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Falling off the housing benefit cliff

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The last five months has seen the government caught up in a reforming zeal, pledging to slash, cut and reform welfare expenditure. Nowhere has this been more savage than in housing benefit and Local Housing Allowance (LHA).

Local authorities, so often left to bear the brunt of implementing government’s ‘big ideas’, should be weary. If they are to successfully manage this enormous housing challenge, then councils (or, whether they like it or not, more appropriately councillors) will have to learn to work creatively with their local landlords.

Given the way this issue has been talked about, I can imagine how incredulous some people will be about this. If ministers and the media are to be believed, landlords have been behaving more like feudal lords than housing providers. So firstly let’s dispel that myth (regularly used to justify the government’s cuts). It is spin that LHA has allowed landlords up and down the country to regularly charge as much as £2,000 per week for accommodation, costing taxpayers billions in housing benefit.

The reality is more complex and, unfortunately, less shocking. Since November 2008 the number of LHA tenants has ballooned by 260% to over one million. Coming out of the worst recession in modern memory, with the job losses that ensued, has meant that many more people have needed help with their housing costs. More people needing LHA has meant a greater overall cost.

A million households in the private rented sector is a million fewer people on the housing waiting list. The reality is that local authorities have used their local private rented sector as an alternative for a more expensive and less appealing temporary accommodation. The average LHA payment is around £112 per week, equal to £485.33 per month.

That is a far cry from the £2,000 per week that the tabloids believe is the norm. In fact ministers admit the largest LHA rates are down to less than 100 cases, all based on Central London. Ironically a localised problem, this should have required a more localised response from a government intent on localism.

That will change. The official estimate is that the national average cut to housing benefit will be £12 per week per household. Yet no one is certain how these cuts will be absorbed or who will make the shortfall. Our recent survey showed that just under half of LHA landlords could not afford to make any cuts to their rent.

For many landlords this just will not work financially and they will move away from LHA tenancies. But local authorities have options for working with those landlords who are willing to meet councils half way.

Practically, the first thing that Government could help landlords with is enabling direct payment of LHA to landlords. If tenants feel it is in their best interest, especially where they too easily fall into arrears, then they should have that option open to them.

Secondly, local authorities should seriously think about private-rented sector leasing options. These will be more attractive to local landlords weary of higher risk LHA tenants and conscious that Ministers are freezing rates at January 2011 rates for two years.

Thirdly, local authorities should be looking to incentivise accredited landlords to LHA. These are professional landlords letting good quality accommodation and a different rate which recognised this would encourage more landlords to become accredited. That would mean that LHA positively discriminated towards the better end of the sector, encouraging tenants to look for the best rather than falling for the cheapest, roguish end of the sector.

Local authorities know better than most that housing is not free, but we can at least make sure we get value for taxpayer’s money.  

Barry Markham, director for the regions, National Landlords Association

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