Housing Benefit - Local Housing Allowance

Local Housing Allowance

The Government has introduced a new rent restriction policy for the calculation of Housing Benefit for private tenants called Local Housing Allowance. The scheme replaces two previous methods of controlling high rents for most new tenancies. Old scheme cases where the local authority decided the level of restriction based on the cost of suitable alternative accommodation (in operation from 15 January 1989 to 1 January 1996), Reference Rent cases, where the level of eligible rent was decided by the Rent Service based on the lower of what a landlord would have been able to obtain had a landlord not been renting to a tenant on Housing Benefit (the claim related rent) and the average cost of similar properties in that area (the local reference rent).

For LHA cases the eligible rent is decided in part by the size of property a claimant needs. This figure is published monthly by the Council and the Rent Service. The scheme provides for an incentive to encourage tenants on Housing Benefit to seek cheaper properties because if the tenant moves into cheaper accommodation, the tenant gets to keep the difference (up to a maximum of £15 per week). By publicising how much Housing Benefit a tenant can get for the need for Pre-Tenancy Determinations is removed.

The Local Housing Allowance is set at the 30th percentile level for rents in the Broad Market Rental Area. The Broad Market Rental areas are similar in geographic size to Counties. This has led to a number of Counties such as Cambridge criticising the scheme because market rents inside of the County City are considerably higher than those in the Shire areas of the County. The House of Lords ruled against the concept of very large Broad Market Rental areas in the Heffernan case (R(Heffernan) v The Rent Service UKHL 58 ). The DWP re-introduced legislation to overturn this decision, restoring its intention to use very large broad market rental areas to draw down the cost of the scheme.

Local Housing Allowance was introduced across all Local Authority areas on 7 April 2008. The legislation to enable the scheme is contained in the Welfare Reform Act which received Royal Assent in May 2007. The local authorities that trialled the new system were known as Pathfinder Authorities. They were Argyll and Bute, Blackpool, Brighton and Hove, Conwy county borough, Coventry, East Riding of Yorkshire, City of Edinburgh, Guildford, City of Leeds, London Borough of Lewisham, North East Lincolnshire, Norwich, Pembrokeshire, City of Salford, South Norfolk, Metropolitan Borough of St Helens, Teignbridge, London Borough of Wandsworth

The final scheme was different in that the maximum difference between the rent payable and the eligible local housing allowance was restricted to £15. In addition in some pilot authorities all tenants whose rent had been assessed according to reference rent rules were transferred to LHA, when the national scheme came in only those who made a new claim or moved went on to LHA.

From April 2011 the £15 paid to those whose rent was below LHA levels was scrapped. Now the maximum payable will be the rent or the LHA rate, whichever is the lower.

From April 2009, the maximum LHA that can be awarded will be restricted to the rate payable for five rooms.