THE LOCAL HOUSING ALLOWANCE

Expert property lawyer Tessa Shepperson takes a brief look at the proposed changes in the housing benefit system after the 6th April and how it is likely to impact on landlords.

All change after April 07
Local Housing Allowance (LHA) is a new method of payment of housing benefit, which has been trialled in various ‘pathfinder’ areas across the country over the past few years. From 7 April 2008, Local Housing Allowance (LHA) will be used for all new housing benefit applications, although existing benefit claims will continue (for the time being) to be paid under the old scheme. The old housing benefit scheme will also continue to be used for social tenancies, for pre 1989 ‘protected’ tenancies, and for caravans and other mobile homes and houseboats.

New flat rate
Under the new Local Housing Allowance (LHA) benefit will be paid at a flat rate, and not assessed on a property by property basis as before. The rates are set by the Rent Service for different areas. You can find out the rate applicable for your area by speaking to your local council or from the Local Authority web-site. If the property is let at a different rent from the LHA payable, the tenant either has to pay the extra, or can keep the difference, as appropriate.

The rate used is that applicable on the date of the benefit claim, and that relevant for the size of the property and the number of people living there. Although the rates are set by the Rent Service on a monthly basis, the rate used for any one benefit claim will stay the same for a period of one year, at which time it will be reviewed. It will only be reviewed during the year, if circumstances change, for example if the number of occupants changes.

New scheme criticised
The main criticism of the new system, so far as landlords are concerned, is that benefit must be paid to the tenant direct, and not the landlord, as is often done for old style housing benefit. It will only be possible for benefit under the LHA system to be 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’.

Private landlords unfairly treated?
Landlords are also unhappy that this new scheme is only going to be used for the private rented sector. Currently some 60% of benefit in the private sector is paid direct to landlords. 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”. Why however (many landlords are asking) are tenants in social housing, and property owners in receipt of benefit for mortgage payments, not being ‘empowered’ in the same way? Could it be because social landlords, and banks and building societies have stronger lobbying powers?

So far (apart from Blackpool) most feedback received from the pathfinder areas seems to be reasonably favourable. Cynics put this down to the fact that the LHA rates have been on the generous side, which they say cannot be maintained once the system goes national. It remains to be seen how well the new scheme will work after 7 April 2008.

© Tessa Shepperson 2008. Tessa is a solicitor and editor of the popular legal information service Landlord-Law at www.landlordlaw.co.uk. She is also author of ‘Residential Lettings’ and ‘Renting: The Essential Guide to Tenants Rights’ both published by Lawpack publishing.

FREE PROPERTY MANAGEMENT SOFTWARE

FREE SOLICITOR PREPARED TENANCY AGREEMENT