The Local Housing Allowance scheme (LHA) is the new way of working out Housing Benefit for tenants renting accommodation from a private landlord. This new scheme started on the 7th April 2007 and affects:

• all new claims for privately rented accommodation
• all tenants who already receive Housing Benefit, if they now move into accommodation rented from a private landlord

The new LHA scheme will not affect people living in housing association or other social housing accommodation. There is no change to the entitlement rules for Housing Benefit – these will still be based on a person's income, savings and proof of rent etc.

How do I find out what the LHA rates for my property will be?

The Local Authority will publish the LHA rates every month from April 2008. They are also available in Council Connect offices at The Guildhall in Bath, The Hollies in Midsomer Norton and Riverside in Keynsham.

How does LHA affect landlords?

The only change for most landlords is that LHA Housing Benefit will normally be paid direct to the tenant. The tenant will be responsible for paying their rent to the landlord.

Which landlords does LHA affect?

LHA affects any landlord who enters into a deregulated private tenancy agreement with a person awarded Housing Benefit. By deregulated, we mean a tenancy that has been entered into since 1989 and is not covered by one of the exceptions listed below:

• Accommodation that is rented from a housing association.
• Accommodation where the tenancy started before 1989. 
• Accommodation where the tenancy includes the provision of care, support or supervision and is provided by local authorities, social landlords, charities or voluntary organisations. Therefore a claimant is not exempt from the LHA scheme if they are living in a de-regulated property and are receiving floating support or the landlord is providing care.
• Tenancies that includes substantial board and attendance, such as hotel accommodation.
• Accommodation that is a caravan, mobile home or houseboat.

How is the Local Housing Allowance calculated?

Every month, The Rent Service will give each local authority a list of LHA rates for each BRMA.

The LHAs are calculated from lettings information collected by rent officers. The LHA categories are based on number of bedrooms. For each category, rent officers compile a list of rents that represent the market within each BRMA. From these lists a median rent is calculated. This is the LHA.

Rent officers do not set the median. It is done automatically, based on the rental information that rent officers have collected. Rent officers will ensure there is a representative range of lettings data to accurately reflect the local market.  In other words, it is the market that sets the Local Housing Allowance.

How you can help us…

You can assist in ensuring that the list of rents is representative by providing The Rent Service with examples of your recent lettings – i.e. basic details about the property and the rental level achieved.  

Please contact your local Rent Service office and ask to speak to a rent officer. The telephone numbers can be found on their website www.therentservice.gov.uk or in the telephone directory. Or you can email lettingsresearch@therentservice.gov.uk

Why are we stopping direct payment to landlords?

Tenants who get benefit calculated using the LHA rates should be able to take greater responsibility for managing their financial affairs and paying their rent to their landlords, in the same way as other tenants do.

This is why any benefit will usually be paid to the tenant and not to the landlord. In the past, there has never been a right for a landlord to receive Housing Benefit payments direct. However, there is a right for tenants to ask for this arrangement, and it is this right that is changing.

We have produced a guide for tenants about opening a basic Bank or Building Society Account.

I already receive direct payment for some of my tenants. Will these payments stop?

No. Any tenant who is already getting Housing Benefit on 7th April, 2008, will continue to be paid the old way. If you are receiving Housing Benefit payments direct on behalf of your tenant(s), these will continue to be paid to you. The LHA rules will only affect any tenants who make a new claim, move address to new private rented accommodation or have a break in their claim, on or after 7th April 2008.

If you are a landlord who owns or manages a number of properties, you may find that you have tenants who claim Housing Benefit under the two different schemes. This will mean that you may have tenants where the Housing Benefit is paid direct to you, and other tenants where Housing Benefit is calculated using the LHA rates, so the tenant will be responsible for paying you their rent.

What protection exists for landlords?

There are a range of safeguards to protect the interests of landlords. Some of these already exist. For example, a local authority must usually pay the benefit to the landlord if the tenant is eight weeks or more in arrears with their rent.

We recommend that, if a tenant is starting to build up rent arrears, you should get in touch with the local authority before it gets to eight weeks. This will allow them time to investigate whether there is a problem that needs addressing.

Payment may be made direct to the landlord by the local authority where they decide that the tenant is;

• Vulnerable and cannot manage their own affairs (see the Safeguard Policy - request a copy of the policy by email).
• 8 weeks in rent arrears (in accordance with Regulation 94, Housing Benefit Regulations 2006).
• Unlikely to pay their rent - i.e. has a history of non payment of rent.

