Local Housing Allowance Benefit Rates Are Too High & Open to Fraud say Lettingfocus.com. What’s Your Experience?

In our patch and the patches of many other landlords it is clear that Local Housing Allowance (LHA) rates are some way above private market rents.
Here in our area the local authority pays tenants the equivalent of £996 per month for a 2 bed property. But if you tried letting to private tenants who are not in receipt of this benefit it is not easy to get much over £870 for that kind of property.
So, no surprise that recently I have seen a few ads on letting sites where it says something along the lines of, “If you’re interested in letting to tenants on DSS/ LHA and are willing to say the rent is higher than it really is when I make a claim so we can share out the extra, then please contact me.”
Mmmm, this sounds a bit like fraud to me.
So the over-high LHA rates are making sure the taxpayer is being well and truly ripped off by being a green light to a few rogue landlords and tenants to try to “ring” the system.
So, please tell me if you are in an area where LHA is well above local rents.
We would also be interested in hearing about any cases where you know this kind of fraud is taking place. You don’t have to give details – we would just be interested in how widespread this practice is.
Let me know by emailing david@lettingfocus.com
Oh - and you may be wondering why are LHA rates so high?
Is it just that the Broad Market Rental Areas (BMRB) set by the Rent Service are just too wide and encompass too many diverse areas within a single BMRB? Yes, I would say so.
Could it also be that the high rates be a bribe by the government to get landlords to let to tenants on LHA (because landlords don't like the new system in which LHA is now normally paid to the tenant).
I think so.
The simple (though costly) solution to all this would be more council houses, but maybe I'm still living in the 1970s.
Thanks to LS for the tip off on this story. Local presence can help!

MORE TIPS ON USING A LETTING AGENT
Tell the letting agent what kind of tenant you want and don’t want. Think about who you want as well as how you do tenant reference checks.
Will you accept students? Animals? How about Student animals? Will you accept DSS? What should the tenants’ minimum income be?
Why tell the agent all this? Well, if you muck an agent about he will rightly have nothing more to do with you. So, be straight and be upfront. And confirm every conversation in writing too.
Tell the letting agent you will want to see the application form the tenant completed and the Tenant Report the agent gets back from the referencing company. Insist on reserving the right to speak to a prospective tenant before you agree to the letting. But only reject a tenant if there is a good reason to do so.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the landlord experts. Read Property Articles.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - buy Property Investment Book. The new edition is for accidental and experienced landlords and is fully up to date with all the recent changes to tenancy deposit schemes, landlord registration and capital gains taxes.
I’m a property expert and property speaker - and I run the well known property blog that you are reading now.
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general advice on property letting to anyone looking to buy property for themselves or to let.
What’s unique about lettingfocus.com is that we offer independent unbiased advice on renting out property because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier.
Find out about some great deals we have arranged at our Property Affiliate page.
For landlords' insurance products such as rent guarantee cover and property insurance click on Ukinsurancenet. Don't forget to quote our reference code, LFOC, to get the best rates from them too.
Copyright: David Lawrenson 2009. This blog is updated roughly once a week.
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Landlords are smiling at lower buy to let mortgage rates by David Lawrenson of Letting Focus. Just as long as they don’t need to raise new money!

Every now and again some smarmy old wage-slave former work colleague rings me up and says something like, “Boy, you landlords must be suffering at the moment.”
I reply, “Well, if you call a huge downward hike in my borrowings, suffering, then yes, I guess I am.”
You see, things are not as bad for us wiley old landlords as many people (fed by a constant media diet of hapless novice landlords losing thousands on now worthless Thamesmead flats) like to claim they are.
Take mortgage rates for instance.
Lots of landlords, myself included, opted for Bank of England (BOE) base rate tracker mortgages. I also have some lifetime trackers – at .75% above base and .85% above BOE base for life. Oh how I recall baulking at the set up fees at the time – a whopping £650 - which of course, is a pittance of a mortgage fee in today’s terms where 2 or 3% of the loan amount is now the norm.
Quite a few of my tracker mortgage deals which weren’t for life are coming out of their “special discount periods” in 2009. But even then it won’t be so bad.
Why?
Well, many buy to let mortgage lenders said in their contracts that at the end of special discount periods, the mortgage rate would switch to a set amount above the Bank of England’s base rate.
Now, one of the biggest players in buy to let lending was the Mortgage Express. But in the case of many of the Mortgage Express’s deals it seems the default mortgage rate will be 1.75% above BOE base. And Mortgage Express was not alone in doing this either.
Now that kind of rate actually looks superb when compared to current Standard Variable Rates – which is the normal default mortgage rate for domestic residential (non buy to let) mortgages coming to the end of THEIR special discount or fixed rate period. These are typically 4% above base.

