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Local Housing Allowances and Housing Benefit and its Impact on Landlords by David Lawrenson of LettingFocus.com

I recently had an interesting email discourse with a tenant who was very upset that many landlords insist on guarantors and two months rent before they will take people on Local Housing Allowance, the new name for Housing Benefit.
I replied that I had some sympathy and that personally I would accept someone on benefits but in the absence of any evidence of employment income and a guarantor I would want to see very strong proof from a former landlord that rent had been paid on time.
I pointed out that the reason why landlords are nervous about people on benefit and who have no guarantor is because many have had a negative experience in the past.
In the past the govt could pay allowances (or housing benefit as it then was) direct to landlords. Now, in their wisdom, they have decided to pay this direct to the tenant (in most cases)
And that’s made landlords nervous because whilst there are many good people in receipt of housing benefits, there are unfortunately some who receive the local housing allowance and go and spend it on things other than paying the rent – like the bookies.
In the worst case they could stay for months until evicted leaving the landlord with a big bill, which of course he has no way of recovering because the defaulting tenant will usually have no assets.

LACK OF HOUSING PROVISION IS NOT LANDLORDS FAULT
I suggested the tenant’s issue should surely be with past governments who have failed to make adequate housing provision at the lower end of the market. They are the ones who sold off the council houses for goodness sake!
And the current govt too are hardly at fault, because they changed the rules on local housing allowance – i.e. they stopped paying it direct to landlords and then expected landlords to take on the increased risk of tenant default at no cost.
Some landlords had told the government what they thought of that by exiting this end of the market or demanding guarantors.
Sadly, it was the honest tenants who didn’t chuck their local housing allowance away on booze and the bookies who were now suffering as a result of this shift in govt policy.

NOT ALL BAD FOR LANDLORDS
But it’s not all bad for landlords.
If the tenant doesn’t pay over his LHA for two months, the landlord can still apply to have it paid direct. And for some vulnerable tenants with social problems it’s still possible to have the money paid direct to the landlord from the off.
In some areas the LHA rates are actually pretty generous.
One of the landlords I’m in touch with in Rochdale says it is far too generous compared to local rent levels - and as such hardly encourages people to come off benefits and get back into work.

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ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the property letting experts. Read Articles for Landlords.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - buy Landlords 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, HMOs, licensing, capital gains taxes and it has new sections on sale and rent back.
I’m an expert property writer and property speaker - and I run the well known landlords 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 property letting advice and consulting to anyone looking to buy property for themselves or to let out. I can 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 these sources.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
Find out about some great deals we have arranged at our Landlords Resources page.
Copyright: David Lawrenson 2009. This blog is updated roughly once a week.
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