Generally speaking, a vulnerable person is defined as someone who could not reasonably be expected to manage their own affairs. Examples of vulnerability could include:

• Substance Abuse/Addiction
• Medical reasons - either physical or mental health issues
• Learning Difficulties/Illiteracy
• Fleeing Violence
• Homelessness
• Leaving Prison

Please note that the above situations are not conclusive proof of vulnerability and only serve as a guide regarding claimants who may experience difficulty managing their affairs

Who decides if a tenant is likely to have difficulty in paying their rent?

The local authority will decide whether a tenant is likely to have difficulty in paying their rent. Evidence will be required to support a request, which can be made by the tenant or other interested party. You, as a landlord, can approach the local authority if you think it likely that your tenant will have difficulty in paying or you feel they cannot deal with their financial affairs. The local authority will contact your tenant for further information regarding this. It is up to the local authority to decide whether a tenant is unlikely to pay their rent. They can only do this if they have evidence of past, or likely, failure to pay rent. They will take into account all knowledge and evidence available to them at the time when they make their decision. It will also be important for the landlord to keep proper and adequate records of rent payments received and details of any contact made with the tenant about irregular rental payments.

Can the tenant ask for their benefit to be paid to their landlord?

As part of the Housing Benefit reform, a tenant will no longer be able to simply ask for their benefit to be paid direct to their landlord. If a tenant feels that they may have difficulty in managing their financial affairs, the local authority will consider the request to make housing benefit payments direct to their landlord.

Where direct payments are made to me, how long will they go on for?

Where a tenant is considered likely to have difficulty in paying their rent and there is little or no prospect of their situation changing, payment of benefit to the landlord is likely to be long-term. In cases where the situation is likely to be temporary, or where rent arrears of more than eight weeks have been repaid, the situation will be reviewed. If the tenant is in a better position to have their benefit paid to themselves, and will pay their rent in full and on time, direct payments to the landlord will stop.

Won’t tenants spend their LHA on other things?

Many tenants in the private rented sector get their Housing Benefit paid to them and regularly pay their rent on time. Where a tenant is moving to direct payment, the local authority will make it clear to them what their responsibilities are and the consequences of not paying their rent. There will be some tenants who can’t manage their own rent payments. Bath & North East Somerset has developed a comprehensive safeguard policy designed to stop tenants falling into unmanageable difficulties.

The LHA scheme has been operating in 18 local authorities across England, Scotland and Wales since October 2003. In these areas, 84% of tenants whose benefit is calculated using the LHA rules are successfully managing their own rent payments. Of the remainder, only a third has their Housing Benefit paid to the landlord because they have fallen into arrears of 8 weeks or more. The rest are having their Housing Benefit paid to the landlords because the local authority identified that they might not be able manage their rent payments.

Won’t this discourage landlords from letting their properties to claimants?

The government believe the LHA scheme has positives for both landlords and tenants. The reforms are intended to help landlords, as well as tenants, by creating a more transparent system that is simpler to understand and administer. Overall, it will support and clarify the relationships between the local authority, tenants and landlords. Landlords will still be able to approach the local authority for help with rent arrears for tenants getting benefit calculated using the LHA rules. They cannot do this where they have a tenant in rent arrears who is not getting benefit. Because payments are going to tenants in most cases, this removes the possibility of landlords being asked to repay large amounts in overpaid benefit. Under the LHA scheme it is unlikely that the local authority would ask you to repay any money that your tenant has paid directly to you. The government believe that the safeguards that exist regarding direct payment to landlords strike the right balance in protecting the interests of both landlord and tenant.

Can I make direct payment a condition of the tenancy?

A local authority is not party to the tenancy agreement between a landlord and tenant, and is not bound by any conditions in a tenancy agreement. The local authority cannot pay benefit to a landlord directly at the tenant’s request – the rules about when the local authority can pay the landlord directly are outlined above. You cannot change this by making direct payment a condition of the tenancy.

What appeal rights do I have against a payment decision?

Appeal rights are not changing as a result of the new scheme. You will still have the right to appeal against a decision by the authority not to make direct payments.

Where to get more information

If you want to know more about the changes and how they affect you, please contact Benefit Services on 01225 477777 or visit the Government website http://www.direct.gov.uk/en/index.htm for more information.