Talking Point: Housing benefit reductions - not all doom and gloom
As millions of people who claim housing benefit prepare to have their allowances capped, here at ilkestonproperty.com we have been inundated with enquiries from landlords who are worried about how the impact of the new reductions will effect on both them and their Local Housing Allowance (LHA) tenants.
Ministers had planned to cap allowances from Next April onwards, but recent reports indicate that existing claimants may have until January 2012 to adjust their circumstances in advance of any change being made, despite The Department for Work and Pensions failing to confirm the move.
Of course the main concern from both sides is that LHA tenants will struggle to pay their rent moving forwards as the new limits on their benefit entitlement are introduced. In effect, these cuts will mean that the new limits are £250 a week for a one-bedroom home, £290 for a two-bed, £340 for a three-bed and £400 for a four-bed home.
I do think that landlords across the Midlands should be keeping abreast of the imminent changes to Local Housing Allowance (LHA), but it isn’t all doom and gloom.
Firstly, any reduction in housing benefit that the tenant may experience can be made up from other benefits that the tenant will receive from other sources. This means that being able to top up any rents they are contracted to pay under their tenancy agreements, should not be a major problem.
What’s more, from 1 April 2011 the rent can be paid directly to the landlord for cases assessed under the Local Housing Allowance arrangements. I think that the direct payment provisions are significant to landlords, as the government is in effect doing a u-turn on the subject of direct payment to landlords.
As long as the landlord tells the benefit office that in they will consider a local housing allowance tenant, as long as they receive the rent direct, then this should secure direct payment to the landlord.
Secondly, any changes will have to be phased in gradually to avoid tenants not being able to pay their rent en masse! This should give ample time for the changes to be absorbed naturally, by things like annual increases in benefits that tenants are entitled to.
There is a shortage of housing already, and the Government is aware of the importance of the private rented sector, and the need for landlords to have financially viable buy-to-let properties, which they are entitled to make a profit on
Thirdly, the government are looking at ways to pay the landlord direct, in return for financial incentives, such as reasonable rents, but there seems to be a lot of uncertainty within the government, as to what will be implemented and when.
The Government do not want landlords to turn their back on LHA tenants in favour of working persons, so what is needed for both the landlord and tenant, is clarification of this issue, which will in turn bring stability to the private rented sector.
Richard Jones, director of Ilkestonproperty.com
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