Local Housing Allowance
Encyclopedia
Local Housing Allowance was introduced on 7 April 2008 to provide Housing Benefit
entitlement
for tenants renting private sector accommodation in England and Wales. The LHA system introduced significant changes to the way Housing Benefit (HB) levels are restricted and how benefit is paid. It does not replace Housing Benefit - it is just a different way of calculating entitlement under the existing Housing Benefit scheme. Its aim is to improve levels of transparency when calculating Housing Benefit. Under LHA, a flat allowance is used to decide the eligible rent of all claimants with similar sized households living in a broad rental market area, rather than tying the level of benefit to the individual property. This is supposed to provide an incentive for those on Housing Benefit to find cheaper accommodation.
Local Housing Allowance was introduced starting in November 2003 as part of a wider review of Housing Benefit regulations in nine 'Pathfinder' or pilot areas: Blackpool, Brighton & Hove, Conwy, Coventry, Edinburgh, Leeds, Lewisham, North East Lincolnshire and Teignbridge - starting in Blackpool in 2003. From April 2005 a further nine councils started to implement the LHA, starting with Wandsworth, followed by East Riding, St Helens, Argyll and Bute, South Norfolk, Norwich, Pembrokeshire, Guildford and Salford.
An evaluation of the operation of the LHA was commissioned by the Department for Work and Pensions, and carried out by The Centre for Housing Policy, working as part of a consortium of universities, together with the National Centre for Social Research.
ed social security
benefit in the UK
that is intended to help people with low incomes pay for rented accommodation
. It is governed by various acts of Parliament - see, for example, The Social Security Contributions and Benefits Act 1992 . Operationally, the governing Regulations are statutory instruments arising from that Act. It is governed by one of two sets of regulations. For working age claimants it is governed by the "Housing Benefit Regulations 2006", but for those who have reached the qualifying age for Pension Credit, these are amended by The LHA and Information Sharing Regulations. The legislation to enable Local Housing Allowance was introduced under the Welfare Reform Act
which received Royal Assent in May 2007. This provided for the national application of the LHA regime on April 7, 2008 and the introduction of the Employment Support Allowance, which replaced Incapacity Benefit
.
The LHA system is a form of housing benefit
administered, along with council tax
benefit, by the local authority
in whose area the property being rented lies. For those areas where there is two-tier local government Housing Benefit is administered by the District or Borough council layer of local government.
Unlike the previous schemes, the claimant is normally unable to request that payments of benefits are made to their landlord, although they may be made to a third party. Exceptions may be made where the tenant has a history of not paying rent or is not sufficiently able to handle their affairs. Decisions on this are subject to a Council operated Safeguard Policy which may be requested from the Local Authority.
In all cases a landlord must be paid the rent (without any excess) if the tenant is more than 8 weeks in arrears. This will continue until the arrears are below 8 weeks.
LHA does not currently affect:
The BRMAs, which decide how much benefit can be paid, have been criticised by the House of Lords, in the Heffernan case (R(Heffernan) v The Rent Service [2008] UKHL 58) and by Shelter.
In the Pathfinder and Second Wave Group of Local Authorities (those detailed in the section above), any tenant who would have received less Housing Benefit under the LHA rules than under their previous scheme had their prior eligible rent protected until their LHA figure is higher than the benefit allowed under the previous scheme, after which time their eligible rent switchs to that set under the LHA rules.
Initially, where the LHA amount was more than the actual rent paid, the claimant was permitted to keep any excess Housing Benefit paid over and above their rental liability. The rules have been amended for the national roll out of LHA so that claimants will only be awarded a maximum LHA of £15 per week over and above their actual rent if they find a property cheaper than their applicable LHA rate. Any existing claimant in the Pathfinder/Second Wave Group authorities who receives more than this amount under the existing rules will also have this extra protected for 52 weeks, after which time the £15 maximum excess will apply. As part of the 2009 Budget, the Secretary of State for Work and Pensions proposed to amend the Housing Benefit regulations from 5 April 2010 so that the up to £15 weekly excess that customers can receive over and above their contractual rent is removed. This will mean that no claimant can receive more in Housing Benefit than they actually pay out in rent. This proposal would remove the incentives for tenants to seek less-expensive accommodation which was one of the primary rationales for the roll-out of Local Housing Allowance. Coupled with the removal of the supervisory role formerly played by the local rent officer, this raises questions about the long-term sustainability of the programme.
