Whilst many people who rent in the private sector do not need any financial assistance in the form of benefits, many others do. The Local Housing Allowance is a flat rate allowance for different sizes of properties within a Broad Market Rental Area (BMRA) and comprised of  two or more distinct (but adjoining) areas of residential accommodation where someone could reasonably be expected to live. It takes into consideration facilities and services for the purposes of health, education, recreation, personal banking and shopping. The Rent Service (now part of the Valuation Office Agency) is responsible for determining BMRAs in England and the Rent Officer takes account of the distance of travel, (by public and private transport), to and from facilities and services of the same type and similar standard. It must also contain ‘residential premises of a variety of types, including such premises held on a variety of tenures’, plus ‘sufficient privately rented residential premises, to ensure that, in the rent officer’s opinion, the LHA for the area is representative of the rents that a landlord might reasonably be expected to obtain in that area’.

The main feature of Local Housing Allowance is the automatic direct payment of the benefit to the tenant who then becomes responsible for paying the rent to their landlord. The idea is to encourage tenants to not only manage their own money but to choose how they spend their income ahead of gaining employment, whether to rent larger properties or to spend less on housing, thereby increasing their available income.

Note: Tenants who were already on HB when LHA was implemented are not affected unless they changed addresses and moved into accommodation rented from a private landlord. Then they would be moved to LHA.

LHA is not paid to the following:

  1. Council tenants;
  2. Housing association tenants;
  3. Those living in bed and breakfast accommodation, caravans, mobile homes or house boats;
  4. A tenancy that commenced before 1989;
  5. The tenant lives somewhere that provides care, support or supervision (where instead Housing Benefit may be payable).

Pre-Let Tenancy Agreements

LHA is not granted until tenants have found a property and signed a pre-let tenancy agreement which commits a tenant to the agreement. This in turn reserves the tenancy along with confirmation of its basic terms. This is invaluable to the landlord because they can offer accommodation to a tenant before signing a Tenancy Agreement with them.  Another element of the pre-let tenancy agreement is that the landlord can have in writing who will be responsible for the payment of the utility bills as either parties can be responsible. The landlord could even choose to have the tenant pay for some of then but not others.

However, this pre-tenancy agreement only shows the maximum benefit that could be paid for that particular property as LHA is based on the broad market rental area. When this is calculated, the figure reached for the rent is a fixed amount and the maximum used, (even if the rent demanded by the landlord is actually higher).

The components of the calculation are based on:

  1. The location of the property, it’s size and composition;
  2. The number of people in the household;
  3. The number of bedrooms required, (up to a maximum of 4), whichever is the lower with the rules stating that the number of bedrooms required are determined as 1 bedroom for every adult couple, any other adult aged 16 or over, any two children of the same sex under 16, any two children regardless of their sex under the age of 10 or any other child aged under 16.

One bedroom is also needed for any carer of a disabled tenant who stays overnight but does not nomally live at the property. This requirement came into effect in April 2011 and means that if a property is rented with an extra bedroom for a carer then that extra cost will be taken into account, up to 4 bedrooms.

The council will  then establish what amount of LHA the tenants are entitled to, how much they can afford to pay towards the rent themselves from their income (if working) and any capital (savings) they have. If LHA covers the whole cost then the rent is considered affordable.

If it does not, then the tenant will be expected to make up the difference.

Once the payment of a deposit has been received and any requested references have been approved by the landlord, both parties will be able to sign a Tenancy Agreement.

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