Local Housing Allowance (LHA) was introduced for new tenancies in April 2008 when it replaced the old housing benefit system. Under the new rules, instead of rent being paid directly to private landlords to cover housing costs, it now goes straight to the tenants who must choose whether or not to pass on the rent money to their landlord.
In practice, the research has shown many tenants are failing to pass on these payments to landlords. This is causing major problems. In the most serious cases, landlords are facing repossession because rent money does not arrive.
The research shows that 52 per cent of landlords surveyed have decided they would not let, or be ‘less likely' to let, to LHA tenants. A further 43 per cent of those landlords who have already tried the new system said they would now be leaving this failing market because of increased uncertainty about rent payments.
Clearly, LHA is now actively contributing to a shrinking of housing supply for benefit claimants, and more pressure is being placed on social housing. As always, this will affect the most vulnerable tenants and increase homelessness. With a forecast £2.6 billion being spent on LHA** during 2009-10, the NLA is calling for immediate action.
Currently, a landlord must wait for eight weeks of rental arrears before the local authority can take action and an automatic ‘trigger' pays the rent directly. In reality, arrears can be as long as three months before the landlord receives their first payment. If the landlord chooses to try and reclaim the lost money, they must pursue the tenant privately through the courts.
Contrary to the Government's intentions, LHA tenants now have less choice as landlords opt out of this part of the market because they simply cannot afford to house the most vulnerable tenants. If the Government is not going to return to direct payments to landlords, the NLA is today calling for the ‘trigger' to be reduced to four weeks before direct payment kicks in.
Richard Price, Director, NLA, commenting on this research, said: "It is clear that LHA is not improving access to housing and has actually reduced tenant choice. This was not the Government's intention but the new system is simply not working. If landlords are opting out of this part of the market, where will these families go? The situation is now becoming very serious.
"Local councils across the country are still not using the available guidance consistently and this is creating confusion. Not only are we calling for the ‘trigger' period to be reduced to four weeks but the NLA believes a more creative working relationship between councils and landlords should be developed.
"Empowerment is about giving people the right to choose. The current situation is not sustainable and the Government must act to ensure that LHA tenants are not further disadvantaged."