Local Housing Allowance (LHA) – what is it and how is this different from Housing Benefit?
Local Housing Allowance is a new way of working out how much Housing Benefit private tenants will receive.
The Government has been operating a LHA pilot scheme in 18 different areas of the country over the last 3 to 4 years and now the Department for Work and Pensions (DWP) has decided to roll this out nationally from the 7th of April 2008.
The allowance uses a Local Reference Rent based on flat rate rents established in local areas by officers from The Rent Service and published on their web site for all parts of the country.
The amount of Housing Benefit actually received by private tenants will also depend upon the number of people living in the accommodation, their age, incomes, other personal circumstances and the number of rooms and certain types of amenities in the accommodation.
Housing Benefit (HB) has long been criticised as an extremely complex benefit that does little to promote personal responsibility and can act as a barrier to work.
From the private landlord’s viewpoint, although there are definite benefits from letting to HB tenants, currently it can take a long time to process claims leading to months of uncertainty. In addition, though in practice this is a rare occurrence, landlords with tenants on HB can be subject to payment claw-backs where a tenant’s circumstances has changed and they have not informed the authorities.
The objectives of the LHA system are to give tenants more responsibility for running their own lives, to encourage them to open bank accounts and to get them into an employment as opposed to an unemployment mode of living.
Controversially, for the landlord, this means rents will normally be paid direct to the tenant and not to the landlord as is often the case at present, unless under exceptional circumstances the tenant has a history of rent arrears and debt.
The tenant therefore is to be given more choice of types of accommodation, the option to top-up their rent if they want better accommodation, but most importantly, be made responsible for paying their own rent.
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