Local Housing Allowance (the current form of housing benefit) is a means-tested payment made to low-income families in rented accommodation.
The amount of allowance paid is fixed by reference to the relevant ‘broad rental market areas’ and is intended to reflect the ‘middle of the range’ rental for a suitably sized property in the area. That size will depend upon the size of the household – allowing one bedroom per couple, plus one more for any other person over 10 (except children between 10 and 16 of the same sex are expected to be housed two to a room), and one more for any two children under the age of 10.
For single claimants under 25 years old there is a ‘shared’ rate of LHA. This rate also applies to single people over 25 and couples with no other occupiers who choose to live in shared accommodation.
Local Housing Allowance rates are set by the Rent Service. The website LHA Direct (https://lha-direct.voa.gov.uk) has a local housing allowance calculator by local authority area.
LHA is paid to claimants, not to landlords. The principle is that tenants negotiate the actual rent to be paid, make up any difference or keep any excess up to a maximum of £15 per week.
Tenants can claim LHA as soon as they have a rental agreement in place. An ‘A to Z’ of local councils can be found at https://lha-direct.voa.gov.uk/Secure/LHASearchIntro.aspx.
According to government advice on LHA, it is up to tenants to pay their rent to their landlords. If they do not, they may be taken to court and evicted from the property.
‘Broad rental market areas’ (BRMAs) are areas within which a housing allowance claimant could reasonably be expected to live given the facilities and services available for health care, education, recreation, personal banking and shopping, and taking account of the distance of travel, by public and private transport, to and from those facilities and services. They encompass residential premises of a variety of types, including premises held on a variety of tenures, including privately rented residential premises. The mix must be such that, in the rent officer’s opinion, the local reference rents for tenancies in the area are representative of the rents that a landlord might reasonably be expected to obtain in that area.
The reference rents determined for each BRMA can be checked on the website https://lha-direct.voa.gov.uk.
Drastic changes are to be made to the system from April 2011 the rates will no longer be based not on the median of BRMA rents but effectively on roughly 60 per cent of the average (the 30th percentile of rents, as the Government puts it).
What is more, housing benefit is to be capped. There will no longer be a five bedroom category, and the allowance for a four bedroom property will not be allowed to top £400 a week. The top rate for a one bedroom property will be £250, two bedroom £290, and three bedroom, £340.
So there will be an end to the £2,000 a week that the Government says is paid to some claimants in some parts of London.
There is more. LHA claimants will no longer be able to pocket the first £15 each week of any saving they make by renting a property for less than the allowance they receive.
Also, from 2013, out of work tenants who have claimed Job Seeker’s Allowance for more than 12 months will have their housing benefits cut by 10 per cent – as an incentive to do more to get back into work.
Recognising that the transition is likely to cause hardship, the Government said it will triple its contribution to local authority funding for discretionary housing payments. This is currently £20m a year, and will increase to £30m in 2011/12 and then to £60m a year from 2012/13. This is comparatively small beer in comparison to the current £20bn annual cost of housing benefit (£14bn paid to people of working age), not to mention the £25bn that the Government says housing benefit would have cost in 2015/16 had changes not been made.
Taken overall, the Government says the changes ‘will provide a fairer and more sustainable Housing Benefit scheme by taking steps to ensure that people on benefit are not living in accommodation that would be out of the reach of most people in work, creating a fairer system for low income working families and for the taxpayer. It will avoid the present situation where Housing Benefit recipients are able to live in very expensive properties in areas that most working people supporting themselves would have no prospect of being able to afford’.
Under the new regime local housing allowance claimants can expect to see the amounts they receive go down by an average £12 per week. Some, of course, will see the amount go down by very much more.
The changes will apply to new claimants from the date they come into effect and to existing claimants from the anniversary of their claim - unless in the meantime they have a change of circumstances which requires their local authority to re-determine their claim sooner.