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17 October, 2003

Dear Landlord or Agent

Local Housing Allowance

Thank you for taking the opportunity to write to me recently following publication of the first issue of "Renew", our newsletter for landlords in the nine local authorities that will initially operate the Local Housing Allowance.

The overall response has been tremendous - so much so in fact that it has proved impossible for me to write individually in reply to each of your points and queries. My apologies for this and instead, I hope you will find the attached "Question and Answer Brief" useful. I have tried to cover every point and question raised by landlords over the past few weeks. This brief is also available on the Housing Benefit Section of the DWP website (www.dwp.gov.uk).

While the list of points is long, it is fair to say a recurrent theme in your letters has been concern over the new policy of making payment of the Local Housing Allowance to, in most cases, the tenant. The Department understands your concerns on this matter and we accept that this new way of doing things will initially be challenging for landlords and tenants alike. We think it is right that tenants who happen to receive help towards their rent from their local authority, should be treated in the same way as tenants who fund their rent from salary or other funds. We do not expect employers to pay a portion of their employee's salary direct to their landlord as rent and nor do we see it as the typical responsibility of local authorities to make payments to landlords in this way.

It is important to emphasis however that we are working with the local authorities, voluntary organisations such as Citizen's Advice and other parts of this Department, such as Jobcentre Plus, to ensure tenants are supported and given proper advice as they learn to take responsibility for paying their rent. We are also talking to the high street banks to ensure tenants have as wide an access as possible to bank accounts.

Additionally there will of course be safeguards to ensure that local authorities can make direct payments for tenants who it is considered will have difficulty in managing their affairs or who are unlikely to pay their rent. And we are retaining the requirement that direct payments are made when 8 weeks or more of rent arrears have accumulated.

The Department is currently preparing the second issue of Renew, which will be issued in the next few weeks and we hope you will continue to find it a useful source of information about the Local Housing Allowance.

Yours sincerely
By e mail

Matthew King
Housing Support Division

Local Housing Allowance: Frequently Asked Questions from Landlords

1. Why are you introducing LHA?

The fundamental aims of the LHA scheme are to promote:

· Fairness: The new scheme has been designed to pay the same amount to tenants with similar circumstances living in the same area. This differs from the existing scheme, which ties the level of benefit to the rent actually paid (subject to a range of restrictions applied by a rent officer). Currently, tenants who live in smaller properties than they are entitled to, or less attractive properties, generally receive less benefit than those with similar needs in the same area, who live in larger or more attractive properties.

· Choice: The intention is to allow tenants to trade between the quality and price of their accommodation. For example, tenants will be able to choose between paying more to stay in a property that is larger than they qualify for under the size criteria or increasing their income after paying their rent y moving to less attractive accommodation.

· Transparency: The expectation is that the scheme will make it easier for tenants and landlords to find out in advance how much rent could be covered by Housing Benefit. Although tenants can ask for "pre-tenancy determinations" under the current scheme, to see how much benefit they might receive for a particular property, this process is time consuming and rarely used. As a result, private tenants often find that Housing Benefit could not meet their rent only after they have already signed a tenancy agreement. This should happen less frequently under the new scheme, as a major uncertainty will have been removed.

· Personal responsibility: The intention is that paying the allowance to the claimant will encourage them to take responsibility for budgeting and paying their rent themselves rather than have it paid for them.

· Increased work incentives: Greater certainty about what in-work benefit they could receive is expected to help claimants bridge the gap between being out of work and taking a job.

· Simplicity: There would no longer be a need for the complex rent restrictions and individual referral of rents to rent officers that currently contributes to the delay in processing claims by private tenants. In general the complexity of the Housing Benefit scheme makes efficient administration difficult, illustrated by an average processing time of 47 days for a new claim, with the bottom quarter of authorities taking on average between 56 and 142 days.

2. When does LHA begin in my LA and will it be phased or immediate?

The attached table shows the start dates for each of the "Pathfinder" Authorities, who will introduce the Local Housing Allowance. It also shows which Authorities are adopting a phased approach (where exisiting cases are converted at the point where there would have next been a referall to the Rent Officer-for whatever reason) and which are converting all their cases on the go live date, what we have called "big bang". N.B. Under both approaches, new claims from the go-live date will be treated under the new rules.

LA Start Date Approach
Blackpool 17 November 2003 Phased
Lewisham 1 December 2003 Phased
Coventry 12 January 2004 Phased
Teignbridge 12 January 2004 Phased

Brighton 2 February 2004 Big Bang

Edinburgh 9 February 2004 Big Bang
NE Lincolnshire 9 February 2004 Big Bang
Conwy 9 February 2004 Phased
Leeds 9 February 2004 Phased

3. How long will LHA last in my LA?

We expect LHA to initially run for about two years in the nine Pathfinder Authorities. After that the scheme will be evaluated prior to a national roll-out.

