Local Housing Allowance (LHA)
What is the Local Housing Allowance?
Local Housing Allowance (LHA) is the new name for Housing
Benefit for tenants in privately rented
accommodation which will come into effect from 7th April
2008.
The idea is to simplify the rules and to allow tenants more
freedom - both financially and to choose where they live.
It will only affect 'New Claims' or people who change their
address from the 7th April 2008.
LHA is a flat rate allowance based on the size of household and
the area of Hereford in which a person lives. There are no changes
to the entitlement rules - this will be based on a person's income
and savings and proof of a valid tenancy. Payment will normally be
to the tenant, who will then pay the landlord.
Each local authority will be divided into Broad Rental Market
Areas (BRMA). Rent Officers will set individual LHA rates for each
BRMA. These will be published by the local authority so that
landlords and prospective LHA customers can be clear about the
amount of rent that LHA will cover.
Prospective tenants will be able to shop around with their
allowance. If they find a property they like with a rent that
exceeds their LHA they will need, as they do now, to make up the
difference themselves. But if they find somewhere with a rent below
their allowance, they will be able to keep the difference up to a
maximum £15.00.
Why is the Local Housing Allowance being introduced?
LHA is the cornerstone of the Government's HB reform programme
which aims to simplify Housing Benefit and ensure it supports the
wider objectives for welfare reform.
The fundamental aims of the LHA scheme are to promote:
- Fairness: LHA bases the maximum amount paid to tenants on
the size, composition and location of the household. Therefore,
two households in similar circumstances in the same area will
be entitled to similar amount of benefits.
- Choice: Tenants are able to take on greater responsibility
and choose how to spend their income in a similar way to
tenants who are not in receipt of benefits. Like other tenants
they are able to choose whether to rent a larger property, or
spend less on housing and increase their available income.
- Transparency: The current link between Housing Benefit and
individual rents is complex and does not set out clearly what
level of state support is available for people on low incomes.
A clear and transparent set of allowance rates helps tenants
(and landlords) know how much financial help is available from
the state. Tenants are able to compare how much support is
available towards their housing costs in different areas and
for different property sizes.
- Personal responsibility: Empowering people to budget for
and to pay their rent themselves, rather than having it paid
for them, helps develop the skills unemployed tenants will need
as they move back into work. Currently around 40% of Housing
Benefit payments in the private rented sector are made to
tenants, with the remainder paid straight to landlords. The
Government believes that, where possible, LHA should be paid to
tenants, as are most other benefits and tax credits.
- Financial inclusion - Ideally, we want people to have their
housing payments paid into a bank account and to set up a
standing order to pay the rent to their landlord. This has the
advantage of being a safe and secure method of payment and
provides certainty for landlords that rent will be paid.
- Improved administration - For working age tenants, LHA
provides a simpler system and also helps speed up
administration of housing payments, giving tenants more
confidence when starting a job that any in-work benefit will be
paid quickly. A more transparent system may also improve the
ability of individuals to move between areas and to take
advantage of employment opportunities.
Which landlords will be affected by Local Housing
Allowance?
LHA affects any landlord who enters into a deregulated private
tenancy agreement with a person awarded Housing Benefit. A
deregulated tenancy is one that commenced after January 1989.
What happens if the landlord increases rent?
The LHA takes no account of the actual level of rent payable. It
is based purely on their room requirement. That is why if a
claimant rents somewhere cheaper than the LHA rate they can keep
the difference of up to £15.00 per week. A rent increase would not
normally be a change that would require a new LHA to be used.
How will the LHA be paid?
LHA is payable to the claimant. Claimants will no longer have
the choice of direct payments to the landlord. Payments will be
made according to the existing payment cycle if the claim is
currently in payment of benefit, or two weekly in arrears if they
are a new claimant.
The tenant will have to arrange to pay their landlord. The
Council will not talk to the landlord about a claim unless the
claimant has given written permission to do so.
However, if a tenant is in arrears with their rent by eight
weeks or more the landlord has the right to ask for direct payments
and in those circumstances the Council would confirm to the
landlord the amount of benefit they are entitled to.
Payments will normally be made by BACS (direct
transfer to bank account), which will mean that there are no postal
delays to worry about and the claimant does not have to wait for a
cheque to clear. The money is available as soon as it arrives in
the claimant's bank account.
Previously the rent was paid direct to the landlord. Can this
continue if the claimant does not want to have the money paid to
them?
If the claimant is unable to take the responsibility for the
payment of rent then the Council can make the payments direct to
their landlord.
However, this will only happen if there is a compelling reason
to do so, such as serious illness, which means that the claimant
cannot cope with handling their financial affairs. If the claimant
is worried about taking this responsibility then they should talk
to the Council about their concerns and explain the situation. The
Council will only makes payments to landlords in exceptional
circumstances and any such circumstances will require documentary
evidence before any decision will be made.
Who will not be affected by LHA?
The new rules will not apply to:
- Tenants of registered social landlords (Housing
Associations)
- Tenants who have a registered or 'fair' rent
- Tenancies which commenced before January 1989
- Protected cases such as supported housing provided by
social landlords, charities or voluntary organisations
- Tenancies in caravans, houseboats or hostels
Summary of LHA
- Aimed at private sector rented sector
- Still means tested but pays single flat rate allowance
according to household size
- If a household secures a rent below the LHA they will keep
the difference of up to £15.00
- The LHA is set by the Rent Officer each month
- Tenant will be paid direct and only in very exceptional
circumstances can the Council pay landlord or landlord's
agent.
- Safeguards to protect the landlord from excessive rent
arrears include:
-
- the transference of the payment to the landlord
where the tenant has accrued eight weeks' rent arrears
until the arrears are cleared;
- payment to the landlord in cases where the tenant
is deemed vulnerable, and so unable to manage their own
affairs; and
- payment to the landlord when the tenant is deemed
'unlikely to pay' their rent due to a history of
chronic rent arrears.
- All of these decisions will be reviewed
regularly.
More information can be found on the following websites: