Changes to LHA affect landlords

by Daniel Jones

Changes and cuts to the Local Housing Allowance (LHA) are being rolled out in April 2011, with the government introducing a £400-a-week cap on all housing benefits.

15% of landlords are reportedly worried about the introduction of these rental caps for housing benefit and have warned the coalition that they face large drops in their income.

But despite the changes starting in April, the LHA cap won’t affect landlords completely until next year. In 2010 the government announced a concession that existing claimants of housing benefits will be given until January 2012 before the lower thresholds for rents take effect. This gives tenants time to find alternative accommodation.  

In England & Wales, a limit will be introduced so that Local Housing Allowance doesn’t exceed:

  • £250 a week for a one bedroom property (including shared accommodation)
  • £290 a week for a two bedroom property
  • £340 a week for a three bedroom property
  • £400 a week for a four bedroom property

The maximum rate of housing benefit will be limited to the rate for a four bedroom property.

Housing benefit concerns for landlords

Some landlords are concerned that if their tenants are made redundant and give up their rental property, they won’t be able to charge the same rent if they have to find a new tenant.

With new caps on LHA rental values, there may be social tenants heading for the street causing downward price pressure across the board.

Also, in the past, some landlords have been happy to rent to tenants without doing any tenant checks. Landlords didn’t care too much about the tenant’s job security or ability to pay the rent, as they knew that local housing allowance could cover the rent if the tenant defaulted.

This change in the housing benefit rate will now make tenant referencing even more vital to landlords.

  • Landlord Services News: Check your tenants with our Tenant Checking Service

Published on: January 31, 2011

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