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Private Rented Sector Access Schemes - Landlords Should Take a New Look At Letting to Tenants on Local Housing Allowance

I have to admit, I’m the original landlord who preferred my tenants NOT to be on Local Housing Allowance (the now not so new version of Housing Benefit.)
Many years ago I had a tenant hailing from Guadeloupe who was getting housing benefit. (Guadeloupe as a department of France, presumably qualified him for getting this! Not sure I would get my rent paid in Guadeloupe or even France for that matter, but let’s leave that one to the “Daily Mail” for now.)
His rent was paid in the end, but it was always late and altogether it was quite a bit of hassle.
The tenant also had an odd habit of going out and leaving the front door open, which, as you might imagine, was a bit annoying to people in the neighbouring flats.
After that experience, in future, I only let to tenants who are working and had incomes.
And that’s why many landlords shy clear of letting to Benefit Tenants - it’s the fear of non payment of rent, administrative delays at the Town Hall combined perhaps with other prejudices regarding how their property might be looked after by such tenants.
Now, some of these prejudices are unfair – there are many good Benefit Tenants who pay their rent dutifully on time every time.
And on average “Benefit Tenants” stay longer too.
But, the prejudices exist all the same.

LHA – Using Landlords as Guinea Pigs
But what really got landlords cross was the decision by the current Government to replace Housing Benefit with the new system of Local Housing Allowance (or LHA as it is sometimes called) for landlords.
This was rolled out nationally in 2008.
LHA brought in a different way of calculating what was paid out - which we have looked at in other blog posts - but the key difference as far as private landlords were concerned, was that unless the tenant was deemed vulnerable, or was in 8 weeks arrears, the LHA would always be paid to the tenant.
This was a big change from the Housing Benefit system where it could be paid to the landlord if the tenant preferred it that way (and many did).
Now this change only affected private landlords. The lucky old councils and housing associations would still be paid direct under the old system of Housing Benefit!
In other words, as my friend Tom Entwistle of LandlordZone eloquently put it, “the private rented sector was being used as a guinea pig.”
The idea behind the change was to give tenants more financial responsibility: “Let them manage their own budgets” said the Government, loftily (possibly in the style of the ill fated Marie Antoinette - when she was discussing bread and its availability.)

Result – Chaos and Arrears for Some Landlords…….
Well, what’s happened as a result?
Well, many tenants spent the money they got from LHA on something other than the rent.
The result was arrears have risen, landlords have exited this part of the market in droves and both landlords groups and the likes of Shelter and Crisis are calling for a change whereby those tenants who don’t trust their own budgeting skills can once again opt to have the money paid direct to the landlord.
I think this policy reversal could happen eventually even under the current government who brought the original change in. (The Conservatives have already said they would reinstate the right for tenants to elect that payments of their LHA can be made direct to landlords.)
In the meantime, is LHA really that bad?
I’m not so sure.

. …An Opportunity for Other Landlords
I have always known that some landlords specialise in letting to tenants on LHA, and that’s not always because they are letting in areas where the entire population is on benefits either.
So why do they do it?
What do they know that other landlords don’t?
Over the past year, through the consultancy work I do with the public sector with local authorities and housing associations, helping them to understand and attract private landlords though things called “Private Rented Sector Access Schemes”, “Local Letting Agency Models” and the like, I have been surprised by the extent and level of help on offer to private landlords who choose to let to tenant on LHA.
I knew help was there, I just hadn't grasped the extent of it.
It varies by local authority but in many areas there is money to pay you rent in advance, to pay and safeguard deposits and occasionally even landlords finders’ fees.
Plus there is lots of help and advice from the local authority too.

New Rules
Recently, new rules have cut the actual time a tenant can be in arrears before the authorities can pay landlords direct.
And the definition of “Vulnerability” which also triggers direct payments has been eased.
Landlords should look at this sector again, but to make it work for you, you do need to be like the landlords who already let in this sector - very, very clued up on how the LHA system works.
Oh, and you need to be in a place where the local authority is landlord friendly and efficient at processing those LHA claims.

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MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of landlord information.
I’m David Lawrenson, a landlord and property investor myself for over 25 years and author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years.
I help private landlord investors (see more on this below) but these days I’m mainly a consultant to banks, local authorities, social housing providers and other organisations – helping them with their landlord facing or buy to let product strategies and services.
I also write for property websites and am regularly quoted by the media.
I have written articles, guides and documents on letting property and property investing for numerous publications including The Independent, The Telegraph and for quality landlord and property websites.

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For private landlords and other investors in the private rented sector, we do two London seminars each year.
We also find some spare time to help landlords and property investors by coaching them in how to make money in the private rented sector using ways that work, which are ethical, fair to tenants and which involve minimal risk to the investor.
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With no links to property firms, developers or bridging loan providers we can advise on where and what type of property to buy for investment and when to buy it. We also show you how to manage tenants properly.

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