Local Housing Allowance and More Changes to Policy
David Lawrenson of www.LettingFocus.com explains the “work arounds” and the sleights of hand involved in the latest changes in Local Housing Allowance funding.
The government has just voted to cap rises in several benefits, including local housing allowance (LHA) base rates, at the lower of 1% or the 30th percentile of local rents – which means that in practice, in most areas, LHA is being uncoupled from the general local levels of rents.
30% of the savings thus made will be reinvested in exempting areas identified as high cost or subject to high rent inflation, (though it is not yet clear how this will work in practice).
The National Landlords Association (NLA) observes it thus:
“Not long ago many landlords were convinced to lower rents to a rate that could be met by the [local reference rent] in return for a guarantee of direct payment of rent. However, with the promise of direct payment to landlords very likely to be removed next year [once Universal Credit rolls out], those same landlords will likely feel the need to increase their rent back to market level simply to cover the increased risk that the rent will not be paid over [by the tenant-recipient]”.
Private Landlords will Continue to Exit
I would go further than the NLA and make the case that many of these landlords (the few remaining landlords who still do LHA lets) will likely stop letting their properties to the LHA dependent end of market altogether, especially in places like London where a thriving non-LHA tenant alternative exists.
The madness of all this is that meanwhile we increasingly see local authorities, especially in London, being given central government money to spend, in part, on giving incentives to try to get landlords to let their properties to tenants on LHA. Indeed the same NLA magazine issue reports how the London Borough of Barnet is offering landlords “incentives of up to £3,200 to take on LHA tenants”. Many other London councils do the same and I have no doubt we will see more of this.
Sleights of Hand
So, what the government taketh away with one hand, the government also giveth with the other.
It does this because it knows full well it can not afford ever more people to be homeless on the streets or in Bed and Breakfast accommodation (which costs a lot more than accommodation provided by private landlords does).
Why the sleights of hand? Why not just set LHA at a rate to track the level of local rents and allow tenants to continue to nominate their landlords to receive LHA?
Well, politically this is important, because whilst the media will probably not notice the grants and subsidies to local councils that serve to prop up the crumbling edifice, they most certainly did notice the mythologised (Afghan) family in Acton whose landlord was allegedly being paid £150K a year in LHA.
That story, from sometime back in 2008, of course, led to a national outcry and the rolling back of the Housing Benefit/ LHA monster. It led to the cutting of LHA rates and the curtailing of direct payments to private landlords in favour of giving tenants responsibility for their own financial affairs (even though many tenants do not want this).
Control of the Media Story
By whatever means it takes, it seems the government has decided that stories like the landlord getting £150K from one family’s LHA must not be allowed to reappear again.
If Peter can be robbed to pay Paul and no one notices (especially the tabloids) and the whole system continues to appear to creak along, then the objective will have been achieved.
It seems that both the Labour administration (who initially moved to stop direct payments to landlords whilst generously allowing the councils lots of workarounds), and the Coalition (who have gone even further) are signed up to the same policy of obfuscation.
I think we deserve better.
Meanwhile, private landlords who are still keen to let to the LHA-dependent will have to figure out if local incentives exist and if they outweigh the cuts in the overall LHA rate.
Services to Businesses and the Public Sector
We advise a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors and insurers. We help them develop and improve their services and products for private landlords. We also write for property portals, speak at property events and we are regularly quoted by the media.
Services for Private Landlords
We help landlords and property investors by showing them how to make money in the private rented sector using ways which are fair to tenants and which involve minimal risk.
HOME PAGE OF THIS BLOG: Blog
THE HOME PAGE OF THE MAIN SITE: http://www.LettingFocus.com
For general information on our CONSULTING SERVICES and also to find a small sample of links to where our comments have been featured in the National Press: Consultancy and Seminars
For ONE TO ONE PRIVATE CONSULTANCY FOR PRIVATE LANDLORDS: Property Advice
CLIENT TESTIMONIALS – from both organisations and private landlords: Testimonials
BUY “SUCCESSFUL PROPERTY LETTING”
Our book is the highest selling property book in the UK. Click here to Find Out More and Buy it at Amazon. If you are from an organisation and would like to bulk buy, please ask us for special rates.
TO JOIN OUR FREE NEWSLETTER Mailing which goes to over 3,500 people (as at Jan 2013) just send an email to [email protected]
We do not spam or sell our mailing list to advertisers, though we occasionally mail landlords about good products from third parties. Please put us on your “white list” to ensure you receive our emails.
OFFERS ON PRODUCTS FOR LANDLORDS and TO ADVERTISE YOUR PRODUCTS to LANDLORDS: Landlords Resources
PERUSE LAST TEN BLOGS BY GETTING THE RSS FEED: Click Here
NEXT SEMINAR EVENTS FOR LANDLORDS: We are now running some one off events in different cities around the UK: Landlord and Property Letting Seminar
Copyright of Blog: David Lawrenson 2013. Please link to us here or quote us. We actively pursue copyright infringements. The blog is updated once a week.
TWITTER PAGE Thoughts on property, personal finance, plus a lot of other random things: Twitter
LINK TO THIS BLOG OR TO OUR WEBSITE