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A Guide for Landlords

Foreword

The purpose of this document is to provide a guide to the Local Housing Allowance to help explain what the allowance is, why it is being introduced and how it works in practice. It is not meant as a definitive guide to every technical and legislative aspect of the new allowance. The Benefits Service should be contacted for further information regarding the allowance.

Background to the introduction of the local housing allowance (LHA)

In November 2002 the Government published its proposals for a major reform of the housing benefit scheme in its paper Building choice and responsibility: a radical agenda for housing benefit. The Local Housing Allowance (LHA) is central to the government's reform of Housing Benefit and its wider welfare reforms agenda. The LHA replaces the previous rent allowance given to deregulated private tenants to help them meet their rent charges.

When did Local Housing Allowance come into force?

The local housing allowance came into force on the 7 April 2008.

What is the local housing allowance (LHA)?

The local housing allowance (LHA) is a new way of paying out Housing Benefit for people on low income who rent accommodation from private landlords.

The current rent allowance is calculated by taking into account the maximum eligible rent of a property, as determined by the rent registration service, whereas the new LHA is a flat rate allowance based on household size. The amount is not directly related to the amount of the rent charge.

Other circumstances, such as the tenant's income and the number of people within the tenant's household will affect the amount of benefit paid. The tenant may not always receive the full rate of LHA.

LHA will replace the current scheme of awarding rent allowance to those private tenants affected by the change.

How is the local housing allowance set’

This means that the Benefits Service will no longer need to refer each claim to the Rent Registration Service to establish the maximum rent. This will speed up the processing of claims and the payment of benefit.

Who is affected?

It will apply to housing benefit claimants in the deregulated private sector only. That is, those claimants who may be subject to rent restrictions under current benefit rules.

However not every tenant will convert to the new LHA from the 7 April 2008. Instead the LHA will only apply to private tenants in the following cases:

  1. New benefit claim received for the first time
  2. There has been a break in a claim of one week or more
  3. A change of address

This will phase the number of tenants converting to the new LHA.

This means that all other private tenants will continue to receive their rent allowance under the current scheme until they fall into one of the three groups mentioned above.

Also most claims from boarders will not transfer to LHA even if they move address, etc. The Rent Officer will decide whether a claimant is to be treated as a boarder.

Occupants of caravans/mobile homes and houseboats will still claim housing benefit under the current scheme and will not transfer to LHA.

The Benefits Service will therefore be operating two benefit schemes with two different sets of rules at the same time from the 7 April 2008.

What are the aims of the LHA?

The aims of the Government's LHA scheme are to promote:

Fairness: The new scheme has been designed to pay the same amount of LHA to tenants with similar circumstances living in the same area. This differs from the existing rent allowance scheme, which ties the level of benefit to the rent actually paid, subject to a range of restrictions applied by the rent officer.

Choice: The intention of the LHA is to allow tenants to trade between the quality and price of their accommodation. Tenants would be able to choose between paying more to stay in a property that suits their requirements or moving to less expensive accommodation.

Transparency: The LHA for each size of dwelling in a broad rental market area are set and published monthly. This will make it easier for tenants and landlords to find out in advance how much rent could be covered by housing benefit.

Personal responsibility:The LHA will generally be paid to a private tenant instead of the landlord in order to encourage them to take responsibility for budgeting and paying their rent themselves and to manage the transition back into work.

Improved administration: The current system of referring eligible rent decisions for benefit purposes to the rent registration service will be removed with the aim of simplifying the claim process and improving the processing time for benefit claim.

How is the local housing allowance set?

The Rent Registration Service is responsible for setting the LHA or maximum rent for private rented properties and will take into account the following criteria:

  • The Broad Rental Market Area (BRMA) where the property is located
  • From 1 April 2011, the 30th percentile rent for each type of property after taking into consideration the rents changed for similar sized properties in the BRMA

What is a Broad Rental Market Area?

A BRMA is an area:

  1. made up of two or more distinct areas of residential accommodation, each distinct area of residential accommodation adjoining at least one other in the area
  2. within which a person could reasonably be expected to live, having regard to facilities and services for the purposes of health, education, recreation, personal banking and shopping, taking account of the distance of travel (by public and private transport) to and from facilities and services of the same type and similar standard
  3. containing residential premises of a variety of types, and including such premises held on a variety of tenancies

The Rent Registration Service has created one BRMA for the whole of Ayrshire. This means that the LHA rates set for a similar sized property will be exactly the same across Ayrshire regardless of its location.

How is the 30th percentile rent calculated

From 1 April 2011 Local Housing Allowance (LHA) rates reduced to a lower amount so that about 3 in 10 properties for rent in the area should be affordable to people on Housing Benefit rather than 5 in 10 (median rent). The new rate is known as the 30th percentile rent.

The LHA set by the Rent Registration Service will be the maximum eligible rent for that size of property in an area regardless of its location within the BRMA.

Publicising local housing allowance rates

The Rent Registration Service will forward the monthly LHA rates to the Council in advance of them coming into effect. The LHA rates will be displayed at the Benefits Service public enquiry counter, at stakeholder locations and on the web site.

An example of the LHA rates is shown below. (These are provided for illustration purposes only.)

Shared room rate £50.00
1 Bedroom rate 60.00
2 Bedroom rate £70.00
3 Bedroom rate £80.00
4 Bedroom rate £90.00
5 Bedroom rate £100.00
6 Bedroom rate £110.00

How will the Benefits Service calculate local housing allowance entitlement?

The relevant income and capital of the benefit claimant's household will still be used as the basis to calculate any entitlement to the LHA.

The main change is that the Benefits Service will take into account the number of bedrooms required for the claimant's household to decide the appropriate level of LHA. There are a number of rules when deciding the number of bedrooms and these are not covered in this guide.

