Local Housing Allowance
Local Housing Allowance – 1 rule for 1
Landlords are no doubt aware of the phrase one rule for one and one for the others.
This phrase has never been more appropriate than when referring to the actions of the Local Housing Allowance introduced by the Government on the 7th April 2008.
Housing Benefit vs Local Housing Allowance
The Local Housing Allowance (LHA) overturned the established Housing Benefit system which has allowed landlords to receive Housing Benefit payments directly from local authorities. This suited a landlord in that they received a regular and guaranteed rental income and did not have to chase the tenant repeatedly for housing benefit. Equally, the tenant would know their rent was paid and could concentrate their budgeting efforts on making their other benefits go further.
However, in their wisdom the Government decided to bring in the Local Housing Allowance, a system designed so that benefit is paid directly to the tenant and only paid direct to the landlord in exceptional circumstances, such as if the tenant is deemed ‘vulnerable’ or there are serious rent arrears (i.e. over 8 weeks worth).
This aspect of the new scheme has been very much criticised. A local coroner in Blackpool (one of the pathfinder areas) going so far as to suggest that benefit money was helping to fund the cities drug problem. Blackpool has a particularly large private rented sector as well as a very large drug problem, some calling it ‘drug death capital of the UK’.
This gives the Local Authority a little bit of discretion but the inference in the legislation is that the over whelming majority of tenants are paid direct. This compares with on Currently some 60% of benefit in the private sector is paid direct to landlords.
Local Housing Allowance – direct payment
The Government has not issued guidance to Local Authorities on the Local Housing Allowance as to when they should consider paying a landlord direct but in a written answer to a Parliamentary Question, the Minister with responsibility for Housing Benefit, Kitty Ussher outlined the governments view:
“We have not issued guidance on the payment of housing benefit directly to the landlord. If local authorities consider that the tenant is likely to have difficulty in relation to the management of their own affairs they may make payment to the landlord. For example, if the tenant is known to have a learning disorder or a drug/alcohol problem that would mean they are likely to have difficulty handling a budget, payment could be made to the landlord. If local authorities consider it improbable that the customer will pay their rent, for example, if the Local Housing Allowance (LHA) authority is aware that the tenant has consistently failed to pay the rent on past occasions without good reason, payment might be made to the landlord.”
The reason given on the Department for Work and Pensions (DWP) website for payment direct to tenants is that it is “empowering people to budget for and to pay their rent themselves, rather than having it paid for them”, which “helps develop the skills unemployed tenants will need as they move back into work”.
One rule for one…….
All this is laudable stuff. Off course tenants should be treated as responsible adults as many of them are. However, not withstanding the argument that the benefit is being paid to house tenants and not to be potentially spent on holidays, consumer durables; the gripe I have with the new system is far more fundamental. It is that private landlords are being treated differently and are at a disadvantage to other landlords.
This is because Housing Associations and other RSLs will continue to receive payments for their tenants directly.
This fact was recently confirmed by a report in the Financial Times over a reply given to the Council of Mortgage Lenders (CML), in which the government gave a firm re-assurance through the minister responsible for housing benefit, Kitty Ussher, that housing associations (HAs) and other registered social landlords would continue to have a guaranteed stream of income in the form of benefit paid directly to them.
Housing benefit typically provides 60% to 70% of the income of Housing Associations and most of this is received directly by landlords. This guarantees a strong and reliable cash flow, and is cost-effective for landlords.
That income is ultimately a source from which housing associations repay the funds they have borrowed to build and improve affordable housing.
The CML commented that: “The reality is, however, that any decision to pay housing benefit directly to tenants would expose the funding of the social housing sector to greater risk. That would have serious implications for HAs, lenders and other investors.”
Discrimination against private landlords
All this is true, but it is also true for private sector landlords. This is pure and simple an act that distorts the market for housing provision and puts private sector landlords at a huge competitive disadvantage.
If this behaviour involved the actions of any other sector other than housing provision and involved the action of private companies the competition authorities would be crawling all over the government’s actions.
