Local Housing Allowance is Changing from 1st April 2011

Who will the changes affect?

The changes will affect

• All new claimants of Housing Benefit from 1st April 2011
• Existing claimants from the anniversary of their claim

New guidance on direct payments where the landlord is prepared to reduce the rent

The Department for Work and Pensions (DWP) has now published guidance on the new rule effective from April 2011, under which local housing allowance (LHA) can be paid to the landlords where landlords agree to reduce their rents. A link to this guidance can be found below.

The basic rule for payment

The basic rule under LHA is payment must be made direct to the tenant; not the landlord.  There are certain exceptions to this.  This is a new exception.

What does the landlord have to do to obtain direct payment under the new regulation?

From 1st April 2011 local authorities have a discretion to make payments direct to the landlord where they consider that it will assist the claimant in securing or retaining a tenancy.  For these purposes, for a tenancy to be secured or retained the rent must be affordable for the tenant.  This is intended to be a temporary provision anyway.

The rent should be at a level which is affordable to the tenant.  In most cases this will be the LHA rate which applies to the benefit claimant and on which their rent is based.  Even if the tenant pays slightly more than the LHA rate this will qualify so long as they have other resources to pay the rent from.

For existing tenants the local authority will need to see that there is a genuine reduction in the rent charge.  In most cases this will need to be a reduction to the relevant LHA rate for the property. 

If it is a new tenancy the local authority has to be satisfied that the rent has been reduced and is affordable or, alternatively, the letting would not have been made without direct payments as well as the rent charge being affordable.

Where a landlord routinely lets to housing benefit claimants already at affordable rents without direct payments LHA will continue to be paid direct to the tenant.

It is important to note that it is not the Government’s intention that this new rule will be used to make payments to landlords as a matter of routine.  It has to be shown that direct payments are needed to persuade the landlord to reduce the rent so as to obtain a tenancy in the first place or to retain an existing tenant. 

Other situations where LHA is paid to the landlord direct

The existing rules about direct payment are not altered.  The new rule simply adds an additional situation where the local authority may pay the landlord direct.

The local authority must make payment direct to the landlord where :

• Payments have been made to the landlord from other income related benefit to clear off rent arrears.
• The customer is in arrears of up to 8 weeks with the rent (the landlord must request direct payment for this rule to operate).

Local authorities have a discretion to make payment to the landlord rather than the tenant where :

• the local authority considers that the claimant is having difficulty managing his/her financial affairs e.g. due to drug or alcohol dependency or a serious medical condition
• the local authority considers it improbable that the claimant will pay his/her rent e.g. the tenant is likely to run up serious rent arrears
• the claimant has previously had payments made to the landlord because of the operation of the 8 week rule but the arrears have been cleared.

The other changes are?

• Claimants, who receive more Housing Benefit (up to £15) than they pay for their rent, will stop receiving this amount from the anniversary date of their tenancy. Example: if a claimant moved into the property on 31.10.10, their anniversary date will be 31.10.11 and they will lose the extra amount from 31.10.11
• From 1st April 2011, the LHA rates will be set at the 30th percentile of rents rather than the median
• In many cases, if a tenant is already claiming Housing Benefit, they may have up to nine months from their anniversary date before their rate changes. Example: if a claimant’s anniversary date is 20.4.11, they may have up to 20.1.12 before their rate is changed. However the change may happen sooner if they move address or someone leaves or moves in with them. This will mean a reduction in the amount of Housing Benefit we can pay
• From 1st April 2011 removal of the five bedroom Local Housing Allowance (LHA) rate from their anniversary date
• From 1st April 2011, Housing Benefit can be paid directly to you if you are prepared to help your tenant and make the rent affordable. Example: claimant lives in a two-bedroom house, his rent is £90.00 a week and his LHA rate is currently £86.54. His Housing Benefit is £84.00 per week and it is paid directly to him. From January 2012 the LHA rate is £81.00, and his Housing Benefit reduces to £78.00 per week. The claimant tells you that he is having difficulty affording his rent. You agree to reduce it to the LHA rate of £81.00 in return for direct payments to you. Both of you enter into a new tenancy agreement and provide evidence to the council. The council will then pay their benefit directly to you.

Local Housing Allowance rates

From 1st April 2011, the Local Housing Allowance rates are going down.

To help you plan for the changes, you can compare the current rates against what the new rates are likely to be for where you live on the Valuation Office Agency website at www.voa.gov.uk

DWP Guidance

Click here to download the DWP Guidance.  This sets out the detailed rules.  If you look at the five examples in the Guidance this explains how the new rule on direct payment operates.