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Local Housing Allowance (LHA) news and updates

• Evidence to Works and Pensions select committee on LHA – NLA represents UK landlords
• Government consults on Housing Benefit reform
• Government changes 8-week rule and council guidance
• Tories support NLA call for LHA reform
• What is the NLA campaigning for?
• What is the NLA doing to achieve this?
• Background
• Further information

Evidence to Works and Pensions select committee on LHA – NLA represents UK landlords

On the Wednesday 15th January the NLA gave evidence to the Works and Pensions select committee, the only UK-wide landlord association invited to do so.

The NLA was joined by a landlord from the British Property Federation and the housing benefit adviser to the Scottish Association of Landlords at the evidence session called to ensure that the sector could give its professional opinion on whether LHA is achieving the objectives that was set for it. The uncorrected evidence is now available to read here.

Simon Gordon, Head of Communications, sat in front of a packed committee to answer their questions on the benefits and problems that have emerged three years into the national roll out of LHA. Facing diverse questioning from the committee of MPs, the NLA yet again highlighted the problems faced by landlords working with LHA with increasing rent arrears and difficulties in dealing with local authorities.

The MPs faced with a collective call from landlords and housing charities for tenants to be able to choose direct payment to landlord to help them manage their finances and the need for local authorities to engage with landlord more as partners in providing housing.

During the tough evidence session it was evident that MPs still suffer from negative preconceptions about landlords operating in the housing benefit market. One MP questioned whether landlords would coerce tenants into choosing direct payment to landlords if the system was changed. The NLA was able to argue that:

“We feel that LHA tenants have less control over the administration of their benefit payments, and we would echo what you have heard earlier, that local authorities are not focusing their efforts on solving LHA issues as soon as possible so that good tenancies can be maintained...”

Despite the growing evidence, MPs questioned the extent of the problem of arrears and issues that landlords were saying is affecting the LHA sub-market. In response to the representative from the BPF, Committee chair, Terry Rooney MP, said:

“Could I just say, because you have made that statement about nine times now, not fit for purpose, that there are around five million Housing Benefit Local Housing Allowance claims in payment, and with the vast majority of those, probably 99 per cent, there is not a problem. The problem is most often not the Housing Benefit administration, it is the deficiencies of either a rogue landlord or a rogue tenant. It is not the case that the system is not fit for purpose; it is the abuse that it is put to.”

Despite this the NLA was able to put forward effectively the legitimate issues facing landlords operating in the LHA sub-market. By highlight research it has conducted with landlords across the UK, the NLA was able to provide clear evidence of problems with LHA that need fixing.

The committee will now conduct one further evidence session with local authority representatives and the Government Minister in charge of LHA. Whilst there is now general agreement amongst landlords and housing charities about what changes to LHA are now necessary, it is clear that more work needs to be done in changing the perceptions MPs have of the PRS.

The NLA is now looking for the committee’s report to recommend that the Government now reforms LHA to ensure that landlords are not disadvantaged by providing housing for those in desperate need.

NLA members can find out more about the Government’s consultation and how they can provide input into the NLA’s response here.

Government consults on Housing Benefit reform

The consultation looks broadly at how reforming housing benefit; reducing the barriers Housing Benefit and LHA create to those tenants trying to gain employment, as well as whether there should be a limit to the amount of benefit individuals can access.

The NLA is putting together its response to the consultation on behalf of its members and we would welcome input from our members on some specific questions that the consultation asks:

• Would the introduction of fixed period Housing Benefit awards for claimants in work?
  The Government is worried that those claimants who are trying to get into employment face an uphill struggle by forcing them to report every change in earnings to local authorities. The Government has suggested that claimants could receive, housing benefit at a fixed rate for six months after which their claim would be reassessed by local authorities under a ‘streamlined’ procedure to avoid delays.
  
  How would this affect landlords? Would it increase administrative burdens? Or would it be welcome for those landlords whose tenants face erratic housing benefit because of part-time or casual work?

• How could we set benefit rates to reflect different market conditions in different areas?
  The Government is concerned about the effect high rents are having on LHA levels. It believes that LHA rates are being distorted in some areas by the inclusion of high rent property and is pushing up the cost to taxpayers.
  
  The NLA believes that the picture is mixed with some areas facing very low LHA rates which price tenants out of the PRS. Do members have examples of areas where rates are artificially low compared to local rents? Do landlords feel that LHA rates are readjusting areas where previous housing benefit rates were uneconomic?

• How should we set appropriate Housing Benefit areas?
  Housing Organisations have highlighted a variety of problems with the Broad Rental Market Areas (BRMAs) that LHA uses to calculate LHA rates.
  
  Do members believe that BRMAs are working well? Do landlords have examples of areas where landlords and tenants are disadvantaged by badly thought out BRMAs?

• Should Housing Benefit entitlement be conditional on properties meeting certain standards?
  The Government is considering whether Housing Benefit and LHA should only be available for properties that meet certain defined standards in terms of ‘...quality, energy efficiency and carbon footprint.’
  
  There are numerous problems with this suggestion: who and how would these standards be set, who would inspect properties to check standards and would tenants be driven to rogue landlords working outside of the system?

• Should direct payment to the landlord be linked to the property meeting a certain quality or energy standard?
  The Government has suggested that it could consider returning to a system of tenant choice in deciding whether to have their housing benefit payments made direct to their landlord, in exchange for improvements to the quality or energy efficiency of the property.
  
  The NLA rejects the proposal because it unfairly isolates vulnerable groups. Landlords depend on rental income to maintain and improve their properties and rent arrears put tenancies at risk. Do landlords agree that the Government is being unreasonable here? Are members worried that more landlords could abandon housing benefit tenancies and therefore reduce choice for LHA tenants?

The NLA would welcome members views on these questions and the consultation as a whole. We would welcome views by the 15th February 2010. You can email the NLA directly on this issue at lha@landlords.org.uk.

Government changes 8-week rule and council guidance

Following intensive pressure by the NLA and housing charities the Department for Works and Pensions has revised its guidance to local authorities.

The main changes to the guidance are:

• Tenants are considered in arrears once their contractual date for payment has passed without payment – this change takes into account the situation where a tenant is contractually liable for rent in advance. Landlords should still contact local authorities as soon as their tenant is in arrears as councils do not have to wait 8-weeks before investigating the situation;
• Emphasising that where tenants obtain a tenancy with the help of the local authority there will often be evidence of difficulties managing past rental payments and safeguarding is likely to be appropriate;
  
  
• Payments directly to the landlord can be instituted for 8-weeks whilst councils gather evidence to make a decision on further direct payment to landlords; and
  
  
• Identifies further bodies, such as Community Mental Health Teams, who’s evidence can be used to identify whether a tenant is unlikely to pay or have difficulty paying their rent.

Tories support NLA call for LHA reform

The NLA has claimed a lobbying victory following the Conservative Party announcement that it will reinstate direct payments to landlords where housing benefit tenants choose – if they become the next Government.

This follows an intensive campaign by the NLA calling for the Government to bring forward its planned review of LHA.

Read more about the NLA’s research [ 398KB].

What is the NLA campaigning for?

LHA is one of the most important, and potentially damaging, issues currently facing the private-rented sector. Introduced in 2008 to replace Housing Benefit, LHA was intended to empower tenants and provide greater choice for benefit recipients. In reality it has led to a reduction in available housing stock and compelled many landlords to leave the market.

Based on the results of extensive NLA research, including input from more than 1,000 landlords during a high-profile Post Card Campaign, the NLA is calling for urgent reform of LHA.
We are calling on Government and local authorities to:

• Bring forward the LHA review planned for 2010.

LHA is failing to meet its key objectives and needs to be reformed. The NLA supports the Government’s commitment to review LHA but believes that the market cannot afford to wait until 2010. We want to see an open and wide ranging review of LHA, including the issue of direct payments, as a matter of urgency. Tenants need their right to choose direct payments reinstated as soon as possible.

• Initiate an ‘automatic trigger’ for direct payment to landlords after one month’s rent arrears.

This would enable local authorities to limit the amount of rent arrears generated by a tenant. Local authorities would have more time to investigate why rent is not being paid and whether the tenant has any support needs that are not being met.

• Look at how local authorities administer housing benefit to ensure they are effectively engaging the private-rented sector.

Councils should ensure landlords can communicate directly with benefit offices and access support for tenancy problems relating to LHA. Links with other local authority/third-sector PRS housing initiatives would encourage greater participation by private sector landlords and create more landlord confidence in LHA.

• Ensure the Department for Work and Pensions produces clear guidance for local authorities’ use of vulnerability criteria.

Better determination of tenants’ support needs and vulnerability, which could affect their tenancy, would ensure that landlords and tenants have the support needed to protect tenancies in the long run.

• Create local authority links with local deposit guarantee schemes so each new LHA application is accompanied by a deposit guarantee bond.

This would reduce the difference in landlord experience when renting to benefit tenants.