Where the landlord is a not for profit company (or voluntary organisation), a Registered Social Landlord or a Local Council that provides care support or supervision, they will be exempt from Local Housing Allowance and will fall under the housing benefit rules in operation prior to 2 January 1996.
The number of bedrooms needed is based on the number, age and gender of people who live in the claimant's household. The bedroom requirement is calculated as follows:
If the claimant is single and aged under 25, the category of property considered appropriate is a bedroom in shared accommodation. This means a property in which the claimant has the exclusive use of one bedroom, but shares one or more of a kitchen, a bathroom, a toilet or a room suitable for living in.
From 6 April 2009, the claimant cannot be treated as needing more than five bedrooms unless special rules for claimants living in properties with six or more bedrooms apply.
For definition of Broad Market Rental Area, see Concepts and terminology section above.
Housing Benefit
Housing Benefit is a means tested social security benefit in the UK that is intended to help meet Housing costs for rented accommodation. The primary legislation governing Housing Benefit is the Social Security Contributions and Benefits Act 1992. Operationally, the governing Regulations are...
entitlement
Entitlement
An entitlement is a guarantee of access to benefits based on established rights or by legislation. A "right" is itself an entitlement associated with a moral or social principle, such that an "entitlement" is a provision made in accordance with legal framework of a society...
for tenants renting private sector accommodation in England and Wales. The LHA system introduced significant changes to the way Housing Benefit (HB) levels are restricted and how benefit is paid. It does not replace Housing Benefit - it is just a different way of calculating entitlement under the existing Housing Benefit scheme. Its aim is to improve levels of transparency when calculating Housing Benefit. Under LHA, a flat allowance is used to decide the eligible rent of all claimants with similar sized households living in a broad rental market area, rather than tying the level of benefit to the individual property. This is supposed to provide an incentive for those on Housing Benefit to find cheaper accommodation.
Background
In October 2002 the Government announced the introduction of the Local Housing Allowance (LHA) to replace existing Housing Benefit rent restrictions for private tenants. Local Housing Allowance uses the same regulations as the existing scheme. LHA is means tested and tapered in exactly the same way as Housing Benefit - however, the eligible rent is fixed for a household of a given size in a given area. It is not normally restricted below the advertised LHA rate; if the tenant moves into accommodation that is cheaper than the LHA rate, the tenant gets to keep any difference (up to a maximum of £15).Local Housing Allowance was introduced starting in November 2003 as part of a wider review of Housing Benefit regulations in nine 'Pathfinder' or pilot areas: Blackpool, Brighton & Hove, Conwy, Coventry, Edinburgh, Leeds, Lewisham, North East Lincolnshire and Teignbridge - starting in Blackpool in 2003. From April 2005 a further nine councils started to implement the LHA, starting with Wandsworth, followed by East Riding, St Helens, Argyll and Bute, South Norfolk, Norwich, Pembrokeshire, Guildford and Salford.
An evaluation of the operation of the LHA was commissioned by the Department for Work and Pensions, and carried out by The Centre for Housing Policy, working as part of a consortium of universities, together with the National Centre for Social Research.
Operation of Local Housing Allowance
Housing Benefit is a means testMeans test
A means test is a determination of whether an individual or family is eligible for help from the government.- Canada :In Canada means tests are used for student finance , and "welfare" . They are not generally used for primary education and secondary education which are tax-funded...
ed social security
Social security
Social security is primarily a social insurance program providing social protection or protection against socially recognized conditions, including poverty, old age, disability, unemployment and others. Social security may refer to:...
benefit in the UK
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
that is intended to help people with low incomes pay for rented accommodation
Housing tenure
Housing tenure refers to the financial arrangements under which someone has the right to live in a house or apartment. The most frequent forms are tenancy, in which rent is paid to a landlord, and owner occupancy. Mixed forms of tenure are also possible....
. It is governed by various acts of Parliament - see, for example, The Social Security Contributions and Benefits Act 1992 . Operationally, the governing Regulations are statutory instruments arising from that Act. It is governed by one of two sets of regulations. For working age claimants it is governed by the "Housing Benefit Regulations 2006", but for those who have reached the qualifying age for Pension Credit, these are amended by The LHA and Information Sharing Regulations. The legislation to enable Local Housing Allowance was introduced under the Welfare Reform Act
Welfare Reform Act 2007
The Welfare Reform Act 2007 is an Act of the Parliament of the United Kingdom which alters the British social security system. A number of sections come into force two months after royal assent and the first commencement order made under the Act specified that section 31 came into force on 1...
which received Royal Assent in May 2007. This provided for the national application of the LHA regime on April 7, 2008 and the introduction of the Employment Support Allowance, which replaced Incapacity Benefit
Incapacity benefit
Incapacity Benefit is a United Kingdom state benefit that is paid to those below the State Pension age who cannot work because of illness or disability and have made National Insurance contributions. It is administered by Jobcentre Plus...
