Local Housing Allowance - Information for landlords in Gosport
What is Local Housing Allowance?
The Local Housing Allowance (LHA) is how benefit is decided for people receiving Housing Benefit (HB). It uses a flat rate allowance based on the size of the tenant's household and the area in which they rent property to decide the amount of benefit they will receive. This amount is not directly related to the rent that you charge so the benefit that your tenants receive may be higher or lower than the contractual rent. The rate of LHA that customers receive will be reviewed on an annual basis. Other circumstances, such as the money that the tenant has coming in or other people living in the household, will still affect the amount of benefit paid so the tenant may not always receive the full rate of LHA.
Which landlords are affected by Local Housing Allowance?
LHA affects any landlord who enters into a deregulated private tenancy agreement with a person awarded Housing Benefit. By deregulated we mean entered into since 1989 and not covered by one of the exceptions listed below.
Who is not affected by Local Housing Allowance?
LHA does not affect:
- local authority landlords who let to 'council tenants'
- tenancies with registered social landlords such as a Housing Association
- protected cases, such as supported housing provided by certain local authorities, social landlords, charities and voluntary organizations
- tenancies which are excluded from current rent restrictions
- tenancies in caravans, houseboats and hostels
- tenancies where the rent officer decides that a substantial part of the rent is for board and attendance, such as hotel accommodation.
How does Local Housing Allowance affect landlords?
The only change for most landlords is that LHA will be paid to the tenant. The tenant will be responsible for paying their rent to the landlord.
In recognition of the risk that some tenants may struggle with the responsibility of paying their rent, safeguards will be put in place. Rather than introduce a precise list of circumstances when payment could be made to the landlord, we decided that giving Authorities discretion in identifying such cases would be more effective.
Authorities can decide to make payment direct to a landlord in a number of circumstances including:
- if they consider that the tenant is likely to have difficulty managing their own affairs. We have called this 'vulnerability'. Examples of this could include tenants with a learning disorder or a drug or alcohol problem that would mean they may have problems managing a budget. We have prepared detailed advice for councils on what counts as 'vulnerable' for LH
- if they think the tenant is unlikely to use their LHA to pay their rent. This could be if the council knows the tenant has consistently failed to pay their rent in the past
- when the LHA has been backdated or there has been a delay in processing a claim and a large amount of benefit is to be paid. In these cases the Authorities can decide to make the first payment of LHA to the landlord, although it would be sent to the claimant. (This is the same as Housing Benefit Regulation 94.) Making the first payment direct to the landlord is also expected to provide a good indication that the tenancy has actually been established
- if the tenant is having deductions from their Income Support or Jobseeker's Allowance to pay off rent arrears.
To implement any of these safeguards, new and existing, the council must have documented evidence. Authorities will be drawing up local policies/procedures to help this be a simple process.
You can get further information on LHA from the Housing Benefit Section, Town Hall Gosport PO12 1EB You can also get information from the Department for Work and Pensions website (dwp.gov.uk) or write to:
Housing Support Division
Department for Work and Pensions
1-11 John Adam Street
London WC2N 6HT
What are the rates based on?
Different LHA rates will apply in different areas. Within those areas, they will be based on the median rent charged by landlords in the private sector for properties of various sizes. LHA rates will be further broken down into 'Room Rates' that will apply depending on the size of the household, including any non-dependants. Size criteria will be based on allowing one bedroom for:
a) Every adult couple
b) every other adult who is not part of a couple
c) any other adult aged 16 or over
d) any two children of the same sex
e) any two children regardless of sex under age 10
f) any other child
The number of living rooms, kitchens and bathrooms is ignored for the purpose of the size criteria.
How is the LHA calculated?
The LHA is calculated by the Rent Service for individual areas, known as Broad Market Rental Areas (BRMAs), each month. It is based on the median rental figure for that particular area depending on the size of the property.
Basing the LHA on the median of rents for a certain property size means that exactly half of the rental properties of that size in the area will be affordable within the LHA amount that the customer receives.
Who decides LHA rates?
Having set the BRMAs, Rent Officers are responsible for calculating the LHAs for different sizes of property in that area. Once the Rent Service has determined the LHA rates for an area, an individual customer's benefit will depend on their age and the size of their household. For example a person aged under 35 will receive the shared room rate whilst a couple with one child will receive the two-room rate.
What if the customer's benefit is lower than their rent?
You may ask them to make up any shortfall out of their other income. Alternatively, the customer may also choose to move to cheaper accommodation.
However, if the customer previously paid their rent without any support from HB in the past year they will be entitled to an initial 13 weeks of benefit that will cover the full rent, without any restrictions.
How will joint tenants be treated?
Joint tenants will receive a rate of LHA based solely on the customer's family plus any non-dependants, sub tenants or boarders that the customer has.
Who will benefit be paid to?