What is the NLA doing to achieve this?

• Pushing ministers and officials at the Department for Work and Pensions to recognise the problems with the current implementation of LHA and what improvements are urgently required;

• Calling for an open and wide ranging review of housing benefit policy, including the issue of direct payment to landlords;

• Working closely with politicians from all political parties to put pressure on the Government to bring forward their review of LHA as a matter of urgency;

• Helping to shape opposition party policies on housing benefit;

• Talking to local authorities around the country to highlight the problems with the current system of LHA, and working with them to implement local solutions to these problems;

• Engaging with parliamentarians to highlight the problems faced by landlords currently providing homes to LHA tenants. We are working to ensure they understand what changes are needed to improve confidence in the system, protect landlords trying to provide much-needed homes in this part of the sector, and improve access to PRS housing for benefit tenants; and,

• Monitoring the ongoing effect LHA is having on landlords through regular NLA Members’ surveys and case studies.

Background

What is LHA?

The Government rolled out Local Housing Allowance (LHA) to all local authorities in April 2008. It completely changed the way Housing Benefit is calculated and paid to Housing Benefit tenants.

The main differences LHA has brought to housing benefit are:

LHA is means tested and tapered in exactly the same way as before; however, the eligible rent is fixed for a family of a given size in a given area. Therefore, everybody in the same circumstances gets the same amount.

• It is now paid directly to the tenant unless the local authority identify that the recipient is vulnerable or the tenant is over eight weeks’ in arrears.

• The way that the LHA rate is calculated is based upon Broad Market Rental Areas (BRMAs) – a geographical area made up of two or more distinct areas of residential accommodation, within which a person could reasonably be expected to live, having regard to facilities and services.

• Tenants can keep up to £15 of their LHA payment if they can find accommodation cheaper than the LHA rate for their area and property size.

According to Government figures there are approximately 1.2 million households in the private-rented sector receiving housing benefit, around 675,000 of which are now receiving LHA.

Local Housing Allowance only affects tenants in the private-rented sector, the changes that were introduced in 2008 do not affect:

• council tenancies;
• tenancies with registered social landlords; or
• tenancies which started before 15 January 1989.

The NLA's position

The NLA believes that the introduction of LHA has had a negative impact on the private-rented sector and is campaigning intensively for a review of the housing benefit system.

The goals behind the implementation of LHA, namely to provide tenants with freedom of choice concerning their accommodation, are laudable and desirable in many ways. Unfortunately we are deeply concerned by the way in which local authorities are implementing the legislation, especially with regard to vulnerable tenants. Rather than providing options, LHA has contributed to a shrinking of housing supply for benefit recipients, as many landlords are no-longer prepared to risk letting to housing benefit tenants.

The Government’s intention for LHA was to increase choice for benefit recipients and encourage greater personal responsibility and financial inclusion. Whereas, in fact, its introduction has led landlords to withdraw from the market and reduce the number of homes available where they are most urgently needed.

Research conducted by the NLA has found that 52 per cent of landlords surveyed have decided they would not let, or be ‘less likely’ to let, to LHA tenants. A further 43 per cent of those landlords who have already tried the new system said they would now be leaving this part of the market because of increased uncertainty about rent payments.

With government projections predicting that LHA will account for £4.4bn of public spending by 2011-2012, it is in everyone’s interest that LHA works.
59 per cent of landlords thought that LHA could be improved, with the top three improvements being:

• An automatic trigger, after one month’s arrears, to direct payment to landlords;
• Better local authority administration of LHA; and
• Better determination of the vulnerability of tenants by local authorities.

Arrears

The picture is no better for those landlords who elect to remain in the market. One of the most serious problems facing the sector is massive amount of rent arrears that LHA-landlords are suffering. As part of our campaign for a review of LHA we sent our members postcards so they could tell us just how much money they have lost because of LHA. The numbers are staggering but probably just the tip of the iceberg.

The latest NLA research (October 2009) indicates that the total rent arrears for all LHA landlords could be in excess of £220 million, with average rent arrears standing at £4,500 per landlord.

Further Information:

• LHA Background - November 2009 [ 103KB]
• NLA's research [ 398KB]
• NLA Guide to LHA [ 233KB]
• LHA Direct
• NLA LHA Member Survey [ 803KB]
• NLA LHA Postcard Campaign
• LHA Regulations

NLA Press Releases

• NLA welcomes Tory reforms to Local Housing Allowance
• Government housing welfare scheme "failing vulnerable tenants"
• Millions of pounds wasted on housing benefit reforms