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Housing Benefit

3.7 Housing Benefit

There are currently (2009) two systems of housing benefit in use. The old
system, called Rent Allowance (RA), is being phased out and all new claims
are now called Local Housing Allowance (LHA). Existing claims for RA will
continue for the foreseeable future until there is a break in the claim. Many
of the rules are similar but there are differences.

The main differences between the systems are that LHA is principally
paid directly to tenants where as RA can be paid to the landlord at the
tenant’s request. Also LHA makes no consideration of the size or value of
a given property (removing the previous need for The Rent Service to visit
the property). Where this manual talks about RA it refers only to the old
system, where the manual refers to LHA it refers only to the new system
and where the manual refers to housing benefit it generally refers to both
systems.

Housing benefit is for people on low incomes, including unemployed
people, who have to pay rent. The tenant has to complete an application
form, which is available from the local authority, or in some areas
application is initially by telephone to Jobcentre Plus.

3.7.1 Tenants Have to Provide Information and Proof of:

• their income, and any savings;

• their identity and sometimes details of their immigration
status in the UK;

• the rent to be paid (usually a written tenancy agreement is
sufficient); and

• name and address of the landlord/agent.

Most local authorities aim to process housing benefit claims within 14 days
from receipt of all the appropriate documentation they have requested.
They cannot pay a claim until they have all the information they need.

Regrettably, some local authorities fall short of the 14 day target, which can
cause hardship and problems for both tenants and landlords. Sometimes
delays occur if a tenant does not fully understand what is required. Some
landlords are willing to help tenants with their applications, whilst others
might form a view about a tenant’s suitability if they are applying for
housing benefit.

3.7.2 Conditions for Rent Allowance and Local Housing Allowance

As housing benefit is means tested, (dependent upon income and savings)
some tenants may have to pay part of the rent themselves.

Some tenants, such as most full time students, some people only allowed
to stay temporarily in the country, or people who have just arrived, will not
be eligible to receive housing benefit. Usually housing benefit cannot be
paid for a tenant who is a close relative of the landlord: the arrangement
must be that of a genuine arms-length commercial transaction.

3.7.3 Setting the Rent

If the rent covers the cost of gas and electricity, Rent Allowance will be
reduced so that the tenant must pay for these items. This also applies to
water rates and any meals or other services the landlord may provide.

For Rent Allowance only, accommodation in the private rented sector
where the tenant applies for Rent Allowance is valued by the Rent Service.
If the rent is more than the Broad Market Rental Area (average) for similar
size accommodation in the locality, Rent Allowance will not be able to pay
the full rent. If the accommodation is larger than the tenant needs, for
example if a couple rent a two bedroom flat, Rent Allowance will also not
pay the full rent.

If a prospective tenant intends to claim Rent Allowance, both the landlord
and the tenant can check whether the rent will be regarded as reasonable
before any agreement is signed. Both need to complete a Pre-Tenancy
Determination application form and send it or take it to the Housing
Benefit Office covering the area in which the property is located. They will
forward it to the Rent Service who will then value the property and send
their decision to the landlord, the tenant and to the council. The target for a
decision is seven working days.

With Local Housing Allowance the Broad Market Rental Areas are published         so it is fairly easy to find the basic amount paid within that area. The
amounts are also available from the local authority. They will vary
according to the locality.

For Local Housing Allowance if the contractual rent is more than £15 per
week less than the Broad Market Rental Area for the size of property to
which the tenant is entitled, then the surplus is capped to a maximum
of £15 per week. This potentially allows a tenant to keep just over £60
a month if they choose a low cost property. In many areas the system is
encouraging landlords to raise the rent to £15 below the Broad Market
Rental Area, regardless of the condition or previous value. The £15 level
will change from April 2010 and should be checked after that time.

Finally, there are different rules for single tenants aged under 25. Housing
benefit will only pay an amount based on the average rent for a room in
a shared house, even if the tenant is living in a self contained flat (this is
called the single room rent). This does not apply to couples under 25 or
families.

In any event, the agreed contractual rent is the rent due from the tenant,
and any shortfall in housing benefit payments should also be collected. If
there is likely to be a shortfall, it is advisable to check the tenant’s ability
to pay it before letting the property. Enforcing the terms of a contract is
likely to be a fruitless endeavour where the tenant has no money.

3.7.4 Payments and Rent Arrears

Councils usually pay either by sending the tenant a cheque or crediting
their bank account every two weeks (this is the norm for Local Housing
Allowance) or by paying the landlord every four weeks in arrears (common
for Rent Allowance but not allowed simply because the landlord wants it
under Local Housing Allowance rules). Direct payment of Local Housing
Allowance is still possible for vulnerable tenants and those owing at
least eight weeks of rent. This may be by cheque on request; Many local
authorities will pay by Bank Automated Clearing System (BACS) transfer.

Where a tenant is in receipt of housing benefit, and is more than eight
weeks in arrears, the landlord can request the housing benefit be paid
directly to the landlord instead of to the tenant. The local authority should
be contacted to arrange this.

Note: the arrears need not have existed for a calendar eight weeks. For
example, if the contract requires payments per calendar month in advance,
if two consecutive payments were missed, there would be more than eight
weeks arrears after one month and one day. It is possible for any surplus
LHA to be used to pay off arrears, but if the tenant leaves the property and
then arrears cannot be recovered from the LHA.

The local authority will do its best to advise landlords, who should note
that all benefit claims are confidential. Information about a tenant’s claim
is unlikely to be exchanged with a landlord unless the tenant has given
express written permission for this.

It is sometimes difficult to work out exactly what the situation is regarding
the tenant’s rent account if rent is payable monthly, but the benefit is paid
out on a weekly basis. It is important to remember that the method of
payment by the benefit office, and the assessment of benefit due, does not
alter the tenant’s contractual obligations.”

It is a good idea to record the payments in the context of the rent payment dates, as shown in the example below.

Here, the tenant has not been making up the shortfall and the arrears will
soon reach a level to trigger eviction on the basis of serious rent arrears.
A landlord wishing to proceed on this basis would have to provide the
court with a schedule of arrears in this format. In this example, the rent is
billed every month but a payment is received every four weeks for only
four weeks’ worth of rent. In this situation, there will be 12 monthly billing
periods in the year but there will be 13 periods of four weeks. To avoid
potential confusion, the rent may be billed to the tenant on an agreed
weekly-based schedule (or fortnightly or four-weekly). Some landlords find
that agreeing a four-weekly rent payment plan is easier to keep track of
than a monthly one.

Table 1

Date                                        Rent due                          Rent paid                      Arrears

18/01/2010                       £ 400.00                                -                                £ 400.00

15/02/2010                              -                                    £ 300.00                     £ 100.00

18/02/2010                       £ 400.00                                -                                £ 500.00

15/03/2010                              -                                    £ 300.00                     £ 200.00

18/03/2010                       £ 400.00                                -                                £ 600.00

12/04/2010                               -                                   £ 300.00                     £ 300.00

18/04/2010                       £ 400.00                                -                                £ 700.00

10/05/2010                               -                                   £ 300.00                     £ 400.00

17/05/2010                       £ 400.00                                -                                £ 800.00

07/06/2010                               -                                  £ 300.00                     £ 500.00

18/06/2010                       £ 400.00                                 -                               £ 900.00