This inconsistency should not be allowed to stand. The government should either abandon the concept of the LHA or if they stick by their guns for their own political reasons; then they should ensure that all types of residential landlord are treated equally. Only this way can we have a balanced, responsive rental housing sector that offers choice and competition between different providers.
Is it working?
I will not be letting any properties I own under the new LHA rules.
It is pointless to reiterate the blatantly obvious facts that…. IT IS A RECEPIE FOR TOTAL DISASTER!
Any properties that now become vacant will be let privately to professionals or sold to highest bidder.
So when the government is crying because amazingly there is now a housing shortage for the population that chooses not to work………….tough.
I am tired of being the middle man between the remedial dip shits in government and delinquent dossers I accomadate.
As an experienced Landlord and Agent I have let a number of properties to LHA claimants and can confirm that in 75% – 80% of the cases money is missing, ie: the claimants have not passed it on and are in arrears with their rent.
The Government must realise that LHA was introduced in a financially thriving climate and designed to work in the same. Things have changed since and therefore paying LHA directly to tenants is unacceptable and does not suit the current financial position of the economy.
Indigo Property Management Ltd
Is it working?
It is pointless to reiterate the blatantly obvious facts that…. IT IS A RECEPIE FOR TOTAL DISASTER!
It may be that RSL’s and HA’s have the payment direct, but the LHA levels are not pertaining to social rented properties as the old Housing Benefit system still applies and not the higher LHA rates.
I never thought I’d be writing to say, actually LHA is working, and to the benefit of myself & the tenants.
The local LHA for my area for a 1 bed flat or studio was set at £105 p/w, under the old rule I was only able to get the rent officer to agree £85.00 leaving the bulk of my tenants to pay a £10 top-up Many of my long term & trusted tenants were persuaded to go over to LHA by stopping their H/B for 1 week and then restarting it. Many of these tenants have issues that would be acceptable for direct payment anyway. The result is I now get £105 clear and the tenant has no top-up to worry about, and in some cases they even get a small differential payment each month. Result for me is £16k p/a extra rent and no work to chase top-up. I figure if I lose a bit to non payment of LHA by stupid tenants I am still quids in overall. The maximum they can go is 8 weeks before direct payment is resumed, 4-5 weeks of that is covered by deposit so assuming there is no damage at the end of the tenancy maximum loss exposure is only 3-4 weeks.
New tenants are of course a different problem, but now instead of letting them in without the 1st month in advance if they are claiming H/B they are now treated as any other self funding tenant and must have the 1st month in advance.
To date I have had good experience of LHA but this does require the cooperation of the tenant, and the H/B team and making the legislation work for you.
I agree there is a 2 tier system the government have put in place, but then this is nothing new for the authorities. They must know there are going to be huge amounts of defaults despite the "success" of the pathfinder areas. Why else would they protect the local authorities, housing associations, and other social landlords?
Another complete mess by this stupid government, who cannot see how important the private landlord sector can be.
I have spoken to 3 friends, all private landlords, who have equally stopped renting to benefit tenants, because we cannot be guaranteed their payments. In all cases, we will only accept employed persons who can present letter-headed proof from senior managers who will confirm that they are in full employment. After re-reading this report, you cannot blame us whatsoever.
Where does this government think all of the benefit housing will come from? That already owned by Associations are already full with waiting lists, they cannot be conjured up overnight. You can now expect futher legislation to force us into accepting these tenants, at our own expense with no redress for late or lost rental. And with a falling property market, the government will be in a win-win situation!
I am a private Landlord and I shall not be letting any properties I own under the new LHA rules.
If the law is equal for everyone then Social Landlords must be subject to these rules too.
All private Landlord should continue to strongly complain at all levels against these rules as there are unfair and discriminatory.
The government should abandon the concept of the LHA as it is ridiculous and makes no sense whatsoever.
Mr N. Fanelli
96% of my tenants on LHA are in arrears.
I have had tenants been me with me 8 years-no arrears whatsoever. Now they are on LHA, they are in debt.
They’ve been camping all weekend on the LHA money.
