Landlord changes

A number of amendments to the Local Housing Allowance scheme will take effect from 1 April 2011. These changes are set out below.

In some cases, customers will be entitled to transitional protection of up to nine months (unless there are certain changes in their circumstances).

Transitional protection will apply where the customer’s Housing Benefit is reduced as a result of the changes, and will be payable for a maximum of nine months. The protected amount may be payable for a shorter period if the customer:

  • Changes address
  • Is no longer entitled to Housing Benefit
  • Has a change in their household resulting in an increase in their Local Housing Allowance rate

The abolition of the £15 weekly excess

At present, where the Local Housing Allowance rate exceeds the amount of rent payable, customers can receive up to £15 extra Housing Benefit.

For example: Customer is entitled to maximum Housing Benefit and is charged £150 per week rent for a 2 bedroom property. The Local Housing Allowance rate is £165 per week. The customer’s Housing Benefit entitlement is £165 per week, giving the customer £15 more than the rent due.

From 1 April 2011, the £15 excess will be abolished, meaning that no-one will receive more than their rent in Housing Benefit. Existing customers will not have their Housing Benefit reduced straight away. The change will take effect on the anniversary of the customer’s claim.

For example: The customer receives £165 per week Housing Benefit, including the £15 excess. The Local Housing Allowance rate is £150 per week. The customer first made a claim on 2 May 2010 therefore the anniversary of the claim is 2 May 2011.

The customer will receive £165 per week from 1 April 2011 to 1 May 2011. Their entitlement will then reduce to £150 per week from 2 May 2011.

The abolition of the 5 bedroom Local Housing Rate

The amount of Housing Benefit payable under Local Housing Allowance is based on the size of the customer’s household. The customer’s Local Housing Rate is worked out as follows:

One bedroom is allowed for: 

  • Every adult couple
  • Any other adult aged 16 or over
  • Any two children aged 10 or over of the same sex
  • Any two children regardless of sex aged under 10
  • Any other child

There are also separate rates for shared accommodation. These rates will apply to single people and childless couples.

Under the above criteria, larger households may be entitled to a 5 bedroom (or higher) rate of Local Housing Allowance. This means larger households will only be entitled to a 4 bedroom rate of Local Housing Allowance.

From 1 April 2011, the 5 bedroom (and higher) Local Housing Allowance rates will be abolished. Again, existing customers will not have their Housing Benefit reduced straight away. The change will take effect from the anniversary of their claim. Customers will also receive up to nine months transitional protection.

For example: Customer receives £450 per week based on the 5 bedroom rate of Local Housing Allowance. The anniversary of the claim is on 5 September 2011, and will reduce to £360 per week. The customer’s Housing Benefit entitlement will change from 5 September 2011 + 9 months, i.e. 4 June 2012.

Caps on the Local Housing Allowance Rates

Local Housing Allowance rates are based on the average rents for different sizes of accommodation within a local Broad Rental Market Area (BRMA). This means rates vary widely across the UK, with areas such as Greater London having much higher rates.

e.g. In January 2011:

  • The 1 bedroom Local Housing Allowance rate for Havant is £115.38 per week
  • The 1 bedroom Local Housing Allowance rate for Central London is £370 per week.

From 1 April 2010, the Local Housing Allowance Rates will be capped. The maximum rates will be as follows:

  • £250 per week for a 1 bedroom property
  • £290 per week for a 2 bedroom property
  • £340 per week for a 3 bedroom property
  • £400 per week for a 4 bedroom property

As with the other changes, existing customers will not have their Housing Benefit reduced straight away. The change will take effect from the anniversary of their claim. Customers will also receive up to nine months transitional protection.

For example: Customer is entitled to a 3 bedroom Local Housing Allowance Rate, and receives £370 per week Housing Benefit. The anniversary of their claim is 1 August 2011, and will reduce to £340 per week. The changes will take effect from 1 August 2011 + 9 months, i.e. 1 April 2012.

Changes in the way the Local Housing Rate is calculated

The Local Housing Allowance rates are currently calculated using the median value for each property size. The median rent is the figure halfway up the distribution list of rents in the BRMA.

This change will take effect immediately for all new claims made on or after 1 April 2011. For existing claims, the change will take effect from the anniversary of their claim. Customers will also receive up to nine months transitional protection.