When counting the number of bedrooms required for the claimant and their family one bedroom will be counted for:

  1. Every adult couple
  2. Any other adult aged 16 or over
  3. Any two children of the same sex
  4. Any two children regardless of sex under age 10
  5. Any other child

For example, a couple and their 14-year-old child would be entitled to the LHA rate for a two-bedroom property.

The claimant may actually live in a smaller or larger property but they can only receive the LHA level based on the number of bedrooms needed for their household, as determined by the Benefits Service.

The number of living rooms, kitchens and bathrooms is ignored for the purpose of this calculation, as it is assumed that all tenants are entitled to these.

The above room rate calculation applies to most cases but not where the claimant is a person aged under 35 years or where facilities are shared. The Shared room rate - will apply where the claimant

  • is single, less than 35 years, treated as a young individual and does not receive the Severe Disability Premium, or
  • is single and aged 35 or over and not renting accommodation with at least 2 rooms i.e. where some or all of the facilities are shared e.g. a room
  • is a member of a couple with no dependant children and not renting accommodation with at least 2 rooms i.e. where some or all of the facilities are shared e.g. a room
  • is a member of a couple with no dependant children and not renting accommodation with at least 2 rooms i.e. where some or all of the facilities are shared e.g. a room
  • Joint tenants will receive a rate of LHA based solely on the each joint tenant's family plus any non-dependants, sub tenants or boarders that they have.

The amount of LHA paid out will either:

  1. Exactly match the full amount of the rent charged by the landlord
  2. Be less than the rent charged by the landlord - the tenant is therefore responsible for finding the additional rent required.

However, if there is a death in the household, and the change would result in a reduced LHA, the authority will protect the tenant for 52 weeks from the date of death at their current rate, while their family continues to occupy the same accommodation.

The rate of benefit that a claimant receives is a flat rate allowance based on the LHA rate in effect for the area rather than the actual rent charge. This means that the tenant's LHA rate will not change even if their rent charge changes. However, their LHA rate will be reviewed annually.

Normally, claimants will not be paid for any service charges included in their rent.

If a tenant receives less LHA than the rent they are charged then they might be eligible for a Discretionary Housing Payment (DHP). The DHP scheme provides tenants with financial assistance with their rent charges for a limited period of time. A tenant has to apply to the Benefits Service for a DHP but as the Council receives a set amount of funding from the Department for Work & Pensions for this scheme financial assistance is not guaranteed.

How is the local housing allowance paid?

The LHA is paid direct to the tenant and not the landlord. The LHA can only be paid direct to the landlord if the tenant is considered vulnerable or where the tenant is unlikely to pay his rent. An application must be made to the Council who will consider each request in accordance with its LHA Safeguard Policy.

The LHA will also be paid direct to a landlord if the tenant is 8 weeks or more in arrears with their rent, as per housing benefit regulations.

It is not possible to pay the landlord direct simply on the basis that either party prefers to do so.

The DWP's preferred method of payment is by Bank Automatic Clearing Services (BACS) transfer direct into a tenant's bank account.

Recovery of Overpayments

The rules on the recovery of overpayments are not being changed. Currently:

  • Benefit overpaid to a landlord can be recovered from either the landlord
    or
    the claimant, as decided by the local authority dependant upon the reason for the overpayment; and
  • Benefit overpaid to a claimant can be recovered only from the claimant

As most claimants will receive their benefit themselves under the LHA, most overpayments will, therefore, be recovered from the customer and not the landlord.

Appeals

Both the landlord and the tenant as persons affected by the decision, may appeal against any decision about whether or not to pay LHA direct to the landlord. Appeals can also be made against decisions on vulnerability.

Neither party can appeal against a decision not to pay LHA the landlord as the claimant's agent.

There is no right of appeal or redetermination about the level of LHA or the BRMA on which those levels are based unless, for example, the Rent Officer has made an arithmetical error.

How does the local housing allowance affect landlords and tenants?

Tenants

  • A significant change is that the LHA will in the vast majority of cases be paid direct to the tenant.
  • Each tenant who receives the LHA direct will be more aware of the amount of benefit they are being paid.
  • Tenants will now need to put in place arrangements for paying their LHA to their landlord to cover their rent charges.
  • Tenants will need to open up a bank account to receive the LHA payment by BACS.
  • As the level of the LHA can in some cases exceed the rent charged it may result in tenants choosing to move to alternative accommodation.

Landlords

  • The main change is that landlords will not receive the LHA payment direct from the Council unless the tenant is considered vulnerable or is likely to fall into rent arrears.
  • Landlords will need to put arrangements in place with their tenants for payment of their rent charges.

South Ayrshire Council Benefits Service contact details

The Benefits Service is available to answer any questions regarding the local housing allowance.

Telephone 0300 123 0900

Office Address
Ayr Housing Benefit and Council Tax Benefit Riverside House
21 River Terrace
Ayr, KA8 0AU
Ayr Council Tax Benefit County Buildings
Wellington Square
Ayr, KA7 1DR
Troon and Prestwick Municipal Buildings
South Beach
Troon, KA10 6EF
Girvan and Maybole 19 Knockcushan Street
Girvan, KA26 9AQ

Email benefit.services@south-ayrshire.gov.uk

Opening Hours for telephone and public enquiries Monday, Tuesday and Thursday 10.00am to 4.45pm, Friday 10.00am to 4.00pm

DWP and local authorities are working together to ensure that stakeholders, including landlords, are kept informed of the changes being made to Housing Benefit and that they know where to obtain further advice and information.

Alternatively you can visit the DWP website: www.dwp.gov.uk/housingbenefit/local-housing-allowance

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