Landlords and tenants in the Private Rental Sector will see significant changes to Local Housing Allowance (LHA) during the next few years.
The 1st April 2011 is the first date to be aware of if you are in receipt of Housing Benefit.
During 2010 the coalition government carried out its spending review and the benefits system became a major area for cuts. With a Housing Benefit bill of over £21 billion, the government has decided to introduce a cap on the amount of Local Housing Allowance paid to claimants resulting in a shortfall, which the tenant or the landlord has to pay.
The capping of LHA has lead to sections of the PRS questioning the government’s strategy. The Department of Work and Pensions recently responded to PRS researchers suggesting that an incentive to reduce rents could be the direct payment of LHA to landlords on a temporary basis. This solution may be welcomed by some sections of the PRS, but might not be suitable for all. Reducing rent for some tenants and not others may cause untold difficulties. Reducing rents may also restrict property value and future investment.
Tenants making a new claim for housing benefit will be the first affected. While those already on an agreed amount of LHA may have more time before the change comes into affect. In some cases your current rate of LHA will continue for a further nine months after reassessment of benefits.
The important LHA figures available from Direct.gov.co.uk are as follows;
The maximum £15 weekly excess that some customers can get will be removed.
A limit will be introduced so that Local Housing Allowance does not exceed:
- £250 a week for a one bedroom property (including shared accommodation)
- £290 a week for a two bedroom property
- £340 a week for a three bedroom property
- £400 a week for a four bedroom property
- The maximum rate of Housing Benefit will be limited to the rate for a four bedroom property.
- There will be help for disabled people towards the cost of an extra bedroom if they need an overnight carer.
Local Authorities will be contacting all who receive Housing Benefit. If tenants are still unclear they should contact their Local Authority or alternatively seek impartial guidance for example the Citizens’ Advice Bureau.
Other changes that will affect new tenancy agreements on or after April 2011 are as follows;
- Deductions made from Housing Benefit will gradually increase if there is an adult living in your household who you don’t claim benefit for, for example, grown up children.
- The shared room rate for single people renting from a private landlord will be extended to people under 35. This is applicable from April 2012.
- From April 2013 people claiming Jobseeker’s Allowance for over a year will have their Housing Benefit reduced and capped at 90%. Those living in larger accommodation than their family needs will also have benefits restricted.
- Payments will only increase in line with the Consumer Price Index, (the cost of living).
Lettingaproperty.com advises landlords and tenants be aware of the changes and seek advice if they are unclear.
