 for spd council tax loss=
£7475.00 divided by 52 weeks= £143.75 per week
divided by 7 days= £20.53
divided by 24 hrs = £0.85 phr!
Would you let your spare room for any less?
I am not even taking into account additional consumption of household items nor additional cost of  elect and gas usage.
Plus giving up your privacy.
Do the council seriously expect anyone to take in a LHA lodger for any less.
Even if you use the RFR amount of £4250.00 per year it works out at £10.78 per day or £0.45 phr
No one in their right mind would let someone have use of their sapre room and common areas for  £10.78 per day.
And yet the LHA shared room rate will be even less.
LHA lodgers are not the type of people most would want in their house.
I sugest the govt needs to start building some hostels for all these LHA single claimants under 35.



Comments (0)

Name
E-mail (Will not appear online)
Subject
Comment
To prevent automated Bots form spamming, please enter the text you see in the image below in the appropriate input box. Your comment will only be submitted if the strings match. Please ensure that your browser supports and accepts cookies, or your comment cannot be verified correctly.
»
This comment form is powered by GentleSource Comment Script. It can be included in PHP or HTML files and allows visitors to leave comments on the website.
Most popular landlord information and FAQs

 

What rental yield should a landlord try to achieve?
Accelerated possession - Section 21 Notice
Non payment of rent
The Tenancy Deposit Scheme (TDS)
How to prepare a property inventory
Grounds for possession of a rental property
Fair wear and tear on a rental property?
Filling out a N5B form for possession
Landlord insurance advice
Letting to students
How do I choose the best tenant?
Should I use a letting agent?
Commercial Mortgages

Whole market search.
Instant personalised quote.
Rates updated in real time.

Find the most suitable mortgage for your individual requirements using our advanced buy-to-let mortgage finder.

