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Landlords who have been letting to tenants on benefits will be all too aware of recent changes in the housing benefit system which have caused considerable problems for landlords previously used to receiving rent direct from the local authority.
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Under the new Local Housing Allowance (LHA) system landlords are no longer able to claim the rent direct from local authorities but have instead to seek payment direct from the tenant. Only in exceptional circumstances will the LA pay the landlord direct, for instance if they are 8 weeks or more in arrears or if they are deemed to be 'vulnerable'.
Property Sparrow in her recent post on the LHA outlines just who and why it is so unpopular.
Meeting with Rent Service
However Property Hawk is always keen to give the other side of the argument. Following a recent meeting with a couple of senior representatives from the The Rent Service which monitors the rents paid by landlords in order to set the LHA rent levels, it was highlighted to me that there are some advantages to the new system. Some landlords are actually doing well out of the LHA by playing the system.
Some landlords doing well out of LHA
A landlord recently e-mailed Property Hawk with his experiences outlining how he is using the rule changes to his advantage.
"The local LHA for my area for a 1 bed flat or studio was set at £105 p/w, under the old rule I was only able to get the rent officer to agree £85.00 leaving the bulk of my tenants to pay a £10 top-up Many of my long term & trusted tenants were persuaded to go over to LHA by stopping their H/B for 1 week and then restarting it. Many of these tenants have issues that would be acceptable for direct payment anyway. The result is I now get £105 clear and the tenant has no top-up to worry about, and in some cases they even get a small differential payment each month. Result for me is £16k p/a extra rent and no work to chase top-up. I figure if I lose a bit to non payment of LHA by stupid tenants I am still quids in overall. The maximum they can go is 8 weeks before direct payment is resumed, 4-5 weeks of that is covered by deposit so assuming there is no damage at the end of the tenancy maximum loss exposure is only 3-4 weeks."
LHA increase business risk to landlord
Where it does seem to work is where a landlord has a trusted tenant in place who pays the rent. A landlord can then 'milk' the more generous rents being paid in some areas under the new system by getting these tenants to move from housing benefit to the LHA. The big problem is where a landlord considers taking a new tenant receiving benefit. This is because the LHA greatly increases a landlords business risk of not getting paid. Many landlords have been put off taking on new benefit tenants for exactly this reason and with unemployment rising rapidly; some estimate there will be another million unemployed by the end of the year. This will put an increasing burden on housing provision for benefit receiving tenants.
If the government does want the private rental sector to play a full part in meeting this demand then they will need to rethink urgently this element of the LHA. Given this was central to the whole idea of the LHA of paying tenants directly then this does call into question the workability of the entire scheme. It's terrible when practicalities get in the way of such a perfect theory! Doesn't life just suck?
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4 comments:
I have a point on LHA If the tenant moves from one house to another (different Llamndlords) If the LA make a payment in error to the wrong landlord they will not make a payment to the tenant in his new address until payment is recovered from previous landlord is this lawful?
Second point if a tenant is paid LHA and does not pass on the landlord and then the council make a demend for repayment and then deduct a sum from future payments shouldn't the payment go to the landlord as this was a correctly paid out benefit it just didnt get to the lanlord or does the tenant effectifively get fined for their failure to pay the landlord as not only do they have their benefit reduce they still have to pay the landlord the arrears?
Frank
Following on from Frank's comment, some tenants and LHA also have little respect for the initial 6 month term of the shorthold tenancy. If the tenant chooses to upsticks (stating change of circumstances for example) the rent money follows him with total disregard for his 6 month minimum contract. This is particularly exasperating because the LHA insist on having one to initiate commencement of the tenancy but don't enforce the rules on the tenant when they receive a new application for a different address. Communication with tenant can then be difficult due to them never seeming to have enough credit on their mobile phones. It's far from fair to Landlords.
Also, benefit paid direct to tenants is paid by lunar calendar ie every two weeks. How then does a tenant work out his disposable income to pay his rent - as well as bills - MONTHLY? Banks don't do standing orders fortnightly, it's either weekly or monthly. The present system makes it very easy for tenants to get into debt because juggling the two money cycles is quite a ridiculous task for anyone without accountancy training.
A tenant of mine recently was made redundant, she went to the LHA only to find that the maximum they pay for a room in the area is £360pcm. However her rent is £430pcm as she has two adjoining rooms. So that leaves her seriously out of pocket and she is very upset as she doesn't want to move. Fortunately they said they will pay the £430 for 3 months, though there is now a six week wait for her application to be processed and money to come through. I know that the market rate for a large room in my area is about £400+ so what are tenants or landlords supposed to do? Don't have much respect for the LHA or the Rent Service for that matter.
The answer is simple, don't take in tenants on benefits. When there are thousands without shelter, this stupid government will have to revise its social engineered thinking. As they only want, and foster Housing Associations, the private landlord is being thrown to the dogs, so it is time to strike back. When the TV stations finally take note of the number of homeless, something will finally be done, especially as there is an election coming. It will take guts and nerves, but there are still plenty of working tenants who will play ball.
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