What is the Local Housing Allowance?
The Local Housing Allowance (LHA) is a new way of deciding rent payments for people who receive housing benefit. It moves away from the existing system of rent service valuations (PTDs) and towards a flat rate tenant allowance.
This is amount is not directly linked to the rent that you charge so the benefit your tenants receive may be the same or slightly higher than contractual rent.
LHA tenants will then be able to shop around with their LHA to find a suitable property. If the benefit received is higher than the contractual rent, then the claimant will be able to keep up to £15 per week.
The LHA is calculated monthly, by the rent service for large areas known as broad market rental areas (BRMAs). The London Borough of Hounslow is spread over 3 separate BRMAs. The allowance is calculated as the median figure for each property size on monthly rent data. Basing the LHA on median (middle-number) rent data should mean that exactly half the properties of any given size will be affordable to tenants who receive LHA. This number should also reflect the market as it rises or falls. For this reason it is important that landlords submit their data to the Rent Service.
Although new LHA figures will be published every month each claim will be fixed for a 12 month period reflecting the usual length of an assured shorthold tenancy (AST).
When are the changes being introduced?
The LHA will be introduced on all new benefit claims from April 7 2008.
How much will the LHA be initially?
The figures below represent a guide only. They are subject to change and will do so monthly as the LHA rises or falls.
Will the changes effect existing housing benefit claims?
Tenants will continue to receive benefit under the existing rules until a change occurs ie. If they have a break in their claim of one week or more or they leave the property.
Will the money be paid directly to the landlord or to the tenant?
In most cases the rent will be paid direct to the tenant who will then be responsible for making their own payments of rent to their landlord.
In certain circumstances rent can be paid direct to the landlord:
As a safeguard - tenants with certain medical conditions or learning difficulties. This may potentially include tenants with drug or alcohol addiction or debt problems
People who have demonstrated, through past behaviour, that they are unlikely to pay there rent
If 8 weeks of rent arrears have built up - in this case the local authority can arrange for payments to be transferred direct to the landlord
Simplicity, transparency, responsibility
It is hoped that these changes will simplify and demystify the complex system of rent assessments that exist at the moment. The LHA should allow any landlord or elligble tenant to quickly find out what they can spend or charge in a particular area and complete the tenancy without waiting for an inspection.
Similarly the system should be fairer as it enables the same allowance to be paid to any tenant within the same broad market rental area.
The contentious switch to “direct payments” aims to transfer personal and financial responsibility to the tenant in order to both empower them and prepare for a transition back to work. The evidence from the 18 trial boroughs would suggest that these objectives have been largely successful.