Local Housing Allowance

A Guide to Local Housing Allowance for Landlords

From Monday 6 April 2009, The Rent Service will no longer give local authorities the Local Housing Allowance (LHA) rate for properties which have more than 5 bedrooms. Instead, all new claims that are paid under the LHA rules will be capped at the appropriate rate for a five-bed roomed home.

Tenants who currently receive the LHA rate for a home with more than five bedrooms will continue to receive their current rate of LHA until:

• The first anniversary of the date their current claim  began; plus
• An extra 26 week period.

Once this 26-week period ends, they will receive up to the rate for a five-bedroomed property. You should renegotiate a new rent with your tenants before the 26 week period ends.

For more information, phone Benefits Contact Centre on 02083563399.

Local Housing Allowance (LHA)

On 7 April 2008, the Government introduced new rules (the LHA rules) for working out Housing Benefit claims for private tenants. The LHA rules affect tenants who are already getting Housing Benefits and who:

• Move into privately rented accommodation; or stop being entitled to benefit for one week or more.

If my tenant is already receiving Housing Benefits, will it change?

No, they will not be affected by the LHA rules. Their Housing Benefits will continue under the existing rules and you, as the landlord, can continue to receive the payments direct if this is what your tenant has chosen.

When your tenant changes address (even if this is to a different place in the same building), or stops claiming Housing Benefit for one week or more, the new LHA rules will apply.

How does LHA work?

Under the LHA rules, the maximum amount of benefit your tenant could receive is set by The Rent Service. It does not depend on the amount of rent you charge.

The maximum amount they could receive will be the same for every household of the same size in the area they live in, no matter what rent the different households pay.

Broad Rental Market Areas

The Rent Service had divided the country into ‘broad rental market areas’ (BRMA). Each area is made up of a number of neighbours. In each area there will be a mix of property types within a reasonable distance of various public services such as health, education, leisure, personal banking, and shopping facilities.

To set the LHA rates for an area, The Rent Service collects information on the rent charged in that area. The LHA rate for an area will be based on the mid-range rent charged in that area. There will be a number of different rates for each area, based on the number of different rates for each area, based on the number of rooms each household needs.

The Rent Service will continually monitor local rents and update the LHA rates every month. The rates may go up or down, or stay the same. This does not mean that the LHA rate applied to a particular person’s claim will change every month. Each person’s benefit will be based on the rate that applied in the month they claimed, until their claim is reviewed each year.

Number of Rooms

Under the LHA rules, we must decide how many rooms a tenants needs. There is a special LHA for tenants who:

• Live in one room and share facilities (for example, a kitchen or bathroom) with other people; or
• Are under 25 and live on their own. If this above does not apply, we will work out the number of rooms a household needs as shown below.

A tenant needs one bedroom for each of the following.

• A couple
• Someone who is 16 or over
• Two children of the same sex, both under 16
• Two children of any sex who are younger than 10
• A child (someone under 16)

Each person is only counted once, in the first group that they would come into.

We do not count everyone in the house when working out how many rooms a household needs. We count the tenant and their partner, as well as any children or young people they are responsible for. We also count any other adults who are not boarders or lodgers. However, we do not count foster or joint tenants.

Which rate applies to my Tenant?

The maximum benefit a tenant can get will be the LHA rate for the number of rooms they need in the broad rental market area they will live in.

The Rental Service will publish new LHA rates each month. The rate that will apply to your tenant will be rate in force on the date of their claim. (This will be normally be the date we received their claim form or the date the tenant first asked to claim Housing Benefit, if they send the claim form back within one month of this date.)

It does not matter if the date we will start to pay their benefit is in the next month. Their benefit will be still be based on the rate that applied when they claimed.

What if a tenant’s rent is higher than the LHA rate?

If your tenant’s rent is more than the LHA rate for their size of home, they must pay the difference to you. If you think they are having difficulty with this, tell them to speak to us or citizens advice bureau.

What if a tenant’s rent is lower than the LHA rate?

If your tenant’s rent is lower than the LHA rate, the maximum benefit they could get is:

• Their rent plus up to £15 a week; or
• The LHA rate;

Whichever is less.

They do not have to give this extra money to you.

Example

Rent: £90 a week
LHA: £120 a week
Maximum Housing Benefit: £105 a week (their rent plus £15)

Example

Rent: £90 a week
LHA: £100 a week
Maximum Housing Benefits: £100 a week (the LHA rate)

I have decided to increase the rent. Will my tenant’s benefit also increase to cover this?

