The LHA system has obviously been a target for reform in the budget and in my opinion about time. The following are the major changes, some good and some bad:
From April 2011:
1. Local Housing Allowance levels will be restricted to the 4 bedroom rate; The 5 bedroom rate is scrapped, so landlords with larger properties will be affected.
2. A new upper limit will be introduced for each property size, with upper limits set at:
- £250 a week for a 1 bedroom property
- £290 a week for a 2 bedroom property
- £340 a week for a 3 bedroom property
- £400 a week for a 4 bedroom property or larger
This affects landlords further south where the LHA rates are a lot higher than they are in the north of the country.
3. As previously announced, the £15 weekly excess provision currently payable within the Local Housing Allowance rules will be removed as planned
In my opinion this is a good thing, we have had experience with parents, with 3 or 4 kids trying to cram their families into smaller houses so that they get the £15 “cash back”
The size criteria will be adjusted to provide for an additional bedroom for a non-resident carer where a disabled customer has an established need for overnight care.
From October 2011:
The Local Housing Allowance will be set at the 30th percentile of rents in each Broad Rental Market Area, rather than the median.
It can also be confirmed that the measure announced by the previous Government for the removal of the top 1% of rents in the market evidence for each bedroom size in the calculation of Local Housing Allowance rates will not now go ahead.
They will take all properties as evidence when calculating any LHA rates and rents
Non-Dependant Deductions – There will be staged increases in the rates of non-dependant deductions in the income-related benefits from April 2011. By April 2014, these increases will bring the rates to the level they would have been had they been fully uprated since 2001 to reflect growth in rents and council tax.
Longer term reform:
The Government announced further measures for the reform of Housing Benefit in the longer term, these will require primary legislation:
1. Local Housing Allowance: The Government also announced its intention to reform the way Local Housing Allowance rates are set in future and, from 2013/14 onwards, Local Housing Allowance rates will be uprated on the basis of the Consumer Prices Index, rather than on the basis of local rents. This means it will be lower!
2. Social rented sector: From April 2013, Housing Benefit for working age social rented sector customers will be restricted for those who are occupying a larger property than their household size and structure would warrant. We will consult on the detailed design of this policy. Just to stop large families moving into smaller properties.
When this sort of reform is mentioned I think they might mean overhaul – Better late than never
3. Time limiting: Housing Benefit customers who are claiming Jobseeker’s Allowance will only receive their full Housing Benefit award for a period of 12 months. After that period, their benefit will be reduced by 10%, and they will continue to be ineligible for the full out of work Housing Benefit rate until they have left the benefit system and been in work for a period.
This has not been thought through at all. Landlords can simply serve notice to people and evict them if they are to get a lower housing benefit. Tenants with children should not be affected
4. Discretionary Housing Payments: In order to provide additional support for the hardest cases, the sum allocated by Government for Discretionary Housing Payments will increase by £10 million in 2011 and by £40 million a year thereafter. This is aimed at giving more flexibility to local authorities to help a greater number of new and existing customers who face a shortfall in rent because of changes to the Housing Benefit rules.
Good news – but they will save much more by scrapping the 5 bedroom rate and putting an upper cap on the 1,2,3,4 bedroom rates. So it’s a case of saving a lot but giving back a little
Finally, the Government also announced its intention to make changes to the way we pay support for mortgage interest costs and has decided to apply the Bank of England published average mortgage rate as the standard interest rate from October. The Bank of England published average mortgage rate is currently 3.67%.
It is quite a complicated subject, so if any one wants further clarification please let me know.
Over all not that bad, could have been a lot worse. let’s hope when they eventually reform the LHA a few more things will change
Cheers
John Paul
The LHA Expert
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