Housing Benefit has often been criticised as an overly complex benefit that does not promote self responsibility and can even act as a deterrent to working. So with a view to improving the current system the government is introducing some major changes.
The Local Housing Allowance is a new way of working out how much Housing Benefit private tenants will receive and has been undergoing trials in 18 different areas of the country. From the 7th April 2008, the system will be rolled out across all of England and Wales.
From the private landlord’s viewpoint this new system carries some mixed signals. Although there are definite benefits from letting to Housing Benefit tenants there are an equal number of problems. Currently it can take a long time to process claims leading to uncertainty about how much benefit a tenant is going to receive, if indeed they are going to receive any at all. On the plus side it is common practice for local authorities to pay the Housing Benefit directly to the landlord giving some piece of mind.
In theory landlords with tenants on Housing Benefit can be subject to payment claw-backs where a tenant’s circumstances have changed and authorities have not been informed, although this is rarely enforced.
One of the main objectives of the introduction of the Local Housing Allowance system is to give tenants more responsibility for running their own lives, to encourage them to open bank accounts and to get them into an employment.
More worryingly for the landlord the introduction of the Local Housing Allowance will mean that rents will in future be paid direct to the tenant and not to the landlord, unless the tenant has a history of rent arrears and debt. During the trials it was found that a tenant had to actually be in arrears with their current landlord for this to happen. Simply proving that a tenant had a history of rent arrears was not sufficient to trigger payments to the landlord or agent.
Many landlords are sceptical and concerned about this change and fear future rent money will be used for other other living expenses instead of rent. The new system is intended to give the tenant more choice of where they live and the types of accommodation open to them. As per the current Housing Benefit system the option for the tenant to top-up their rent exists.
The Housing Benefit entitlement rules are not about change. Housing Benefit will still depend on personal circumstance: age, incomes, savings etc. although it is hoped that the Local Housing Allowance process should speed-up decisions on whether or not a tenant gets the benefits and how much.
Speed of decision making has often been cited as the major stumbling block for many landlords accepting Housing Benefit so any improvement is to be welcomed.
The local authority housing officer will publish reference rents for their local area which will give landlords and tenants a quicker way of determining likely Housing benefit payments meaning that they will no longer need to wait for Rent Offer assessment visits.