They’ve paid their gym membership using the LHA money & not had enough to pay the rent.
They’re getting bank charges they’ve never had before because LHA is being paid into their bank & this is being used to pay direct debits etc. & not enough left over to pay the rent.
And this week alone, I’ve had a girl lose two stone in weight in the two months she’s been on LHA ’cause she’s being using the LHA money to buy her drugs & consequently lose the weight-All because the Govt have been giving her £440 every 4 weeks-Her drug habit is now worse.
If a tenant hasn’t handed over for example £200 for the rent that the LHA has put in her bank, what sane person would then 2 week later give her another £200 & then another £200 all the way to 8 weeks £800? Why give 8 weeks £800? If someone’s spent the first £200, why give them any more? Because that’s what the Govt/Housing Benefit do-They say we must wait for 8 weeks arrears to build up before they pay the Landlord direct-Why? What sensible person would deliberately put a tenant into debt? Help their drug problem? Put a Landlord at risk of repossession?
Why not just err on the side of caution to protect a tenant’s home & just pay pay the Landlord if there is any doubt whatsoever.
I have just let one of my properties to a L.A. tenant for the first time. I was amazed to discover that not only was the rent to be paid direct to the tenant but that the rent will only be paid fortnightly in arrears which effectively cancelled out the first month’s rent that I took in advance. I now have to ‘trust’ my tenant to hand over the money on a regular basis which she did the first time but ‘forgot’ last week until reminded on Christmas eve. I could well end up having to remind her every fortnight and have no guarantee she will pay the last amount when she leaves. I will certainly think twice about taking on another L.A. tenant and believe the government have been very shortsighted – I am not a charity and I am not paid to help them to ’empower’ people and develop their skills. This will only make it harder for such people to obtain a tenancy in the future.
Keep up the good work – I find your website very helpful and informative.
I am the unfortunate loser in Local Housing Allowance – direct payment as featured in your newsletter.
I had a tenant who split from her husband. He was in full time employment and paid the rent on time consistently during the term of the tenancy. When he left she went onto benefits. She kept hold of the rent that was due to me resulting in me having to apply for the direct payment to be made to me (even though when she signed the new tenancy agreement she had signed a letter of consent for the payments to go directly to me) I am now chasing over 3 months of back rent due to me.
I have had some negative experiences with this system, firstly I had issues with two tenants whom accrued outstanding arrears of up to six weeks laming the processing systems one did a moonlight flit, the other spent it all on a drug habit. However both were in bed-sit and studio style accommodations in a HMO although the rent was £70 LHA only paid £50 as they were not self contained i.e. were inclusive of council tax, both tenants were over 25 and eligible for up to £395 PCM but the LHA said they have strict guidelines on payments for HMO they gave an additional payment of £15 per week to top it up but this was a temporary discretionary scheme, considering I have invested so much to meet with revised government standards in HMO the government in their infinite wisdom then under valued my rental income….
As the tenants had not ticked the box to allow landlords intervention with the LHA they and I were powerless and unsupported throughout, the irony once I had lost hundreds of pounds these tenants moved to upgraded accommodations with another landlord and their payments paid direct, as they had a history of bad payments to me…My loss another’s gain!
Coventry LHA did not want to know until the arrears had reached eight weeks by then one of the tenants had long gone and the other dragged it out drip feeding me with small weekly token gesture payments, then left without notice, owing hundreds leaving no forwarding address…
When the tenant has spent their Housing Benefit on themselves and not paid the rent they end up in arrears and there is no way of the Lanlord claiming that money back so it has a knock on effect the Lanlord can then end up in arrears if they have a mortgage.
The tenants are spending money that is not theirs and there is no law against it- it is legal robbery.
eg If i did not pay my council tax the goverment can legally take it direct out of my salary.
If the tenant does not pay rent why cant the goverment pay them less benefits until the rent that they illegally took is paid back to the Landlord.