Search
News and Advice for Landlords

MAGAZINE
Landlord Freehold Ground Rent Investments Many landlords are attracted to investing in proper...
Hello, I am Amy Castleman, a specialist Housing Solicitor at Premier Solicitors in Bedford. M...
One of the biggest issues that landlords face when tenants move out is the oven clean. Why is...
Should landlords let to students? Students can make good tenants & here’s why: ...
The risks of a leak in an apartment block To date I have bought two apartments in residential...
The three pillars of successful residential investment I’m often asked by newbie landlo...
This has been a question that has pre-occupied me for several years.  By instinct I don’t l...
I noticed recently there have been some significant repair bills coming through as the age of my buy-t...
“To furnish or not to furnish your rental property, that is the question” The dif...
‘Rent to rent’ sometimes known as rent2rent is the latest get quick scheme dreamt up by th...
What are tenancy renewal fees? A tenancy renewal fee is ostensibly the charges made by the le...
Cleaning Deposit Disputes between a Landlord & Tenant One of the most regular a...
If I had a pound for every time over the last 25 years of renting property and more recently running P...
Dates play an important part in a landlord’s life.    Pict...
Over the last two years, the property industry has seen an increase in the number of disputes between ...
Before you turn off thinking "oh yeah it’s another plug for  landlord insurance,"...
A vital part of being a successful landlord is to get the right tenant. In fact if the truth be known,...
For property investors, particularly first time property investors there a huge number of potential in...
BTL landlords are often portrayed as money grabbing, evil, exploitative beasts. We are accus...
How I started my property portfolio I started my portfolio back in the early 90's. We had jus...
INVESTORS CHECKLIST For potential property investors there is a huge amount to take...
We have spoken before about the life of a student landlord, but here's a little bit more advice for th...
Lease options are all the rage in some landlord discussion forums having usurped BMV or Below Market V...
Property gurus & experts The rise in the buy-to-let residential investment market has bee...
  Advanced residential investment strategies Buy-to-let investment is pretty st...
For landlords with residential investment property it’s rapidly approaching that time of year &n...
Since the introduction of the Tenancy Deposit Scheme (TDS) on the 6th April 2007 it has been a legal r...
It seems timely with the deadline for paying and submitting your self assessment t...
Lee Sharpe from TaxInsider.co.uk looks at the implications for property businesses considering incorpo...
This modern day ‘knight’ of the urban realm can be hero or cowboy depending on the one you...
I'm fascinated by 'financial engineering' and how every so often, quirks of timing cause financial opp...
Rental period confusion One of the most confusing aspects of let...
Caveat emptor for the non-linguists means ‘Let the buyer beware’.  Loosely translate...
Property Hawks Property Manager software is mainly designed for individual buy to let landlords to man...
Here we go again. The leaves are turning a riot of oranges & reds before we descend headlong into ...
Landlords could be forgiven for feeling a little brow-beaten. Over the last 12 months, we hav...
The Government have produced a new Section 21 Notice. We have updated the version of our free...
A number of users have contacted us to share their concern over the proposed tax changes in the Budget...
Is Landlords Boiler insurance worth it? Getting your boiler fixed can be costly for landlords...
Landlords looking for a buy-to-let mortgage will face more restrictive lending criteria in the future....
Cash Back Offer Landlords looking at taking out a buy-to-let mortgage want to look at the Pro...
The Chancellor has not been overly generous to landlords and the buy-to-let sector in his Summer Budge...
PM3s is the 4th generation of our Free Property Management Software. The software has been free to use...
Section 21 Notices are about to change as a result of the Deregulation Act 2015.  Rebecc...
Following the election result. many landlords are breathing a sigh of relief.  Economic stability...
Landlords should be fully aware of the importance of being adequately insured. I know it's a pain to s...
Taxing Concerns for the Buy-to-Let Market The UK’s property market was given an unprece...
I hate change and regulation.  Most of it is badly thought out, counter productive & pointles...
The latest legal case to unsettle the traditional certainties of a landlord’s world is the case ...
Private Rental Sector – Party Policies The big day approaches and finally it will be yo...
Changes that came into force this week (6th April) (see for instance http://www.bbc.co.uk/news/business-32087038) now allow many ...
When selective landlord licensing was introduced  by the Housing Act 2004 it was intended to be a...
My small claims court experience My case came about because my tenant stopped paying the rent...
Rents are rising. Great!  According to the Rentindex they are up over 2.5% over the last year. ...
My tenant has always been an exacting type but it's now getting beyond a joke. Every few week...
Most landlords know that they need specialist landlord insurance.  Why? Because household policie...
It's been a while since I've sold one of my buy-to-let properties, but the potential of a new buy-to-l...
Christmas is a time for reflection and after over 20 years in the landlord game I've seen a fair few c...
Landlords are never off duty.  Last week I was in the middle of a patisserie class of all things ...
Tenants are getting more politically militant! They are mobilising, pulling together, and forming grou...
After 12 years of owning and renting out a flat, the freehold landlord has decided they want to start ...
Refubish to let – finance is key 'Refurb to let' is the latest trend in buy-to-let acco...
The the referendum and the party conferences of the past few weeks have thrown politics back into the ...
We have warned landlords before about the purges on landlords. The cash strapped Revenue periodically...
My problem tenant has gone, and finally I have possession of my rental property. ...
What interest rate should a landlord charge on late rent payments? My problem tenant has fina...
Tenancy Deposit Scheme disputes Tenancy deposit disputes are a messy business, so we asked th...
My tenant has left - time to celebrate? This week I was greeted by a text from a friend/neigh...
Revenge Evictions –time to act? 'Revenge eviction' is a new concept to me .  It&rs...
Letting agent questions I’m just in the process of selecting a letting agent.  I&r...
Buy-to-let hotspots are the ‘talk of the town’ right now.  Clearly we are in some kin...
Letting agents are not the ‘favourite kids’ on the property block. Landlords tend to view ...
Landlords should get fixed up I have been eyeing the latest developments in the economy and t...
What are the new court fees for possession? The court fees for landlords obtaining possession...
What are my allowable expenses? I’ve been contacted recently by several landlords who w...
Solicitors are costly. I'm all for landlords using their initiative and avoiding paying unecessary pro...
Section 21 notice dates – where are we now? Rebecca Brough our resident expert from Fid...
People frequently ask me what is my biggest tip on how to be a successful landlord. The answer is simp...
Not all our users realise that having signed up to our website they are FREE to start using our Proper...
I've been hit recently by a range of maintenance issues on my buy-to-let portfolio, including a number...
