Enoying the benefits

Leading property author Liz Hodgkinson looks at the impact of the new Local Housing Allowance

Liz Hodgkinson

“If your LHA tenant is renting a room at less than the rent level set by the council, they can keep up to £15 a week.”

When the Local Housing Allowance (LHA) scheme was rolled out nationally in April 2008 as part of an overhaul of Housing Benefit, many landlords were worried. The main fear was that they would never get their rent, as LHA was to be paid to the tenant, instead of directly to the landlord.

The idea was to give low-income and unemployed tenants control of their affairs and so increase their self-respect.

But this was not the only change. Rents for tenants on benefits would no longer be set by landlords, but local authorities would decide how much to pay, based on Broad Rental Market Areas.

Firm but fair

In return for handling their own rental payments, accommodation rules became more strict. A single person or cohabiting couple would be allocated a one-bedroom flat, while a family with two children may be permitted either a two- or three-bedroom property depending on the ages and genders of the children.

Since April, frequent inspections have been made to ensure these rules are being followed, and speedy eviction will follow any contravention. The LHA is means-tested although if a tenant secures a property at less rent than the set LHA, they are allowed to keep up to £15 a week for themselves.

Private landlords do not have to rent to LHA tenants, of course, but in areas of high unemployment it may be virtually the only tenant pool that exists.

So far, so good

A number of local authorities have been piloting the scheme since 2004, so how is it all now working out in practice?

Benefits manager Mo Lawless of Brighton and Hove Council is extremely enthusiastic, saying it is all going very well. She says: “We were one of the authorities pioneering the scheme and we held many meetings with landlords who naturally had many concerns.

“The main fear was that tenants would keep the rents for themselves once they were paid directly. But this simply hasn’t happened as, if the rent is not paid, the tenant is evicted and would have a problem finding other accommodation.

“Where tenants are considered vulnerable, and suffering from mental or physical problems, rents are still paid directly to the landlord. We accept that you can’t just give tenants money when they have never handled money before and may be incapable of budgeting. Otherwise, the LHA is paid into the tenant’s account two weeks in arrears, and rents can only go straight to the landlord after eight weeks of non-payment. Under the previous scheme, rents were paid four weeks in arrears directly to the landlord.”

So, if a tenant defaults, can the landlord ever recover this lost money?

“Yes, definitely,” Mo says. “We have the capacity to clear the arrears, but we advise landlords not to wait for eight weeks. If the rent is not being paid as agreed, we suspend the benefit while we investigate the case.” Deposits are taken and protected under the Tenancy Deposit Scheme and LHA tenants have to come up with a deposit before being allowed into a property.

Landlord concerns

But not all landlords are satisfied. Bernie Lewis, who lets to a number of LHA tenants in North Staffordshire, says: “The aim was to increase the personal responsibility of unemployed tenants to help them develop skills as they moved into employment. But in many areas, there are just no jobs for them.

“And we have found that many LHA tenants do not have the right kind of bank account, which means they cannot pay by direct debit. This means they have to find cash points and pay the landlord by cash. Many of these tenants are now begging their landlords to take the money direct from the local authority yet this is not allowed. The latest survey found that 84% of LHA tenants were paying rent properly, but 16% were not, and the result is that landlords are less likely to let to benefit tenants than before.”

Bernie is also concerned that communities could be damaged by the new LHA. “As the allowance is based on personal entitlement, tenants have to move as household size changes.

For instance, a family that has lived happily in a three-bedroom house for, say, 15 years would have to move to a one-bedroom property once the children have grown up and left.

“Landlords then either accept a greatly reduced rent or turn the tenant out. And the £15 excess they are allowed to keep is encouraging LHA tenants to seek substandard properties.”

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