This is a major problem that is going to get out of control if the goverment dont change it back there will be less lanlords renting to Housing benefit
Seems only I am making it work. It has done me a power of good so far. Or perhaps only those that its not working for are posting. Just recently I have let one of my 4 bed houses for £100 more p/m to a new family because of LHA rules, and because of previous poor payment history I get it paid direct.
I think the 2 tier approach says more about the blubberments expectations of long term success than any single thing. I have been told by my local H/B manager that there are going to be some changes very shortly, but didn’t indicate what these were, but my suspicion is they are looking to close the loophole I am exploiting.
As you are aware the figure for LHA differs each month. For the last several months the figure has come down(only a couple of pounds) each month. They say they collect data from localities and adjust the rent amount allowed. In our area the amount has decreased. This will decrease further as more people become desparate to get some one into their property. Tenants are now looking for cheaper properties so they can benefit the difference themselves.
Even if the tenant falls into arrears the local authority has the right to decide. I honestly believe that private landlords and letting agents should not allow these tenants accomodation.
Being a Blackpool landlord I have had first hand experience of LHA, one sided can not be overstated. Benefits can as stated be paid direct the landlord and this does happen however its usually after a default to the first landlord who looses rent through non payment of money and the tennant moves on.
I have personnally lost hundreds of pounds and the council wont offer help to either say where the tennant has gone to, good old data protection. Having to collect rent on different days costs time and money, only landlords will know that if you dont collect on the day the paymnent reaches the tennants account, it gets spent so be on the ball.
Bring back direct rents, it simple and if a tennant wants move by choice they do so.
They have choices as they have always done
It is clearly wrong that the private landlord should be discriminated against in this way. Which of the landlords associations will be the one to act on behalf of landlords and lead the fight for justice?
I have one tennant who benefitted from this to the tune of 8 weeks rent or rather the local drug dealer benefitted from over £800 pounds of my money being used by my tennant on canabis etc He is now in debt to me to the tune of £800, and if I go to court the court will look at his situation and ask him to pay back at the rate of £1.00 per week even if he feels like paying it. I feel like I should evict him with no references he then becomes homless with all that that entails. Good scheme or what !!!!????!!!!
Of course it isn’t working and anyone with a brain predicted that. It is simply another step by the present Marxist government to destroy the private rental sector – even though the government housing sector is grossly inadequate.
I have read your article on direct payments to the tenant and it seems as the government is forgetting that a large number of private landlords are currently bridging the gap in the current shortage of housing available to people on low income or benefits, but I wonder if private landlord decide to no longer rent to people on benefit, would RSL and the local authority have enough housing stock to accommodate such tenants.
If the government continue to but barriers for the private landlord then they may need to start building more social housing. as landlords will get to a point that it would no longer be worth the hassle
As a landlord myself, I will no longer rent to people on benefits
Having attended the DWP/Private Landlord Meetings prior to the roll out of LHA, I realise how democratic China is compared to the British government. We brought up all the obvious issues surrounding direct payments to tenants, it was tantamount to the devil in the wilderness to give them large amounts of money, when they are trying to survive on less than £70 pw etc. etc.
The DWP did all the necessary Pathfinder evaluations (at great taxpayers’ expense) and managed to come up with the desired answers. They omitted to evaluate the increased homelessness (other external factors contributed towards this, they said) or the number of tenants who had returned to work, because now they could budget with the extra rent they received over and above the contractual rent. The ethos behind this legislation was that it would teach tenants to budget. They have thrown the tenants in the deep end without teaching them how to swim or given them a life jacket.
I have personally lost over £5,000 in rent.
One of my tenants, in a wheelchair, had pleaded with Stockton Council to have his rent paid direct to me (without my knowledge or prompting). He can not get direct debits set up with his bank so had to post the LHA cheque to his bank, wait for it to clear, then phone our manager to either take him to the bank to collect the cash or arrange for some one else to do so. Our manager then had to collect the cash from his house. This went on for several months before we managed to train our bank to accept third party cheques! I now send out SAEs to all those tenants who get paid by cheque and they just forward it to me.
Why should the British tax payer be supporting all this robbery. Yes it is theft when it is not used for rent.