No, we will review your tenant’s benefit every year, using the correct LHA rate that applies on the date they renew their claim.

We will only review the rate at any other time if they are significant changes to the household (for example, if a child turn 16 or somebody else moves in).

My tenant has asked for their claim to be backdated. Which LHA  rate will apply?

This depends on whether they have asked for their claim to be backdated to a date before 7 April 2008.

If we backdate their claim to before 7 April 2008, we will class the date they claim as being before the LHA rules came into force. Their claim will only start to be worked out under the LHA rules when they move or if they stop claiming for a week or more.

If we backdate their claim to a date that is after 7 April 2008, their benefit will be based on the LHA rate that applied in the month their claim starts. This may be different from the rate for the month they actually claimed in. We will review the LHA rate on the anniversary of the date their claim was backdated to.

There are exceptional circumstances when we can pay benefit under the LHA rules direct to you.

I always get my tenant’s benefit paid direct to me. Will this change under the LHA rules?

Yes. One of the changes under the new rules is that benefit will almost always be paid to the bank or building society account of the person claiming. The tenant will be responsible for paying you the right amount at the right time.

We will give our customers advice on how to open a bank account. You may want to consider the way you normally collect your rent and look at changing to some kind of automatic payment (for example, standing order).

There are very few circumstances when we will pay a tenant’s benefit direct to you. We will only do this if we think your tenant will have serious problems paying their rent and managing their money.

If you think this may be the case with one of your tenant’s, contact us. We will probably ask you to fill the form. We may need evidence from an independent person or organisation (for example, a GP or social services).

My tenant owes me rent. Does their benefit still have to be paid direct to them?

If your tenant is eight weeks or more behind with their rent, please contact us. We may be able to make the payments direct to you.

How can I tell what the LHA rate will be for my property before my tenant claims benefits?

You will need to find out the LHA rates for the broad rental market area your property is in. This information can be found on the website at: www.lha-direct.voa.gov.uk/secure/default.aspx

However, the actual rate your tenant’s benefit will be based on depends on the size of their household. The number of rooms they need may not be the same as the number there are in the property.

Will my tenant’s benefit always be the full LHA rate?

No. The way we base benefit on the tenant’s income and savings is not changing. We will use the LHA rules to work out the maximum benefit they would be entitled to. However, they may only receive part of this amount, depending on their income and saving.

My tenant has told me the size of their household has changed. Will this affect the LHA rate used to work out their benefit?

Yes. We will review their benefits using the correct LHA rate for the new size of their household.

We will also change the benefit when the circumstances of a member of the household change in a way that will affect the LHA rate (for example, when a child turns 16).

Either you or your tenant must tell us if anyone moves into or out of the household.

I don’t agree with the LHA rate that will apply to my property. Can I or my tenant appeal?

No, you cannot appeal against the LHA rate. This is because the level is set for the whole broad rental market area.

Overpayments

If the tenant receive too much benefit, or benefit they are entitled to, we will take action to recover the overpayment. If you receive benefit payments direct, you may be responsible for paying back any overpayment if your tenant could have reasonably been expected to know that the benefit should have either reduced or ended.

As a local authority, we can apply for a country court judgement against you. This is where a court orders you to repay a debt. We can take action up to six years from this date that:

• The overpayment was made; or
• The debt was last acknowledged by the landlord; whichever is later.

You will only receive a letter about an overpayment if you are paid benefit direct. The letter will tell you what to do if you don’t agree with the decision.

You will need to tell us about the following.

• If you tenant stops living in the property. (the tenant is responsible for telling our Benefits Service section about a change of address. But if you know that your tenant is moving, or that they have moved, you must tell us so we do not pay too much benefit.)
• If someone else moves into the property (for example, another adult or joint tenant).
• If your tenant’s rent decreases.

You should also tell us about any changes in your own circumstances (for example, if you change address or you bank details change).

If you do not tell us about your changes, we may recover any overpaid benefit from you.

The information we need from you we need:

• Accurate information about the tenancy, including the date the tenancy started the rent, and any services you provide.
• Information about tenants moving into and out of your property; and
• You to acknowledge that the tenancy agreement is with the tenant.

This information has been provided by one of the local authorities in London.