What is the Local Housing Allowance and when was it introduced?
What does the LHA scheme cover?
What do you define as the mainstream private sector?
Will benefit claims be transferred to LHA rates right away?
What are the rates based on?
Why are the changes being made?
Will you be introducing LHA into the social sector?
Background to the Local Housing Allowance
What is the Local Housing Allowance and when was it introduced?
The Local Housing Allowance (LHA) was introduced nationally on 7 April 2008 as a new way of deciding rent payments 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 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.
What does the LHA scheme cover?
The new scheme will apply to Housing Benefit customers in the deregulated private sector and mainstream private tenancies only.
If you are a landlord providing accommodation in one of the following types of tenancy, your tenants will be exempt from receiving the LHA:
- Registered social landlord tenancies;
- Protected cases, such as supported housing provided by certain local authorities, social landlords, charities and voluntary organisations;
- Tenancies which are excluded from current rent restrictions (such as pre-1989 tenancies);
- Exceptional cases such as caravans, houseboats and hostels; and
- Cases where the rent officer judges that a substantial part of the rent is attributable to board and attendance (e.g. hotel accommodation which already exists in the private sector).
Customers renting within these sectors will continue to receive Housing Benefit calculated under existing rules.
What do you define as the mainstream private sector?
If you are a landlord who lets accommodation in the sector deregulated by the Housing Act 1988, then we consider this as the mainstream private sector.
Will benefit claims be transferred to LHA rates right away?
Tenants will continue to receive benefit under existing rules until a change occurs that affects either the number of occupants in the household, they have a break in their claim of one week or more or they move to a different address. Benefit will then be transferred to the new LHA scheme. However, if there is a death in the household, and the change would result in a reduced LHA, the authority will protect the tenant for 52 weeks from the date of death at their current rate.
What are the rates based on?
Different LHA rates will apply in different areas. Within those areas, they will be based on the 30th percentile of the range of rents 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. To calculate your room allowance please visit the LHA-DIRECT website
The maximum LHA rate from April 2012 is a four bedroom rate.
Why are the changes being made?
The LHA is part of the Government’s agenda to modernise public services and will help to give everyone access to decent housing. The fundamental objectives of the LHA are to promote:
Fairness: The new scheme will generally pay the same amount to tenants with similar circumstances living in the same area.
Choice: Tenants will be able to choose between paying more to stay in a property that is larger or keeping the difference if they move to a cheaper property (to a maximum of £15 per week).
Transparency: It will be easier for tenants and landlords to know in advance how much rent could be covered by HB.
Personal responsibility: Paying the allowance to customers hands back responsibility to them for budgeting and paying their rent themselves. Accepting this responsibility while on benefit will make it easier to manage the move into work.
Financial inclusion: Most people will have their housing payments paid into a bank account and set up a standing order to pay the rent to their landlord.
Increased work incentives: Greater certainty about what in-work benefit you could receive will remove barriers to take the step from welfare into work.
Simplicity: There will no longer be a need for complex rent determinations and restrictions that contribute to the delay in processing claims.
Will you be introducing LHA into the social sector?
At present, the Local Housing Allowance is being rolled out within the private sector. The Department for Work and Pensions have not yet made any decision regarding the Social Sector.