Vulnerability – DWP suggest in their guidelines that the tenant gets a doctor’s report to say that they are vulnerable and can not manage their budgets. Doctors have no idea whether a person will pay their rent or not. Only landlords know the answer to that. (My eldest daughter is a GP and their hours are being extended as it is).
I was amazed that the Heffernan case came to court. No I should not have been. DWP said that ‘no one would be worse off under LHA at the point of transition’. So why was Mr. Heffernan worse off? Because the government said that the Rent Service must increase the areas of the Broad Market Rental Areas to include such facilities as doctors, pubs, churches, schools and other social amenities, and then take the median rents. Obviously this would make some people worse off by definition of median rents.
The DWP said that Social Landlords would follow with LHA within two years! U-turned on that one.
I am not in one of the pathfinder areas but since April 2008 we have changed 95% of our tenants(who are on benefits) over to LHA by missing one week’s HB. We did all the paperwork for the tenants, getting them to sign authorisations etc. This was their choice. Only 5% did not want to change and we respected this. Even though these instructions were filed with the local authorities correctly, two of the Local authorities then paid home visits to our tenants and persuaded them that they should not change over to LHA. Another local authority (I deal with nine of them) told my tenants that one week break was not enough, they would have to lose a month’s housing benefit! Here in the north east most tenants are nearly 40% better off under LHA than HB – we have suffered suppressed rents, hidden behind Rent Office secrecy for so long.
We are having great difficulty in local authorities accepting that our tenants are 8 weeks in arrears (the tenancy agreement is set up that the rent is payable 8 weeks in advance – I have been doing this since 1983 when I bought my first property – all my working tenants pay 8 weeks in advance). We took this up with the DWP and David Barr Head of Housing said ‘we recognise that there is no separate definition of ‘arrears’ in Housing Benefit Regulations, and therefore we must accept the common meaning – when something has become due and not paid’ and yet in their guidelines to the local authorities they tell them not to accept this as landlords would be trying to circumvent the policy intention. Councill tax is payable in advance and we are billed in advance and when we have not paid it we are considered to be in arrears and taken to court for non-payment!
The DWP have written this legislation. They have then provided the local authorities with guidelines on how to implement it. These guidelines conflict with the Regulations. Local Authorities have said they now have discretionary powers to decide who should receive the rent payments but are afraid to send landlords direct payments in case they displease the DWP. The DWP spent 51 million pounds on new IT equipment and yet the local authorities can not flag up when a person was either in rent arrears at a previous address or if the tenant comes from a different catchment area. The facility is available but it would have to come out of the local authority’s budget.
I am sorry I could go on for ever on this subject. I will bore you no more. What we need to do is find the landlord associations, shelter, CAB and whoever to join forces over this totally discrimination of only paying private tenants rent directly and not social tenants. It may even be worth considering taking the government to court for discrimination, disallowing human rights (to nominate who receives their entitlement) – perhaps use a tenant as the claimant (who may be entitled to legal aid). It certainly needs co-ordinating nationally – any suggestions?
Thanks for reading
LHA review a year on
Mr A is a particularly sad case
He never wanted the LHA to be sent to himself and attempted to arrange
for direct payment to me in respect of his rent.
Mr A has a history of alcohol abuse and it appears that he could not
resist the temptation of the last two LHA cheques.
Mr A has now gone in to hiding and we are really worried as he expressed
suicidal tendencies to his friends.
Its a shame that the onus is on the vulnerable to prove there
One of my tenants (Mr C) is now in arrears simply because he had to
deposit his LHA cheque in his bank account. His bank has no desire to
demarcate the funds purpose and as such the LHA cheque has been used to
pay off an overdraft.
Another tenant (Mr D) does not know what to do with his LHA cheque he
complained that he cant deposit it in his bank because its a basic
benefit account but does not accept housing benefit he explained that he
could not afford to take to cash converters.
We also have had situations of arrears incurring due to payment clearance
times (Miss C) with her bank taking five days to clear her LHA cheque and
then another five days to send the standing order. Therefore by the time
I received the rent it was two weeks late and it was paid in arrears by
two weeks so she ended up 4 weeks in arrears.
