What is Local Housing Allowance (LHA)?

local housing allowance LHA

The rules and processes around Local Housing Allowance are intricate, complicated, variable (depending on the local authority) and constantly changing. Here we look at exactly what LHA is, who is eligible for it, how it is changing and most importantly what it actually means for a landlord to have a tenant in receipt of it.


Contents


What Is Local Housing Allowance?

Local Housing Allowance (LHA) is a housing-related benefit that helps low-income tenants pay their rent when renting a home from a private landlord.

Who Can Claim?

A claim of local housing allowance can be made by a private tenant who needs help with paying the rent. If the individual is in receipt of low-income or other welfare benefits, they could be eligible to claim LHA.

Who Processes LHA Claims?

LHA is paid locally by the governing local council. The rules and guidance notes for housing benefits are set by the Department of Works and Pensions (DWP) but they are interpreted by each authority.

Because the system is open to interpretation, procedures may vary from one geographical area to another. It is imperative that you or your managing agent speak with your local authority in order to learn about their specific policies in relation housing benefit claims

How Is It Calculated?

LHA rates are calculated independently by the Valuation Office Agency (VOA). Individual areas known as Broad Market Rental Areas (BRMA) are assessed annually and figures are published each April.

The Local Housing Allowance rate for each property size is based on the ’30th percentile of the range’ rental figure for the area. This means 3 in every 10 rental properties of that size in the area will be affordable when a tenant is claiming benefit under the Local Housing Allowance rules

How Is A Claim Made?

Depending on the requirements of the local authority, a claim for LHA is made either online or via a paper application form. There are different rules surrounding the application process and the supporting evidence required so it is imperative to check with the governing council the property falls under.

How Long Does A Claim Take To Process, Be Awarded And Paid?

This can vary greatly with each council and in my experience, building a positive relationship with your chosen authority will assist you in the smooth operation of claims.

When we first launched our homeless housing pilot scheme, we had some claims which took over twelve weeks to be paid out! Later, with councils familiar with our work we began to see initial payments made as quickly as two weeks following submittal.

The good news is that however long it takes to process a claim, as long as you all requests are met within council deadlines the claim will be paid from the date it is submitted which should be the date your tenant moves in.

What Landlords Need To Know About Local Housing Allowance

The benefits system is currently undergoing some big changes and landlords are understandably nervous that taking on tenants in receipt of LHA might mean that they have problems collecting the rent. Below are the more important things that landlords need to know if they have a tenant on housing benefit.

Can A Landlord Be Paid Directly?

Councils are currently working hard to promote financial independence amongst welfare claimants, so, unfortunately, the old direct payment system is no longer a fail-proof system in terms of guaranteeing a landlord’s rent. The eventual mass adoption of Universal Credit will see this message pushed out further, with the emphasis very much on personal financial responsibility for those who need welfare assistance.

Currently, a council can will LHA payments directly to a landlord if any of the following applies:

  1. If a tenant is classed as vulnerable.
  2. If a tenant has rent arrears of eight weeks or more.
  3. If a tenant is having deductions made from benefits for rent arrears.

In some cases, the council might choose to pay LHA directly to a landlord if, for example, a tenant has failed to pay rent in the past, is having problems paying rent because of a medical condition, or if the tenant has support needs.

The council will require evidence and consultation with anyone supporting the tenant before deciding to pay LHA directly. This may include written confirmation; statements from a doctor, support worker, probation officer and /or other professionals.

Whilst in the past, it was entirely appropriate to apply for a direct housing benefit payment on behalf of a tenant applicant, more and more vulnerable individuals are failing the strict assessment required in order to be awarded this transactional payment method – this has resulted in a number of our pilot scheme tenants being overwhelmed with (substantial) payments by cheque.

How Often Is LHA Paid?

LHA is paid in arrears by BACs on a four-weekly basis. Unfortunately, councils do send cheques on occasion, something which should be actively discouraged by landlords, their tenants, and managing agents during the application.

How Much Will A Tenant Be Able to Claim?

The amount of LHA a household can receive depends on the income and savings of all non-dependent adults living in the property.

The amount is also determined by the maximum rent allowed for properties in the area and the number of rooms the council decides the household need.

Are There Different Rates For Younger People?

If an individual under 35 is single with no dependents, they will usually only be entitled to claim LHA at the reduced shared accommodation rate.

What Other Benefits Can Private Sector Tenants Receive?

The welfare benefits system is complex; made up of around twenty different awards, which are further complimented by HMRC’s Tax Credit system. The entire welfare benefits system is currently being overhauled with welfare reform which most notably sees the introduction of Universal Credit, a combined award which encourages claimants to become financially responsible and independent.

Generally, the benefits which tenants in the private rented sector encounter most frequently are LHA, Job Seekers Allowance (JSA) and Employment and Support Allowance (ESA). JSA is payable to those who are unemployed but fit for work, ESA is for those who are unable to work through sickness or ill health.

Universal Credit plays a big part of the government’s Welfare Reform. It is a new benefit that is replacing six existing benefits with a single monthly payment for those who are out of work or on a low income.

What Happens If a Benefit Claim Is Suspended?

A suspension of benefit simply means the payments have been placed on hold whilst investigations or re-assessments of the award are conducted. Once all relevant departments have processed information to their satisfaction, a claim can be reinstated and any monies outstanding will be credited.

It is imperative to comply with requests made whilst benefits are under suspension in order to avoid the claim being canceled altogether. Deadlines given must be strictly adhered to.

What Happens If A Tenant Has Their Benefits Sanctioned?

If a tenant doesn’t follow the rules of the benefit they are in receipt of – such as going to an employment interview or medical examination – their payments can be stopped or temporarily reduced. When this happens, the local council will automatically receive a notification of a change to the tenant’s income and place the LHA claim under a suspension.

It is possible to have this suspension lifted by following procedures highlighting an authority’s duty of care to meet essential housing costs during a period of benefit sanction, so long as a tenant continues to meet the requirements of the means-tested award. If losing benefits means an individual is in severe need, they may also be entitled to a hardship payment.


Join Our FREE Property Investment Training Programme Today

Sign up for our free online property training course today.

In there we cover a range of different property strategies to help you get started on building a long-term property portfolio or creating a cash flowing property business.

We also look at ways to increase your return on investment with any of the properties you may be considering and we also have a couple of cheat sheets and downloadable documents.

Just click the image below to join our free training course today.


Any Questions?

If you have any questions or thoughts about Local Housing Allowance then leave them in the comments section below.

Alternatively, you can get in touch via our Facebook page.

We’d love to hear from you and as always we’re happy to help.


Related Posts:

What Is Social Value and What Does It Mean For Property Investors? Most property investors are acutely aware of the housing crisis which Britain is currently facing and many, working in the private property marketplace, are exploring new ways of increasing accommodat...
What Will The Homelessness Reduction Bill Mean For Landlords? The effects of the Homelessness Reduction Bill are going to hit in 2018, so property investors and professional landlords need to be ready if they want to take full advantage of the changes that are c...
Universal Credit & What It Means For Landlords and Investors What exactly does Universal Credit mean for landlords with social tenants? On the one hand, Universal Credit encourages claimants to be more responsible with their money. But, on the other, it offers ...
How To Find The Perfect Social Tenant For Your Multi-Let If you are thinking of investing in a multi-let social property then it's of paramount importance to know how to go about selecting the perfect social tenant. With this tenant profile, the normal rule...
Where Is The Best Place To Invest In Social Property? The success of any property investment lies in the investor's ability to determine the best place to invest. Social property is no different, although, given the desperate need for affordable housing ...

Leave a Reply