We are just a couple of weeks into 2014, so I thought I’d take a look at some of the best deals ...
OMG!  It's here again.  The ‘bloomin’ personal assessment tax deadline looms lar...
It looks like ‘Austerity’ …..‘Prudence’s’ long lost sister is on ...
The Section 21 Notice has not been the easiest of things for landlords to get right. Using the right o...
In the week that the Land Registry released historic data going back 18 years, I thought I would share...
Rebecca Brough solicitor at Fidler and Pepper highlights the potential dangers and consequences of the...
It appears that landlords are starting to fight back over unfair licensing charges by some local autho...
Access to finance is key When I started as a landlord the key for me was access to ...
Prospective property investors thinking of dipping their toes into the residential property market, or...
Longer tenancies?  Sounds like bliss to most landlords. Most of use love the thought of long-term...
The section 21 notice is a powerful tool. It is the one document that gives a landlord the certainty o...
When is a landlord not a landlord? Well the obvious answer is when they are a leaseholder.  ...
Creeping landlord licensing is on its’ way affecting many landlords.  A perfect example is ...
I was talking to one of the waitresses in my local.  She is so excited! She’s ...
Tenancy agreements are our thing.  We have been providing a free tenancy agreement to the landlor...
The latest projections see no immediate end to the long run of low interest rates.  This week Mar...
Our Property Manager software has come on leaps and bounds since we first developed it as free propert...
In these tough financial times some landlords may be looking at how they can pull in a few extra quid ...
The Government's latest proposals are to introduce a statutory obligation on landlords to check whethe...
Many landlords have been thrown into confusion over the last few months as tightening legislation and ...
I love being a landlord.  I’ve recently set up another new business.  I work ...
According to figures from the Dogs Trust, 46% of the population currently own a pet.  Now assumin...
Recently, I was talking to a new landlord about their first ever tenants.  They had been chuffed ...
Should I use a letting agent? The perennial debate amongst landlords is should I use a lettin...
Landlords who may be thinking about buying into purpose built student accommodation should stop and th...
Landlords are increasingly often under a time pressure. With the burgeoning regulatory requirements of...
Most of us ‘hard bitten’ landlords get fed up with the endless splurge of meaningless head...
Are rents about to fall? Landlords have been insulated from many of the harsh economic winds since the...
Tenancy Deposits – ESSENTIALS I’ve recently had a scare over one of my tenants de...
The queen is dead! Yes off course I'm referring to Margaret Thatcher.  Now she never sai...
Landlord Insurance Minefield My landlord insurance falls due this month.  As u...
We have frequently expressed opposition to a blanket landlord registration scheme - the ‘so call...
We’ve all had it - the phone goes, it’s one of your tenants’.  Do you:...
Better The Devil You Know?   I've recently advertised my rental property follo...
I was contacted this week by a fraught landlord who was the subject to a negligence claim from their t...
The buy-to-let mortgage market has gone from bust to boom again over the last few years.  With le...
This is a regular discussion point amongst many landlords.  Those that have been dissatisfied wit...
It's a landlords’ dread!   A nice respectable looking tenant, with a good...
Rebecca Brough of Fidler and Pepper Solicitors asks whether landlords need a tenant guarantor, and exp...
The thing with managing a portfolio of buy-to-let property is that for much of the time you don't have...
Brings Threats and Opportunities Many landlords are adopting a wait and see approach to the G...
Severe rental arrears fell by almost 16 per cent in the fourth quarter of 2012 according to data from ...
Should a landlord let their tenants smoke? Landlords are acutely aware of the bad smells and ...
New Year celebrations are well and truly over, so it’s back to work, and for many landlords, sma...
I was thinking today, what would be the top 5 things I would wish for next year as a landlord.  S...
You may think that as a landlord you are not liable for your tenants’ water bill. Well up until ...
I can't begin to explain how fraught the last few weeks have been.  Most part time landlords will...
The buy-to-let mortgage market has been in the doldrums for several years after the ‘crash&rsquo...
Rebecca Brough of Fidler and Pepper explores the world of fees and charges in respect to a landlords ...
Don’t forget your section 213 notice! Property Hawk has been urging landlord not to forget about...
You are just about to let your buy-to-let.  So what are the essential bits of paper work that you...
Is there such as thing as the ‘fair wear and tear’ of your buy-to-let property? ...
Landlords looking to obtain possession have two basic choices when trying to get their buy-to-let prop...
So it all goes wrong!  The tenant moves out (disappears) and owes you months of rent.  They ...
We recently had a enquiry on the Landlord Forum asking whether it was a good idea to serve a section 2...
Landlords seeking possession frequently have to decide between the merits of using a Section 21 notice...
Renewing a tenancy is one of the most straightforward aspects of managing a tenancy.  But many la...
Getting possession of a rental property when your tenant falls into rent arrears Th...
I read recently on a landlord forum a suggestion from one disgruntled tenant that landlords should be ...
My latest round of tenant gripes has hit me after a relatively quiet period. I suppose it was...
After launching the new version of the property management software we felt the actual site pages look...
Rental yields have always been a critical metric when evaluating a buy-to-let investment and they are...
Any landlord who follows London politics will not have escaped the fact that the private rented sector...
I was chatting this week to my joiner Steve. He was having a nightmare! Steve had done most o...
The Co-op announced last week that it was stepping up lending into the buy-to-let mortgage market by a...
Legislation should be in place by the end of the year to allow landlords to benefit from the Green Dea...
It's January which means only one thing for most landlords, yes it’s time to get to grips with t...
As the year comes to an end many landlords will be drawing up their plans for 2012. With the ...
I was contacted several weeks ago by one of our longstanding users. Kevin wrote to highlight ...
I'm like the majority of small landlords in that I have opted to use the Deposit Protection Scheme (DP...
Europe is at it again! Not content with their crazy project “Euro”  putting ...
You might be aware that I’ve had a number of new tenants recently. This has i...
It’s a great time to be a landlord. Many of us including me are making record rental pr...
I was contacted last week by a landlord looking to gain access to their bu...
I’ve written before about landlords not needing to use a letting agent. We al...
It's been a while since I've had a new tenant move in. The new tenant seems amiable enough. A middle a...
My landlord insurance fell due at the beginning of this month. DAMMM! Yet again the dilemma. ...
It is possible to get a company to fill out your N5B.  This will cost anything upwards of £...
Most landlords use an Assured Shorthold Tenancy agreement to let their property. So how long ...
I've been looking at some recent enquiries from landlords who use our Property Management software to ...
Most landlords who let a property that is tenanted will not be liable for council tax.  This is b...