I had another situation where a tenant who suffered from mental illness
(Mr F) had to slip into several weeks arrears before his direct claim
would be considered.
We have also had situations where I have had to serve notice due to rent
arrears and therefore risking homelessness before direct payments would
be considered (a long list)
Maybe the vulnerability policies developed by the local authorities could
have a provision to allow the tenant to request direct payment and then
proceed to do so for a probationary period. This would ensure the rent is
paid and prevent homelessness yet at the same time provide a timescale
for the tenant to provide the council with the documentary evidence
required for the vulnerability decision. As most councils appear to have
a process of annual reviews anyway this could perhaps encompass a
probationary period during which no arrears accrue.
Its a shame that the vulnerable have to declare the nature of there
vulnerable issues to a public body that has no need in reality for this
information of a confidential nature.
It could be considered demeaning to provide proof of for example
bankruptcy, (Miss A) addiction issues (Mr S) or mental health status (Mr
F) as most of these conditions also have stigmas attached.
In most of my rent arrears and notice of possession cases the initial
direct payment request at claim onset was ignored and has resulted in
arrears and prompted me to serve notice.
Blackpool and Fylde Coroner Anne Hind has previously stated that the LHA
benefit payouts were funding the resorts drugs problem. A tenant who
has a drug or alcohol problem (Mr S) is unlikely to provide supporting
A year on since the inception of LHA the only achievement its
introduction has been was to reduce my income increase my eviction rate
and place more vulnerable tenants at risk.
I have no evidence of the LHA introduction meeting its primary aim of
encouraging fiscal responsibility instead its created hardship and
The LHA is obviously not working, as is causing loss and cost to private landlords. The problem of tenants keeping the LHA is spreading throughout the industry as more and more tenants are taking the view that if their friends can get away with it, then so can we.
Housing associations and registered Social landlords receive LHA direct, and this of course is deliberate policy, a policy that is destabilising the private rental market, and will result in many, many tenants losing their homes.
Beat them at their own game – I can see no reason why a nationwide housing association cannot be formed, it does not need to own any property, but will ‘manage’ properties registered (for say six months at a time) with it by any landlord large or small.
LHA would then be paid by the local authority to the Housing Association, cutting out the tenant problem. Then passed to the landlord.
Rents could rise to the full level of the LHA in that area (which could mean additional income for the landlord).
As a Housing Association is a non profit organisation, then only a small percentage fee would need to be charged to the landlord to cover admin cost (Ive no idea what percentage at this stage, but it could be as low as 5%)
A Housing Association also attracts other benefits and advantages over the private landlord, and if possible these can be taken advantage of.
Tenants would benefit hugely by having the threat of home loss, being pursued by debt collectors and having the task of managing what could be large sums removed from them.
This is of course only an idea at the moment, and it may be a complete non starter, but on the other hand if it could work both landlords and tenants would get a lot more sleep.
If you feel that it has some merit, or that you would be interested in such an association, or any other thoughts please let me know.
LHA is a real pain. The tenants who apply don’t want to be empowered, they want somewhere to live. With no deposit, rent paid in arrears, LHA not paid direct, what hope do I have of getting a private landlord to take on people reliant on LHA?
By the time it can be paid direct the landlord has lost two month’s payments. It’s a joke!
We had the first applicant for lha in the first month after launch,our new tenant had been currently suspended at the time,we did not know this,the council (INVERCLYDE COUNCIL) wrote to the tenant for further information and gave 30 days for this,considered mandate to pay landlord direct as typical,paid in a record 6 days,while ignoring a safeguard letter of our own, signed by tenant,a separate mandate ,the suspension seemed to vanish,our new lease was considered as worded in a fashion that the council did not need to notify us (the regulation) the tenant was safeguarded alright ,as the first couple of thousands of pounds disappeared into thin air,we have pursued this vigorously ever since,with team leaders ,DHS
ps,,,,,,will update you or answer any questions on the matter that you have (OUR CO LETS 100 prop)