Local Housing Allowance is a different way of working out Housing Benefit for tenants renting accommodation from a private landlord. If you live in council accommodation or other social housing, Local Housing Allowance will not affect you.
Changes to Local Housing Allowance from 1 April 2011
The Government had made changes to the Local Housing Allowance from 1st April 2011 for all persons claiming Housing Benefit, and for those single and under 35 from 1st January 2012. If you are currently receiving Housing Benefit you may want to seek advice before you sign a new tenancy agreement.
Important Changes to Local Housing Allowance
Changes for the under 35's from January 2012
What is Local Housing Allowance (LHA)
Local Housing Allowance (LHA) is the new name for housing benefit for tenants in privately rented accommodation which came into effect in April 2008, although several Councils had already implemented and tested the scheme on a trial basis prior to this. The idea is to simplify the rules and to allow tenants more freedom – both financially, and to choose where they live.
Local housing allowance is not based on the property in which you live; it is based on:
- who lives with you
- which area you live in
- how much money you have coming in
- what savings you have
LHA is a flat rate allowance based on the size of household and the area in which a person lives. There are no changes to the entitlement rules – these 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 is placed into one or more Broad Rental Market Areas (BRMA). Rent Officers set individual LHA rates for each BRMA. These are then published by the local authority and the Rent Service so that landlords and prospective LHA customers can be clear about the amount of rent that LHA will cover.
Prospective tenants should 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.
Why was the local housing allowance being introduced?
Local Housing Allowance (LHA) was the cornerstone of the previous Government's housing benefit reform programme and it's aim was 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. 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. Previously only 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, local housing allowance 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 / direct debit 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.
Who is affected by the local housing allowance?
LHA will be used to work out Housing Benefit for all new claims received on or after 7th April 2008, except for the cases in the 'who will not be affected by LHA' listed below. LHA will also apply to claimants already on housing benefit if they move home after 7th April 2008 or have a break in their claim.
Who is not affected by local housing allowance?
The Local Housing Allowance scheme does not apply to:
- local authority tenants
- 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
How is the local housing allowance paid?
LHA is normally paid to the claimant; however from 1 April 2011 we have the discretion to make payment direct to the landlord where it will help a tenant 'secure or retain' a persons tenancy. Payments will normally be made every 4 weeks in arrears, although a tenant can request that it is paid 2 weekly in arrears if they prefer.
The tenant will then have to arrange to pay their landlord. We will not talk to the landlord about a claim unless the claimant has given written permission to do so. 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 we would confirm to the landlord the amount of benefit they are entitled to.
We recognise that some tenants will find it difficult to manage their own money and we have adopted a 'safeguard policy' to protect both tenants and landlords. This means that we also have the discretion to pay the benefit directly to the landlord where the tenant is considered “vulnerable”, for example the tenant has learning difficulties or medical conditions.
Payments will normally be made by BACS (direct transfer to their 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.
In summary:
Local housing allowance is...
- aimed at private sector rented sector
- still means tested, but pays single flat rate allowance according to household size.
- the LHA is set by the Rent Officer.
- tenants will normally be paid direct, only in certain circumstances will we pay the landlord or the landlord’s agent
How to calculate your Local housing allowance
Click on the link below to look at the current local housing allowance rates for this area, and for information on how to calculate what rate would be applicable for you and your family.
Alternatively, you can visit the Valuation Office Website, you can use their site to also look at the local housing allowance rates for others parts of the country.
Please note that from April 2011 any Housing Benefit entitlement will be 'capped' at the four bedroom rate, even if you and your family would be entitled to five bedrooms or more.
Date of last review: 21 January 2012