Three out of ten properties in any area should be set at lower rents for those receiving Local Housing Allowance (LHA).
However, many of these homes are not available to applicants dependent on LHA. This is due to landlords often being reluctant to let to tenants receiving housing benefit.
LHA is not always paid directly to the landlord, as of changes introduced in 2008, but rent payments are nearly always late. Landlords are therefore more likely to favour a private letting, as the rent is paid a calendar month in advance, meaning better cash flow.
Additionally, tenants dependent on housing benefit often do not have a deposit to give to the landlord. Sometimes, the local government can help with this, but private landlords have found that these schemes are slow and difficult to claim against if the tenant leaves the property damaged.
The administration of housing benefit can also be slow and involves lots of filling out forms. Payments can start and stop without notice and councils also have the right to try to claim back past payments from landlords if it later emerges that the tenant was claiming benefits fraudulently, even if the landlord was unaware of a change in the tenant’s circumstances.
A minority of landlords wrongly believe that tenants claiming benefits are more likely to miss rent payments and not look after the property.
Perhaps fuelling this belief is the fact that buildings and contents insurance premiums are often higher when a landlord lets to those receiving LHA. Sometimes, insurance is refused altogether. It is unknown whether claims records justify the higher premiums.
Furthermore, some buy-to-let mortgage terms and conditions prohibit landlords from renting properties to tenants on any kind of benefits or income support.
On top of this, landlords are confused by the many changes to the housing benefit system over the past four years. Because of this, many simply don’t rent to tenants receiving LHA.