For example: Customer receives £170 per week Housing Benefit based a 2 bedroom rate of Local Housing Allowance. The anniversary of their claim is 4 July 2011, and the new rate is £150. The change will take effect from 4 March 2012.

Additional bedroom for non-resident carers

Previously there has been no provision to allow an additional bedroom for a non-resident carer who stays overnight with the customer within the Housing Benefit assessment. This meant that a customer could have their carer(s) staying with them for 3 or 4 nights a week, but still only be entitled to a 1 bedroom Local Housing Allowance rate.

From 1 April 2011, this provision will change to allow an extra bedroom within the Local Housing Allowance rate. This will only apply where the claimant and/or partner need overnight care on a regular basis, and have a bedroom that is used by the carer(s) for overnight stays.

This change will take effect for both new and existing claims from 1 April 2011.

Direct Payment Provisions

One of the main principals of Local Housing Allowance was to encourage ‘financial inclusion’ and ‘individual responsibility’ by making payments to the customers rather than the landlord in the majority of cases.

Under the Local Housing Allowance scheme, payments can only be made directly to the landlord in the following instances:

  • Where it is considered the customer will have difficulty paying their rent due a vulnerability, e.g. due to a mental or physical disability; illness; a young person in their first tenancy etc. – ‘Can’t pay’.
  • Where it is considered the customer will not pay their rent, e.g. customers with a history of rent arrears; customers with a history of drug or alcohol dependency; customers with debt problems – ‘Won’t pay’.
  • Where the claimant is more than eight weeks in arrears with their rent.

From 1 April 2011, the provisions will be expanded to include the following:

  • Where it is considered direct payments will assist the customer in securing or retaining a tenancy.

The intention of this change is to provide landlords with an incentive to reduce rents to a level that is affordable to customers.

The April 2012 changes

The Shared Room Local Housing Allowance Rate age provision will change from April 2012. Currently, single customers under the age of 25 are only entitled to the Shared Room Rate, unless they are disabled or were previously under the care of Social Services.

From 1 April 2012, the age provision will change from 25 to 35. At present, the government have not announced how this change will affect existing customers, and whether there will be any transitional protection.

This change will apply to all single customers under the age of 35, irrespective of whether or not they live in shared accommodation.

The impact of the changes

The impact for customers in Havant and for the council itself, are likely to be significant.

The £15 excess

Havant currently has around 300 claimants who receive excess Housing Benefit due to their rent being below the Local Housing Allowance rate. These claimants will see their entitlement reduce from April 2011.

Although customers will still receive Housing Benefit equal to the amount of rent they are charged, they will see a reduction of their weekly income of up to £15.

The Abolition of the 5 Bedroom LHA rate

Havant currently only has 4 claims where Housing Benefit is being paid based on a 5 bedroom rate of Local Housing Allowance.

The average loss of Housing Benefit entitlement for affected customers will be £115 per week, which is likely to make it extremely difficult for these customers to maintain their current tenancies.

Changes in the way the Local Housing Allowance Rate is calculated

The most significant change to impact customers will be the move to use the 30th percentile of local market rents to calculate the Local Housing Allowance rates. To give an idea of the likely impact of this change, the tables below gives the LHA rates for January 2011, both as they are currently calculated and as they would be using the 30th percentile (the 30th percentile figures are taken from the impact assessment produced by the DWP). The figures are shown for both the Portsmouth and Chichester BRMA’s, and are weekly figures.

Weekly Local Housing Allowance January 2011 - Portsmouth

1 Room 1 Bed 2 Bed 3 Bed 4 Bed 5 Bed
As calculated currently £67.50 £115.38 £144.23 £173.08 £249.23 £340.00
30th Percentile £64.62 £114.23 £137.31 £161.54 £225.00 £225.00
Difference    £2.88 £1.15 £6.92 £11.54 £24.23 £115.00

Weekly Local Housing Allowance January 2011 – Chichester

1 Room 1 Bed 2 Bed 3 Bed 4 Bed 5 Bed
As calculated currently £71.54 £134.43 £167.31 £206.54 £286.15 £392.31
30th Percentile £68.35 £126.92 £160.38 £195.00 £265.38 £265.38
Difference    £3.19 £7.51 £6.93 £11.54 £20.77 £126.93