What is Local Housing Allowance (LHA)? (And What Do Landlords Need to Know)
The rules and processes around Local Housing Allowance are 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.
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 for 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?
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, if you are able to build a positive relationship with your chosen authority then 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 benefits.
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:
- If a tenant is classed as vulnerable.
- If a tenant has rent arrears of eight weeks or more.
- 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.
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, and ESA is for those who are unable to work through sickness or ill health.
Universal Credit plays a big part in 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 cancelled 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.