Personal responsibility and financial inclusion are two key aims of the LHA. In the vast majority of cases, benefit will be paid to the customer who will be responsible for making their own payments of rent to their landlord. In certain circumstances, benefit can be paid directly to the landlord.
What are these exceptions?
Local authorities will have discretion to pay rent direct to the landlord where there is evidence that the customer would be unlikely to pay their rent and making direct payments would be in the interests of the customer. The following factors, which are not exhaustive, may be considered when deciding on whether direct payments should be made:
As a safeguard. The customer may have learning difficulties, a medical condition or educational needs that suggest that they may have difficulty in handling their own financial affairs; they may not be able to read or have language difficulties; they may suffer from drug or alcohol addiction; or have severe debt problems. It should be noted that the existence of any of these factors does not necessarily mean that rent should be paid directly to the landlord.
People who are unlikely to pay their rent. Customers may have demonstrated, through their past behaviour, that it is improbable that they will pay their rent. In these cases, a local authority may make payments direct to the landlord.
If 8 weeks rent arrears have built up. If rent arrears are owed, the local authority will arrange to make payments direct to the landlord unless it is not in the customer's overriding interests to do so. However landlords are encourage not to wait for the 8 week period to be reached before contacting the local authority.
Why is eight weeks arrears significant?
Under Schedule 2 of the Housing Act 1988 (as amended by the Housing Act 1996) a landlord may be able to terminate an Assured Shorthold Tenancy Agreement when at least eight weeks rent is unpaid and the rent is payable weekly or fortnightly.
What if I, as a landlord, just prefer to have the rent paid direct to me?
The choice of having the payment made directly to the landlord will not exist under LHA. Taking responsibility for the payment of essential items such as accommodation is an important aspect of helping customers with the move into work. Most customers will be paid their benefit into a bank account and then will be free to set up a Standing Order to pay you, just as they would if they were in work.
If I ask 8 weeks rent in advance, so that the tenant is 'in arrears' after one day of the tenancy, is the local authority obliged to pay me directly?
Direct payments should be made to a landlord where "the person is in arrears of an amount equivalent to 8 weeks or more of the amount he is liable to pay his landlord as rent".
The Department for Work and Pensions' takes the view that a person cannot be in rent arrears in respect of a period that has not yet been served. Additionally, the requirement to pay directly is intended as a safeguard to protect vulnerable tenants as well as legitimate landlords and remedial action may be taken if there is evidence that this safeguard is being abused.
If I do receive the payment of rent direct to me, will I be paid any of the customer's excess as well?
Not normally. Where a payment is made direct to you, it must not include any amount above which the tenant is liable to pay in rent. If there are rent arrears, any excess may be paid to you but only until the arrears are paid off.
What if the tenant is withholding rent due to a dispute?
Once arrears of rent, whatever the cause, have reached 8 weeks then it is mandatory for the local authority to make payment direct to the landlord provided that there has been no finding that the landlord is not a "fit and proper" person or that it is not in the customer's overriding interests to make direct payments. This can include where the tenant is in dispute with the landlord, but they must provide evidence of this.
What is the "fit and proper" test?
Local authorities are not obliged to make direct payments where they are not satisfied that the landlord is a "fit and proper person to be the recipient of a payment of rent allowance". This will apply even when the criteria for a direct payment would otherwise have been met.
A landlord may not be a "fit and proper person" where it is proven that they have engaged in financial impropriety. This should normally include an element of HB impropriety, such as fraud or a knowing failure to declare changes in circumstances affecting the payment of benefit. Authorities may choose to consider other areas, such as failure to pay Council Tax or business rates, but generally the lesser connection that the offence or impropriety has with Housing Benefit, the less relevant it will be.
How will overpayments be recovered?
The rules on the recovery of overpayments are not being changed. Currently:
- Benefit overpaid to a landlord can be recovered from either the landlord or the customer, as the local authority chooses; and
- Benefit overpaid to a customer can be recovered only from the customer.
As most customers will receive their benefit themselves under the LHA, most overpayments will, therefore, be recovered from the customer and not the landlord.
Will appeals against direct payment decisions be allowed?
Yes. Both you and your tenant, as persons affected by the decision, may appeal against any decision about whether or not to pay rent direct. Appeals can also be made against decisions on vulnerability.
If I won an appeal obliging the local authority to make direct payments to me, would the LA pay me all the arrears that are due, even though they had already paid benefit to the tenant?
No. Even if you win an appeal, the local authority will not make duplicate payment of benefit. Direct payments would be made from an acceptable date in order to ensure that no overpayment occurs.
Can a tenant or landlord appeal against a decision that the landlord should not receive Housing Benefit on the customer's behalf as an agent?
No. This decision is not appealable.
Will there be any right of appeal about the application of an LHA in an individual case?
There is no right of appeal or redetermination about the level of LHA or the BRMA on which those levels are based unless, for example, the rent officer has made an arithmetical error.
For further information you can visit the DWP website.