Garry Heil, the National Landlord Association’s Local Representative for the North West, gives us his advice on working with Local Housing Allowance (LHA) tenants…
Local Housing Allowance is to change dramatically in the next three years and it is important that landlords understand what impacts this will have on them and their tenants.
As a result of the Welfare Reform Act, all benefit recipients – including LHA – will soon be in receipt of Universal Credit instead of their current benefits package.
Universal Credit, which will be introduced in October 2013 for new claimants and from April 2014 for existing claimants, combines all benefit entitlement into one, wage-like payment. This new system will cap the benefit amount paid to each household at £26,000 per year.
At present, LHA varies according to the area and the subsequent rental costs. Under Universal Credit, capping the amount per household per year to £26,000 could mean that many tenants receive hundreds of pounds less in benefits per month and may no longer to be able to afford their current rental arrangements.
The changes to LHA are likely to have a significant impact on tenants living in high rent areas, particularly on families. In turn, the landlords are likely to see more instances of rental arrears.
My advice to landlords is that they work with their tenants, taking time to talk through the changes, discussing how they plan to manage their finances and helping tenants make arrangements for a bank account, if necessary.
Tenants may find credit unions helpful when setting up bank accounts and arranging for standing orders and direct debits. These outgoings can be deducted from the bank account as soon as the benefit payment is received, helping the tenant to manage their funds when Universal Credit is introduced.
It is essential that landlords are aware of the pending changes and understand that their tenants may be receiving significantly less money as a result of Universal Credit. Ahead of its introduction, landlords should work with their local council to plan how they can work together during the changeover.
And if, when Universal Credit is introduced, tenants do begin to struggle with their rent, landlords should work with them, perhaps arranging a short-term reduced rent or a repayment plan. Ending a tenancy should only ever be a last resort.
And for those landlords who currently don’t have LHA tenants, you’d be wise to keep informed of the changes – in this economic environment all tenants could find themselves needing to turn to Universal Credit for support.
For more information on the changes to Local Housing Allowance, visit http://www.landlords.org.uk/news-campaigns/campaigns/local-housing-allowance and attend your next NLA branch meeting for the latest update.