There are currently two systems of housing benefit in use. The old system, called Rent Allowance (RA), is being phased out and all new claims are now called Local Housing Allowance (LHA). Existing claims for RA will continue for the foreseeable future until there is a break in the claim. Many of the rules are similar but there are differences.
The main differences between the systems are that LHA is principally paid directly to tenants where as RA can be paid to the landlord at the tenant’s request. Also LHA makes no consideration of the size or value of a given property (removing the previous need for The Rent Service to visit the property). Where this section talks about RA it refers only to the old system, where the manual refers to LHA it refers only to the new system and where the manual refers to housing benefit it generally refers to both systems.
Housing benefit is for people on low incomes, including unemployed people, who have to pay rent. The tenant has to complete an application form, which is available from the local authority, or in some areas application is initially by telephone to Jobcentre Plus.
Tenants Have to Provide Information and Proof of:
• their income, and any savings;
• their identity and sometimes details of their immigration status in the UK;
• the rent to be paid (usually a written tenancy agreement is sufficient); and
• name and address of the landlord/agent.
Most local authorities aim to process housing benefit claims within 14 days from receipt of all the appropriate documentation they have requested.
They cannot pay a claim until they have all the information they need.
Regrettably, some local authorities fall short of the 14 day target, which can cause hardship and problems for both tenants and landlords. Sometimes delays occur if a tenant does not fully understand what is required. Some landlords are willing to help tenants with their applications, whilst others might form a view about a tenant’s suitability if they are applying for housing benefit.
Conditions for Rent Allowance and Local Housing Allowance
As housing benefit is means tested, (dependent upon income and savings) some tenants may have to pay part of the rent themselves.
Some tenants, such as most full time students, some people only allowed to stay temporarily in the country, or people who have just arrived, will not be eligible to receive housing benefit.
Usually housing benefit cannot be paid for a tenant who is a close relative of the landlord: the arrangement must be that of a genuine arms-length commercial transaction.
Setting the Rent
If the rent covers the cost of gas and electricity, Rent Allowance will be reduced so that the tenant must pay for these items. This also applies to water rates and any meals or other services the landlord may provide.
For Rent Allowance only, accommodation in the private rented sector where the tenant applies for Rent Allowance is valued by the Rent Service.
If the rent is more than the Broad Market Rental Area (average) for similar size accommodation in the locality, Rent Allowance will not be able to pay the full rent. If the accommodation is larger than the tenant needs, for example if a couple rent a two bedroom flat, Rent Allowance will also not pay the full rent.
If a prospective tenant intends to claim Rent Allowance, both the landlord and the tenant can check whether the rent will be regarded as reasonable before any agreement is signed. Both need to complete a Pre-Tenancy Determination application form and send it or take it to the Housing Benefit Office covering the area in which the property is located. They will forward it to the Rent Service who will then value the property and send their decision to the landlord, the tenant and to the council. The target for a decision is seven working days.
With Local Housing Allowance the Broad Market Rental Areas are published so it is fairly easy to find the basic amount paid within that area. The amounts are also available from the local authority. They will vary according to the locality.
For Local Housing Allowance if the contractual rent is more than £15 per week less than the Broad Market Rental Area for the size of property to which the tenant is entitled, then the surplus is capped to a maximum of £15 per week. This potentially allows a tenant to keep just over £60 a month if they choose a low cost property. In many areas the system is encouraging landlords to raise the rent to £15 below the Broad Market Rental Area, regardless of the condition or previous value. The £15 level will change from April 2010 and should be checked after that time.
Finally, there are different rules for single tenants aged under 25. Housing benefit will only pay an amount based on the average rent for a room in a shared house, even if the tenant is living in a self contained flat (this is called the single room rent). This does not apply to couples under 25 or families.
In any event, the agreed contractual rent is the rent due from the tenant, and any shortfall in housing benefit payments should also be collected. If there is likely to be a shortfall, it is advisable to check the tenant’s ability to pay it before letting the property. Enforcing the terms of a contract is likely to be a fruitless endeavour where the tenant has no money.
Payments and Rent Arrears
Councils usually pay either by sending the tenant a cheque or crediting their bank account every two weeks (this is the norm for Local Housing Allowance) or by paying the landlord every four weeks in arrears (common for Rent Allowance but not allowed simply because the landlord wants it under Local Housing Allowance rules). Direct payment of Local Housing Allowance is still possible for vulnerable tenants and those owing at least eight weeks of rent. This may be by cheque on request; Many local authorities will pay by Bank Automated Clearing System (BACS) transfer.
Where a tenant is in receipt of housing benefit, and is more than eight weeks in arrears, the landlord can request the housing benefit be paid directly to the landlord instead of to the tenant. The local authority should be contacted to arrange this.
Note: the arrears need not have existed for a calendar eight weeks. For example, if the contract requires payments per calendar month in advance, if two consecutive payments were missed, there would be more than eight weeks arrears after one month and one day. It is possible for any surplus LHA to be used to pay off arrears, but if the tenant leaves the property and then arrears cannot be recovered from the LHA.
The local authority will do its best to advise landlords, who should note that all benefit claims are confidential. Information about a tenant’s claim is unlikely to be exchanged with a landlord unless the tenant has given express written permission for this.
It is sometimes difficult to work out exactly what the situation is regarding the tenant’s rent account if rent is payable monthly, but the benefit is paid out on a weekly basis. It is important to remember that the method of payment by the benefit office, and the assessment of benefit due, does not alter the tenant’s contractual obligations.”
It is a good idea to record the payments in the context of the rent payment dates, as shown in the example below.
Here, the tenant has not been making up the shortfall and the arrears will soon reach a level to trigger eviction on the basis of serious rent arrears.
A landlord wishing to proceed on this basis would have to provide the court with a schedule of arrears in this format. In this example, the rent is billed every month but a payment is received every four weeks for only four weeks’ worth of rent. In this situation, there will be 12 monthly billing periods in the year but there will be 13 periods of four weeks. To avoid potential confusion, the rent may be billed to the tenant on an agreed weekly-based schedule (or fortnightly or four-weekly). Some landlords find that agreeing a four-weekly rent payment plan is easier to keep track of than a monthly one.