4. Why are you removing a landlord's right to receive payment of Housing Benefit direct from the local authority?

There has never actually been a right in legislation for a Landlord to receive Housing Benefit payments direct. There is a right for tenants to request this arrangement and it is this right that we are reforming. We think it is right that tenants in receipt of Housing Benefit, where they are able to, take greater responsibility for managing their financial affairs in the same way as other tenants do. This should also help to equip people of working age with the skills they need when they move into work.

5. What safeguards exist for landlords?

There are a range of safeguards to protect the interests of tenants and landlords. Some of these exist now: for example, a local authority must make direct payments to a landlord where the claimant is 8 weeks or more in arrears with the rent. In addition, we are introducing new rules to allow authorities to make direct payments where they consider the tenant is unlikely to pay their rent or where it is thought they will have difficulty in managing their affairs, i.e. where they are "vulnerable".

6. How can I rely on my LA to put these safeguards into effect?

The Department already provides guidance to Local Authorities on when they must institute direct payments when rent arrears have reached 8 weeks. We are providing new guidance that will indicate the kind of situations where, for example, the tenant could be considered "vulnerable".
7. Who is to say whether a claimant is "vulnerable"?

It will ultimately be for the Local Authority to decide whether a tenant has satisfied the "vulnerability" criteria, having considered the guidance provided by DWP, along with evidence gathered themselves as a result of representation from the tenant or other interested party.

8. Can I ask my tenant to be classified as "vulnerable"?

Yes. You may approach your Authority if you consider your tenant to be vulnerable. The Authority will want to investigate the tenant's circumstances and will want to interview them and perhaps others and gather other evidence (for example from GPs or social workers) before making a decision. Your Authority may decide to pay the tenant direct pending the outcome of their investigation, as how the tenant manages during the investigation period should be a useful indicator of their ability to manage longer-term.

9. Who is to judge that a claimant is unlikely to pay his rent?

It will ultimately be for the Local Authority to decide whether it is unlikely that the claimant will pay his rent. They will pay regard to all the knowledge and evidence available to them at the time, including any known past history, when reaching their decision.

10. If tenant requests direct payment in writing, will the Council agree?

As part of our HB reforms tenants will no longer be able to request that Housing Benefit be paid to their landlord. If however tenants feel they should be considered as "vulnerable" and therefore entitled to direct payments to their landlord, the Local Authority will consider any representations they make.

11. Won't many tenants spend the HB on other things or abscond?

There will be examples of some tenants not using their Allowance for the purpose it was intended. This could be an isolated occurrence - perhaps when money is particularly tight one month. Where it becomes a habit, Local Authorities will have the option of making direct payment to the landlord. Likewise, tenants who abscond without paying the rent will be considered as prime candidates for direct payment to their landlord in any future application. We do not think it is fair on the majority of responsible tenants to assume that they will all behave in the same way as a minority of "problem" cases.

12. Will you pay all the arrears directly to me?

Where 8 weeks or more of arrears have built up, the Local Authority can pay future LHA to you. Where the tenant's LHA exceeds the rent, the Authority may pay you the excess until such time as the rent arrears are cleared.

13. How will you equip tenants to manage their own affairs?

Tenants' preparedness to manage their own affairs will vary from individual to individual, as will their access to immediate help. The Department is working with Local Authorities and voluntary organisations such as the Citizen's Advice Bureaux to ensure that good money management advice is available to tenants. In addition, we are preparing a range of leaflets that will cover where to get help and advice.

14. Landlords will no longer take HB tenants. What will you do about the resulting homelessness?

We hope that landlords will give our reforms a chance to work rather than decide not to let property to people on Housing Benefit. The reforms are intended to help landlords, as well as tenants, by creating a more transparent system that will be simpler for local authoriites to admininster, thereby speeding up overall processing times.. Also, the safeguards we have built in regarding direct payment to landlords in particular circumstances are designed to protect the interests of both landlord and tenant. We do not therefore expect either a move away from letting to housing benefit tenants or increased homelessness.

15. How do I find out what the LHA rates for my property will be?

The Rent Service will make an assessment of the Local Housing Allowance rates appropriate to your area the month before they become applicable and will be reviewed regularly. The Rent Service will pass the rates to the Local Authority just before the start of the month to which they apply and the Local Authority will publicise them in a way accessible to landlords and tenants. This could be in their reception area, the local paper or on their website.

16. Isn't it unreasonable to expect landlords to go round and collect the rent every week or month?

We hope that landlords will not have to physically collect the rent in most cases. With Local Authorities increasingly adopting credit transfer as the preferred method of payment, we want to encourage tenants to receive their Local Housing Allowance into a bank account and set up direct debit or standing order arrangements so that their landlord receives his rent on time.

17. Why are you singling out the private sector? What about Housing Associations and Council Housing?

It has never been our intention to "single out" the Private Rented SectorWe intend to introduce similar reforms in the social sector as soon as rent restructuring and increased choice create a better market.

18. Will you consider making payments in advance?

There are no plans to make Local Housing Allowance payments in advance. Paying Housing Benefit in arrears aligns it with other social security benefits, many of which are paid in arrears, and with most other forms of income, such as earnings.