.
The LHA system is a form of housing benefit
Housing Benefit
Housing Benefit is a means tested social security benefit in the UK that is intended to help meet Housing costs for rented accommodation. The primary legislation governing Housing Benefit is the Social Security Contributions and Benefits Act 1992. Operationally, the governing Regulations are...
administered, along with council tax
Council tax
Council Tax is the system of local taxation used in England, Scotland and Wales to part fund the services provided by local government in each country. It was introduced in 1993 by the Local Government Finance Act 1992, as a successor to the unpopular Community Charge...
benefit, by the local authority
Local government in the United Kingdom
The pattern of local government in England is complex, with the distribution of functions varying according to the local arrangements. Legislation concerning local government in England is decided by the Parliament and Government of the United Kingdom, because England does not have a devolved...
in whose area the property being rented lies. For those areas where there is two-tier local government Housing Benefit is administered by the District or Borough council layer of local government.
Unlike the previous schemes, the claimant is normally unable to request that payments of benefits are made to their landlord, although they may be made to a third party. Exceptions may be made where the tenant has a history of not paying rent or is not sufficiently able to handle their affairs. Decisions on this are subject to a Council operated Safeguard Policy which may be requested from the Local Authority.
In all cases a landlord must be paid the rent (without any excess) if the tenant is more than 8 weeks in arrears. This will continue until the arrears are below 8 weeks.
LHA does not currently affect:
- council tenancies
- most tenancies with registered social landlords
- tenancies that started before 15 January 1989
- Benefit claims that are treated as under the rules in operation prior to 2 January 1996 because of care, support, or supervision being provided by certain categories of not for profit landlord.
Concepts and terminology
- Broad Market Rental Areas - A BRMA is an area 'within which a person could reasonably be expected to live having regard to facilities and services for the purposes of health, education, recreation, personal banking and shopping, taking account of the distance of travel by public and private transport, to and from facilities and services of the same type and similar standard.' It must contain a variety of residential property types held a variety of tenancies. It must also contain 'distinct areas of residential accommodation'.
The BRMAs, which decide how much benefit can be paid, have been criticised by the House of Lords, in the Heffernan case (R(Heffernan) v The Rent Service [2008] UKHL 58) and by Shelter.
Eligibility
Housing Benefit is available only to those who are treated as liable to pay rent, have permanent right to reside in the UK and pass the habitual residence test.Transition arrangements
In the main only new claims and tenants who move in to a private assured shorthold tenancy will be paid Local Housing Allowance.In the Pathfinder and Second Wave Group of Local Authorities (those detailed in the section above), any tenant who would have received less Housing Benefit under the LHA rules than under their previous scheme had their prior eligible rent protected until their LHA figure is higher than the benefit allowed under the previous scheme, after which time their eligible rent switchs to that set under the LHA rules.
Initially, where the LHA amount was more than the actual rent paid, the claimant was permitted to keep any excess Housing Benefit paid over and above their rental liability. The rules have been amended for the national roll out of LHA so that claimants will only be awarded a maximum LHA of £15 per week over and above their actual rent if they find a property cheaper than their applicable LHA rate. Any existing claimant in the Pathfinder/Second Wave Group authorities who receives more than this amount under the existing rules will also have this extra protected for 52 weeks, after which time the £15 maximum excess will apply. As part of the 2009 Budget, the Secretary of State for Work and Pensions proposed to amend the Housing Benefit regulations from 5 April 2010 so that the up to £15 weekly excess that customers can receive over and above their contractual rent is removed. This will mean that no claimant can receive more in Housing Benefit than they actually pay out in rent. This proposal would remove the incentives for tenants to seek less-expensive accommodation which was one of the primary rationales for the roll-out of Local Housing Allowance. Coupled with the removal of the supervisory role formerly played by the local rent officer, this raises questions about the long-term sustainability of the programme.
Where the landlord is a not for profit company (or voluntary organisation), a Registered Social Landlord or a Local Council that provides care support or supervision, they will be exempt from Local Housing Allowance and will fall under the housing benefit rules in operation prior to 2 January 1996.
