New Claims for Private Tenants – Local Housing Allowance

From 7 April 2008, a new way of calculating Housing Benefit is being introduced called Local Housing Allowance.

Local Housing Allowance is a new 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.

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.

• What is the LHA?
• Why is the Local Housing Allowance being introduced?
• Who will be affected by Local Housing Allowance?
• Who will not be affected by Local Housing Allowance?
• How will the LHA be paid?

Local Housing Allowance (LHA) is the new name for housing benefit for tenants in privately rented accommodation which comes into effect on the 7th April 2008. Several Councils have already implemented and tested the scheme on a trial basis.
The idea is to simplify the rules and to allow tenants more freedom – both financially, and to choose where they live.

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 – 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 per week.

Local Housing Allowance (LHA) is the cornerstone of the Governments 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, 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 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.
  

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.

The new rules will 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

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 four 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 8 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.

However, the Council recognizes that some tenants will find it difficult to manage their own money and a safeguard policy will be introduced from April 2008 to protect both tenants and landlords. The Council will have a discretion to pay the benefit directly to the landlord where the tenant is considered “vulnerable” because 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.

How to calculate your Local Housing Allowance entitlement.

• 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 up to a maximum of £15 per week.
  
• The LHA is set by the Rent Officer
  
• Tenants will be paid direct and only in exceptional circumstances will the Council pay the landlord or the landlord’s agent.

Link here back to Contacting the benefits section

Last updated Nov 2007

More information can be found on the following websites:
www.dwp.gov.uk/housingbenefit/lha