By Craig Smith
Since the coalition government came in to power in May 2010, a number of cuts have been announced as part of their plan to reduce the deficit. One of these cuts is to the LHA (Local Housing Allowance) which is paid to the unemployed or those with lower incomes who are living in rented accommodation.
The Affect to Tenants
The amount of LHA paid to tenants will be reduced, typically around £30 per month on a 3 bedroom house (see the handy table which has been produced on the DirectGov website). This might not sound like a lot to lose, but this could be an extra £360 a year to find, and when your already struggling to make ends meet this can be a lot of money. Put this together with the ever increasing cost of living and things only seem to look worse!
The cuts come into place either on the renewal of a claim (12 monthly anniversary) or when there is a significant change to the claim, such as a new baby or moving from one property to another.
Landlords Reactions
A member of staff from Castle Estates recently attended a local Council Private Sector Landlord Forum which was to discuss the changes and keep Landlords informed of what is going to happen. The meeting itself was perhaps aimed more at private Landlords (as the title suggests!) although a lot of useful information was provided to everyone who attended regarding the cuts.
As the amount paid to Tenants is to be reduced, the extra money needs to come from somewhere. And if the money can’t be found then the council’s answer was simple… reduce the rent. At this moment the room fell silent for a second or two, until a few Landlords began to chuckle. They seemed to have forgotten that Landlords still have mortgages to pay, insurance to cover and repairs to be made.
The Route Forward?
Perhaps the first thing to come into a Landlords mind is to steer clear of any Tenants who may be in receipt of LHA payments. However, in the long run this would mean less and less housing available to those Tenants. This doesn’t necessarily mean that some Tenants may not be claiming in the future, for example, someone who has recently been made redundant and is unable to find new employment?
The other way of looking at the situation is that although the payments would be a lesser amount than would have been expected before, the payments would be made regularly to the Tenant. This doesn’t always guarantee that the Tenant will pay the money to the Landlord, but some good tenant referencing would also help in the selection of a suitable tenant.
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