New Local Housing Allowance Rates How the New LHA Rates Have Huge Implications for House Prices and Rents Everywhere

Even landlords who don’t let to benefit dependent tenants and tenants who don’t get state aid to pay their rent will be affected by the capping of Local Housing Allowance (LHA) rates.

As a result of the changes to LHA rates, there could be some potentially big changes to local house prices and rents.

Lots of Heat

The whole issue of the government’s reform of the levels of Local Housing Allowance rates has raised a lot of heat on various discussion forums. In some of these, private landlords are cast as the villains of the piece but often it is the last government who gets the flak for their approach to LHA.

The arguments usually go something like this.

Someone – who is usually keen to point out they are a taxpayer – will say, “I cannot afford to live in say, Westminster borough myself, so why should I have to pay out of my taxes for those on benefits to live in such locations?” They will point to the figures that show that the average Greater London rent in the private rented sector is £403pw for a 4 bed and £184pw for a one bed as proof that cheaper accommodation is available, adding something along the lines of, “Hey, cheaper accommodation IS available below the new capped LHA rates – you’ll just have to move for it, like people have to move when they need a new job.”

The very real concern is that as a result of the new caps, some vulnerable people will be forced to move from their old homes in these expensive areas to other areas – one has horror visions of armies of old grandmothers with disabilities and young Mums being forcibly moved to cheaper boroughs further out.

Those who may be asked to move to areas where rents are cheaper will rightly point out that it was not they who sold off the council housing stock so it should not be them who have to suffer. To this, the “taxpayer” inevitably replies, “Sure, and it was the bankers who caused the current economic crisis, but us taxpayers are going to have to pay for that too through higher taxes. It’s a shame you now have to move out of expensive Westminster but that’s life. Welcome to the real world.”

And so the argument goes on.

Big Hit

Landlords letting in central London and other “expensive-to-rent-in” UK boroughs to LHA dependent tenants, whose LHA rates will be hit by the new capped rates will soon face a big hit on LHA rates payable once the new rates are implemented next year. (In places like Westminster we are talking huge numbers of LHA dependent tenants) And tenants in these areas will struggle to make up the difference once rates are cut to below the new cap.

So what will these landlords do? Well, they will have to 1) Accept reduced rents from their old LHA tenants but keep going or 2) Give notice to the LHA tenants and let to non LHA dependent tenants instead or 3) Sell up.

What will the tenants do?  Well, if they cannot afford to make up the difference somehow, it looks like they will have to move to different boroughs where they can still get the accommodation they need at below the new LHA cap.

If large numbers do this I can only see additional demand placed on housing in neighbouring boroughs which (for now) have cheaper rents.

So landlords with existing residential property in places like Southwark, Lewisham and Haringey could well see rental demand rise strongly and as a result, house prices going up becuase even if they don’t currently let to LHA dependent tenants, the effect of that extra demand will be to push rents up.

In more expensive to rent in boroughs like Westminster, the opposite will probably happen.

In next buy cheap viagra online uk weeks’ blog I’ll show how these changes have huge implications for both “expensive-to-rent-in-boroughs” as well as neighbouring cheaper ones and I’ll look at what the local authorities should be doing now to plan for this.

Useful Links for Landlords

This site, run by the London Mayor shows the level of private rented sector rents in different parts of London (using VOA data): http://www.london.gov.uk/rents/

Here, using this site, you can what a tenant can get under LHA in different areas for different bedroom sizes:

https://lha-direct.voa.gov.uk/Secure/LHASearchIntro.aspx

Here are the Likely new rates from next year:

http://www.voa.gov.uk/LHADirect/LHA-emergency-budget-news-2010.htm

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