Where HB is paid direct to landlords, it is paid four weekly (or calendar monthly) in arrears. Many landlords charge rent on a four weekly/monthly basis, so paying HB four weekly means that it more closely matches claimants' rental liability. It also strikes an appropriate balance between the interests of the landlord, the administrative burden for local authorities and the security of the system. Altering these arrangements could add to the workload of local authorities, hinder the processing improvements they are striving to make and increase the scope for fraud and overpayments.

19. Where direct payments are made to me, how long will they go on for?

When your Pathfinder Authority "goes live" and has adopted a "big bang" appraoch (see Q.2), you will continue to receive direct payments on existing cases for at least 6 months. For new cases this will depend. Where the claimant is considered "vulnerable" and there is no prospect of their situation changing, landlords can expect to receive direct payments indefinitely. In cases where the vulnerability is transitory, or direct payments are being made because the claimant did not pay the rent regularly or had built up 8 weeks or more of rent arrears, we and the Local Authorities will provide or encourage the claimant to seek financial management advice. The intention is that at a future date, they will be in a better position to receive their Allowance and pay their rent on time and in full. In most cases therefore, there will come a time when you will no longer receive direct payments in respect of a tenant.

20. What appeal rights do I have against a payment decision?

Appeal rights are not altering as a result of the new scheme. You will not be able to appeal against the Local Housing Allowance rates set for your area. You will be able to appeal against a payment decision (exisiting cases that are converted to LHA count as "decisions") where you are a "person affected" by that decision. For instance where the local authority has stopped payments to you in an exisiting case or will not make payments to you in a new case. Your Local Authority can give you more information on detailed Appeals procedures, including the circumstances I which you may appeal and the form an appeal should take.

21. Won't this create more work and pressure for councils as well as landlords?

Local Authorities will inevitably have a lot of work initially in setting the new scheme up. However the intention is that the Housing Benefit reforms will reduce the administrative burden over time, as Authorities will no longer have to refer most claims to the Rent Officer and we are changing the rules so that tenants will not have to make yearly repeat claims to Housing Benefit.

Some landlords may encounter some more work in collecting rent, but the increasing use of direct debit arrangements should reduce this over time.

22. What actions has DWP taken to meet landlords' concerns?

We recognised that landlords would have concerns about the new arrangements at an early stage. We have therefore been meeting and listening to landlords on an ongoing basis. We have also been keeping them informed: in meetings and through our regular newsletter for landlords in the Pathfinder areas, "Renew". A range of information material is also being made available. Landlords will provide an important source of information as we evaluate the Local Housing Allowance. Their experiences will contribute towards any changes that are made prior to national rollout.

23. Will you review the policy and revert back to current arrangements if it is shown to be failing?

The Local Housing Allowance and the direct payment changes will be thoroughly evaluated, both on an ongoing basis and at the end of the initial Pathfinder period, in 2006. The findings of the evaluation will inform our future decisions about the system that will be used for national rollout.

24. Will you provide landlords with specific LHA information?

Yes. We are issuing a regular newsletter and other information products such as leaflets, specifically tailored to the needs of landlords. This is in addition to information provided by your Local Authority.

25. How do I find out more?

By contacting your Local Authority. They can put you on the newsletter distribution list and send you leaflets. They are also best placed to answer any specific queries you have about how the Local Housing Allowance will operate in your area.

26. Can I make direct payment a condition of the tenancy?

Theoretically, yes, but unless one of the safeguards referred to in Q.5 applies to the tenant, this would be pointless as the tenant does not have the power to deliver.

27. What happens if my tenant decides that I should be his appointee/have power of attorney?

It is important to bear in mind that this option could entail a considerable amount of work and responsibility on your part. In becoming an appointee or taking power of attorney, you will become liable for the debts and liabilities of the tenant and the accuracy of the information provided when claiming benefit. Overpayments will be recoverable from you and you would be liable should any fraudulent activity be discovered. Furthermore, you would of course become responsible for other aspects of the tenant's finances.

28. Will DWP reimburse landlords for any loss of rent accruing during the pathfinder phase due to non-payment by the tenant?

No. The aim of paying direct to the tenant is to encourage personal responsibility and to enable them to exercise the same choice as anyone else about where to live and how much of their total income to spend on housing costs. Any compensation fund for landlords would actively discourage tenants from acting responsibly. Moreover, we believe we have built appropriate safeguards for landlords and tenants alike.

29. How can I work out how much better off my tenants will be under LHA?

We estimate that around half will be better off but this will very much depend on the condition of the prevailing rental market in each Pathfinder area.

30. Can I use current rates of housing benefit for my properties as an indication of the likely LHA and as a basis for marketing my properties to prospective LHA tenants?

This is not advisable. Current rates of housing benefit reflect a variety of components of the current housing benefit system, e.g. Rent Officer referrals on individual case basis and rules about single room rent will become redundant. Given the changes to these aspects of the current scheme, it would be inadvisable/potentially misleading to attempt to quantify LHA from current actual payments of housing benefit.