Here at Atwel James we appreciate the importance of housing benefit for many people and that includes both tenants and landlords. It is aimed to help those who are on a low income to pay their rent and it is paid by the local councils following strict rules put in place by the government.
It is only used to cover the rent and some service charges but it cannot be used to cover any additional costs.
There are a number of rules and regulations that are in place that directly affect the landlord and the way in which they receive their payments. Technically, there is only one Housing Benefit scheme but within this there are two systems known as Local Housing Allowance (LHA) and the Housing Benefit System which is soon to be known as Universal Credit throughout the UK.
Both systems share similar features and for landlords the main concern is how the benefit is calculated and how it is paid.
To receive Housing Benefit the following criteria must be met:
- UK resident
- Reside in the property that they are claiming for
- Must be in charge of rent payments
- Must have a low income
- Capital below £16,000 per annum
An application must be made to the local authority should the tenant with to claim Housing Benefit but it is also worth noting that some students can also claim Housing Benefit but only if they are studying part-time.
Local Housing Allowance (LHA)
To calculate the maximum amount that can be paid to a private tenant, the market rent prices in the area as well as the number of bedrooms is considered. Therefore, the amount received depends on the price of rent, the number of bedrooms as well as their income and savings. In some cases, the benefit will be affected by the cost of the rent and who is living with the tenant.
A maximum weekly LHA rate has been in place since 2011 and this is based on the number of bedrooms in the property.
- £250 for a one-bedroom property
- £290 for a two-bedroom property
- £340 for a three-bedroom property
- £400 for a four-bedroom property
In most cases, the cost is likely to be lower in a number of areas and therefore, the local rate is based around the cheapest 30% of properties located in the area. This means that there around 3 out of 10 properties are available to those who are on Housing Benefits.
The Housing Benefit System
This is applicable to those who have claimed Housing Benefit since before April 2008 and it also applies to council and social housing tenants. This means that although it is unusual, there is every possibility that it could be implemented for a rental situation involving a private landlord and tenant.
The following groups who are not covered by LHA are covered by the Housing Benefit system
- Those who live in council housing or housing association accommodation
- Those who live in Bed and Breakfast accommodation or hostels
- Those who live on houseboats or mobile homes
Under this system, the benefits are calculated by the amount of rent they pay as opposed to the cost of market rent or the number of bedrooms.
LHA and Landlords
Landlords are affected by two main regulations:
- The benefit is usually paid to the tenant directly and not to the landlord. Landlords may deem this as being risky because it removes a layer of security but it does mean that landlords are removed from potentially being asked to repay any benefits that may be overpaid.
In some cases, it is possible to have the rent paid to the landlord directly and this can only be done if the tenant has arrears of more than 8 weeks or if money is being taken out of the tenant’s income-related benefits to make up rent arrears and also in certain other circumstances.
- LHA is paid in arrears but many landlords may prefer to have the security of having rent paid in advance.
There are a number of factors that landlords should be aware of when it comes to Housing Benefit and buy-to-let mortgages. Some mortgage lenders do not allow landlords to let to tenants receiving housing benefits. A number of lenders have removed this restriction but others still may have it in place.
Atwel James understands the concerns surrounding benefit fraud. Therefore, we are here to assist landlords with any issues they may have. However, it is important that the tenant is made aware that should their circumstances change they should inform the local council. From a landlords perspective, if a tenancy agreement ends then the council should be informed so that they stop direct payments immediately.