Council and Housing Association tenants
The LHA does not currently apply to council tenants and most housing association tenants.Direct Payments
LHA will only be paid directly to the landlord if there are exceptional reasons - e.g. if the tenant is unable to handle their financial affairs, has a bad history of paying landlords or is more than 8 weeks in arrears. If the tenant is in arrears by more than 8 weeks, benefit must be paid to the landlord.LHA Rates
The amount of LHA awarded depends on:- the number of bedrooms deemed to be required by the claimant, and
- where they live (which determines the market level of rents within this area)
Bedroom Requirement
Local Housing Allowance will be calculated on the number of rooms the claimant's household needs not the number of rooms in the property or the amount of rent charged.The number of bedrooms needed is based on the number, age and gender of people who live in the claimant's household. The bedroom requirement is calculated as follows:
- one bedroom for the claimant and partner (over 16 - including same sex couples)
- one bedroom for other person aged 16 or over
- one bedroom for any two children of the same sex aged under 16
- one bedroom for any two children regardless of sex who are less than ten years old
- one bedroom for any other child
If the claimant is single and aged under 25, the category of property considered appropriate is a bedroom in shared accommodation. This means a property in which the claimant has the exclusive use of one bedroom, but shares one or more of a kitchen, a bathroom, a toilet or a room suitable for living in.
From 6 April 2009, the claimant cannot be treated as needing more than five bedrooms unless special rules for claimants living in properties with six or more bedrooms apply.
Market Rental Areas
The old way of setting fair rents for an area involved rent officers assessing each property, and a maximum Local Reference Rent set to reflect the maximum 'reasonable' rent for the area. Under LHA, Broad Market Rental Areas (BMRA) have been defined, and rent officers attempt to determine a median rent level which is intended to give Housing Benefit recipients access to roughly half the properties available to rent in any given area.For definition of Broad Market Rental Area, see Concepts and terminology section above.
Appeals
All Housing Benefit decisions of a Local Authority are subject to appeal through the Tribunals service. There is no direct right of appeal against the LHA rate awarded to an individual tenant, or the local rent level specified by the rent officer for the Broad Rental Market Areas. However, their decisions are open to Judicial Review and they have already been subject to challenge.Criticisms
Questions of fairness of the Local Housing Allowance system were raised when it was revealed in October 2008 that a family in the London borough of Ealing was receiving £150,000 a year in Local Housing Allowance to rent a 7 bedroom property. As the Brown government acknowledged in the 2009 Budget, families on benefit might be significantly better off than low income working families. "Indications [...] are that some claimants may be able to afford accommodation that is out of reach of working families on low incomes. Furthermore, costs of Housing Benefit have been rising above inflation despite static caseloads." The transition from the old housing benefit system to Local Housing Allowance significantly increased payments available for larger houses in some areas, as can be seen by comparing the Local Reference Rent calculated by the Valuation Office Agency, which served as the basis for determining the old housing benefit, against the current Local Housing Allowance. As an example, the Local Reference Rent for the largest type of house in the East Thames Valley locality in March 2009 was £328.85 per week, while the Local Housing Allowance for a similar property in the same area was £646.15 per week, an increase of £16,500 per year.See also
- Housing BenefitHousing BenefitHousing Benefit is a means tested social security benefit in the UK that is intended to help meet Housing costs for rented accommodation. The primary legislation governing Housing Benefit is the Social Security Contributions and Benefits Act 1992. Operationally, the governing Regulations are...
- Section 8 (housing)Section 8 (housing)Section 8 of the United States Housing Act of 1937 , as repeatedly amended, authorizes the payment of rental housing assistance to private landlords on behalf of approximately 3.1 million low-income households...
- analogous U.S. program - Low-Income Housing Tax CreditLow-Income Housing Tax CreditThe Low Income Housing Tax Credit is a dollar-for-dollar tax credit in the United States for affordable housing investments. It was created under the Tax Reform Act of 1986 that gives incentives for the utilization of private equity in the development of affordable housing aimed at low-income...
- U.S. housing subsidy program for new construction and rehab.
External links
- Shelter.org advice from ShelterShelter (charity)Shelter is a registered charity in England and Scotland that campaigns to end homelessness and bad housing. It gives advice, information and advocacy to people in need, and tackles the root causes of bad housing by lobbying government and local authorities for new laws and policies to improve the...
- LHA.net - produced by Guild of Residential Landlords