NEW MORTGAGE DEALS
The problem for us landlords – and here we are just like everyone else - is how to get new mortgage money to buy new property.
The new mortgage deals are at a margin of at least 3% above base rate even if you put in 30% equity and they come with huge “arrangement fees” too - a misnomer if ever there was one. And there are long redemption penalties to make sure you don’t walk away easily too.
And that is why, when it comes to buying property cash is king at the moment! So, if you are set on buying property now at “below market value” prices to take advantage of the credit crunch you’ll need a lot more cash to do it.

GOOD LETTING AGENTS
I was quoted last Saturday in the Daily Telegraph giving a summary of the year 2008 and my outlook for 2009. Click here to view my comments and those of other talking heads - http://propertyclub.telegraph.co.uk/Page/View/465/3
I would like to qualify my comments in “The Tory” by saying that most letting agents are very good – they do a good job and work very hard.
For those of you who have read my book you’ll know that I really save my venom for our mortgage lenders - the banks and the building societies – many of whom I think were guilty of lending recklessly on worthless new build flats from 2001 – 2005 and now not lending at all, even on good property and to good borrowers.
However, there are a few letting agents who are slapdash with your property, inclined to cut corners and with whom you have a good chance of ending up with the tenant from hell. They let down the whole industry. For more information on how to find a good letting agent, read my article on Choosing A Letting Agency
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ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the landlord and property letting advice experts.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - Buy Successful Property Letting - How to Make Money in Buy to Let.
The new edition is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on sale and rent back.
I’m an expert freelance property writer, property speaker and I run this well known property letting and investment blog
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property letting advice for anyone looking to buy property for themselves or to let out.
In my work as a consultant I help private individuals with any aspect of buying property or buy to let. What’s unique about lettingfocus.com is that we are independent property investment advisors because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
In my corporate consulting role I also advise banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my blog & find details of my networking, advice and property training programme at my website.Copyright: David Lawrenson 2008. This blog is updated once a week.
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Letting Agents and Estate Agents Can Be a Pain Outside the Big Cities

I have just bought a property in East Kent, an area that is set to do very well once the fast new train lines are built in three years and the area becomes more commutable. Plus, I expect this area will be increasingly “found” by second home owners over the next 5 to 10 years.
I will admit though, that whilst I wait for the capital growth to come through, in the interim I will have to put up with some pretty low rental yields. (The gap between net (after cost) rental yield and true full financing costs is about 1 to 2 per cent in this area even if one bargains really hard and buys really cheaply!)
But I’m confident capital growth will more than make up for this low rent in the long term.
I mention all this because one thing that always astounds me is how utterly unbusiness like estate agents can be outside big cities like London and Manchester.

Agents in London Do Return Calls Eventually
OK, I know many in London are not too good but at least most do return phone calls - eventually.
I actually signed up with 4 estate agents in this particular town to buy a property (sorry, can’t say exactly where it is) and only one bothered to get back in touch with me or ever sent me any property details. It is just incredible.
And as I am finding out, they are not too keen to make money the letting side too. For example, I contacted and left messages with two letting agents to put the house on with them on Saturday morning. It is now Monday night and they have still not got back in touch with me.
So, if you want to make some money head down the M2, turn right down the A2 and become an estate or letting agent locally. You’ll make a fortune.

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON

LettingFocus.com are the buy to let experts and I’m David Lawrenson, the author of “Successful Property Letting” – which has been the UK’s top selling property and buy to let book for the last 3 years.
We help landlords and property investors make money in property by coaching them in ways that work and which are of minimal risk.
I have been a landlord and property investor myself for over 25 years.

At LettingFocus we offer independent unbiased advice for landlords and property investors on a one to one mentoring and coaching basis as well as through occasional group seminars.

You should know that property clubs and property advice in the UK is still mainly unregulated and advice is often poor.
With no link to property firms, developers or bridging loan providers we at LettingFocus can give unbiased independent advice on where and what type of property to buy for investment, when to buy and how to buy property at a low price.
We also show you how to manage tenants properly and in ways that take up as little of your time as possible.

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