Local Housing Allowance 'failing'

14 December 2009

Local Housing Allowance report

Local Housing Allowance (LHA) is failing tenants and landlords in its current form, new research from Shelter shows today.

Shelter surveyed more than 450 LHA claimants for their report ‘For whose benefit?’ and the results reveal a series of systematic flaws with the implementation of LHA. This has left thousands of tenants struggling to manage their finances, with many in danger of losing their homes.

Shelter says LHA, a form of housing benefit which was introduced last year for tenants in private rented housing, is not fulfilling its original objectives and is in urgent need of reform.

We also say the Government must immediately restore choice to tenants about whether LHA is paid direct to them or to their landlord, and undertake its promised two year review of LHA to rectify the current problems.

Causing serious financial hardship 

LHA was designed to promote fairness, choice and personal responsibility for claimants. However, Shelter’s research shows that LHA in its current form is actually taking choice away from claimants and causing serious financial hardship, with 95 per cent of respondents struggling to manage their finances.

Shelter's director of policy and campaigns, Kay Boycott, said: 'LHA was intended to introduce desperately needed reform to housing benefit. While we support the original principles of the system, LHA is currently failing tenants and landlords. Our research shows the government must make urgent changes to LHA to ensure claimants do not continue to be disadvantaged.' 

In the survey:

  • 81 per cent of people said they found it fairly or very difficult to find a suitable home that was affordable.
  • 59 per cent of claimants said they had to make up shortfalls in their rent.
  • Many respondents were doing this by going without essentials such as food or sufficient heating.

Problems with calculating boundaries 

Shelter believes part of the reason for the financial hardship is due to many claimants being priced out of their local area because the boundaries used to calculate LHA – known as a Broad Rental Market Areas (BRMAs) - are too large.

This means claimants in expensive parts of BRMAs are being forced to move out or find extra cash to make up the huge shortfall in rents. However, in the cheapest parts of BRMAs, anecdotal evidence shows some landlords are hiking up rents when they know local housing allowance will pay out a higher rent than they are charging.

Ms Boycott said: 'Shelter is urging the Government to review the boundaries of the BRMAs to allow claimants more choice about where they live and give them greater access to affordable housing.'

Direct payments causing a quarter to fall into debt 

The LHA system was also intended to give claimants choice and promote financial responsibility by paying rent money directly into their bank accounts rather than directly to their landlord. However, Shelter’s research has found that this system has contributed to more than a quarter of claimants falling behind on their rent payments.

The majority of claimants who had experience of both payment methods said they would prefer to have the money paid directly to the landlord.

Evidence from landlords also shows that a growing number are refusing to let to LHA claimants because of rent arrears due to the new payment method. Shelter’s research shows 60% of respondents found it difficult to find landlords who are willing to let to them as LHA claimants.

Ms Boycott added: 'Under this system tenants have no choice about whether their benefit is paid to them or to their landlord. Many claimants are already struggling financially, so when they get rent money paid into their bank account there is a huge temptation to spend it on necessities such as food or bills rather than paying their rent.

'It is vital that the Government makes urgent changes to LHA to ensure claimants do not continue to be disadvantaged.' 

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