Lime Legal

Not fit for purpose

Published 21 October 2023

It’s not just tenants who are unhappy with the workings of the local housing allowance scheme, landlords are also clamouring for change, reports Vincenzo Rampulla

H omeowners struggling to pay the mortgage – and tenants who have been renting properties for years – are being threatened with repossession after losing their jobs.

A year into the local housing allowance (LHA) scheme running nationally, there’s a growing consensus that the scheme isn’t working well for tenants and private sector landlords.

More than four million people receive housing benefit – about £4.5 billion of the £15.7 billion the government spent on housing benefit in 2017/08 was in the private rented sector.

The government continues to exclaim that LHA is a success. Yet those organisations that work with the most affected people – tenants and landlords – continually hear how problematic LHA has become.

The fear is that those in desperate need of housing will be left with even less housing choice because of the way that LHA disincentivises landlords in this part of the rental market.

With a great number of landlords contacting the National Landlords Association about the problem, we can easily see that, even after just one year, LHA was having a broadly negative impact. In April, we published the results of research into LHA highlighting the truth about the new system. It made for some quite difficult reading.

The majority, 54 per cent, of landlords said that they were willing to rent to benefit tenants, with only 33 per cent saying they were not.

Landlords said they were willing to consider housing benefit tenants on a case-by-case basis. And where landlords said that they weren’t willing to take on benefit tenants, the reasons were complex.

Many landlords had mortgages or insurance cover that specifically stipulated ‘no housing benefit tenants’, others used letting agents who did not allow for housing benefit tenants. But the majority of landlords said it was the fear of rent arrears that made them most wary of benefit tenants.

Just over half of the landlords who responded told us that the introduction of the new system had made them less likely to take on benefit tenants, or that they had failed to be convinced that this was a good opportunity to start renting to LHA tenants. Four out of ten landlords who already had tenants on LHA said they were less likely to rent new housing benefit tenants because of their experience of LHA.

The LHA has come under attack in the tabloid press with stories about the level of allowance paid to the landlords of tenants in large properties

There was a clear sense from landlords that their experience had made them feel that it was not worth the effort. So, rather than opening up the private rented sector for tenants, giving them greater choice and purchase power, LHA is actually undermining LHA tenants’ abilities to access a wider range of properties.

The problems landlords are experiencing are not just to do with rent arrears. Just as worrying are the problems that landlords experience when trying to help tenants access their housing benefit. One landlord said their tenant had been told they needed to open a bank account in order to have their LHA paid into it.

After a battle with their local bank to open up an account, despite the understandable situation of the tenant not having a valid passport, the council told the tenant that they would need to show them three months of bank statements before payments could be made into the account. This is clearly unworkable.

Many landlords have seen tenants abandon properties before the end of their tenancy, effectively running away with the last month’s rent before starting a new claim on a different property elsewhere in the area because local authorities are not monitoring this sort of fraudulent behaviour.

If the administration of LHA by local authorities has caused problems for landlords, the way that LHA is calculated through the use of broad market rental areas (BMRA) has ensured that LHA claimants face a ‘postcode lottery’. The use of larger BRMA to set the level of LHA has often meant that the median rent in these larger areas do not fairly reflect different rental markets and the full range of rents that can exist within areas.

The use of BRMA has aroused criticism from organisations such as Shelter, Citizens Advice and the British Property Federation.

Whether the government has failed to use BRMA as a crude way of readjusting rental markets in certain areas, or failed to acknowledge the costs that landlords are having to bear from those who can abuse the system too easily, LHA is clearly in need of repair.

It should be obvious that local authorities lie at the centre of the solution. Better engagement with landlords taking on LHA tenants, so that problems are dealt with quickly and before they turn into crises.

Specific measures could include greater use of direct payments to landlords to deal with rent arrears before eight weeks of arrears have been accrued; help for local authorities and landlords in identifying vulnerable claimants and providing extra support; and a direct facilities for landlords where problems do occur. We wait to see how much appetite for change exists.

Vincenzo Rampulla is public affairs officer of the National Landlords Association.