Why I Can’t Afford LHA Claimants Any More

Five years ago, the prime room rental market was students and people in receipt of Housing Benefit.  Put an ad in the paper and 9 out of 10 respondents were those on housing benefit – probably a key reason that so many fellow landlords stuck their nose up at me saying I was “mad” and “do you want to make life more difficult for yourself?”.

Housing Benefit vs LHA

I liked Housing Benefit claimants: they tend to stay longer, were satisfied with their environment and, as they were home much of the day, kept an eye on the comings and goings of the house.  Once you understood how the system worked, the claim process was relatively straightforward: upon production of landlord evidence of a room offer the tenant would approach our local Housing and Legal Aid Centre and a cheque for four weeks advance rent was made payable to the landlord.  The tenant would then fill in their part of the claim form and the landlord would fill in the other parts including their bank details for the benefit to be paid into.  We’d sit back, wait and within 4-6 weeks the rent was paid direct into the landlord’s account regularly.  If there were any queries, I’d call the Housing Benefit team (I knew each agent by their first name), find out at what stage the claim was at or if they were waiting for any more information so I could chase the tenant.

Under the LHA system, the process is no longer so transparent.  The tenant can make the claim, the landlord fills in what’s included in the rent and, even though the tenant signs permission for the landlord to discuss the claim, that is the last I’ll see or hear until the tenant hands over the money.  I’ve tried to chase a claim only to discover that the call centre had moved to Slough (nowhere near us) and, despite being allowed to discuss it, the staff couldn’t give me any information “under Data Protection” and “You’ll have to ask the tenant yourself”.  I want to scream down the phone “I bl***y well would if I thought I’d be getting a straight answer and was prepared to camp outside their room all night until they got home!”.

Why LHA Doesn’t Help Tenants

My tenants don’t mean to not hand over the LHA payment, but when their bank account is in the red, they have no mobile credit, possibly haven’t eaten for a while, eeking out their tobacco pouch so their roll up resembles more Rizla and saffron strands than a good smoke, I empathise with their temptation to hand over £150 rather than the £200 paid by the Council.  In their heads (especially if they’ve recently been working), 50 quid is easy to reimburse within the next couple of weeks.  Then the reality sets in that there’s no financial room to manoeuvre: skimming £20/£30/£40 off the LHA payment to cover the shortfall of Job Seekers Allowance means they end up £300-£400 in arrears before you know it and start to get stressed.   At that point, they do what most of us do when we get stressed – drink more, smoke more, blow whatever cash is available because, let’s face it, it can’t get much worse.  Their girlfriend/boyfriend, friends and parents are probably financially exhausted, they’re drowning in debt, despondent from hitting a job wall – so what if they fall out with their landlady on top?  Life is so chaotic we’ll string her along with a few well honed excuses that used to work on our mothers and teachers.

Greg is £500 in arrears and I don’t want to see him homeless but this is what’s happened to him.  When the process starts I meet with the tenant and explain that this is what will happen and, in order to avoid it, we have to work together.  I’ll happily reduce the rent to reflect the LHA payment provided that the LHA is handed over as regular as clockwork.  “Yeah, yeah, yeah, I promise.  It won’t happen to me and I’ll be working again soon.”  I’ve experienced this time and time again.  The most common excuse is “Housing have messed up my claim AGAIN” – and I can’t check out its validity.

Back to Basics – The Real Reason for Housing Benefit

The market’s changed.  For every ad I place the majority of calls will be from working professionals who have chosen an all-inclusive rate so they have enough salary left over to have a life.  I no longer need to fill the rooms with the slightly odd, vaguely desperate or those that fall out of society’s moral code of conduct.

Back in the late 1940s the Social Security System was so named because:

SOCIAL                 def pertaining to human society

SECURITY             def freedom from danger, risk, etc; safety

There are still at least 1 out of 10 callers wanting a room who won’t pass the referencing process, can’t get the deposit together or will struggle to conform to a landlord’s ideal tenant.

My business head tells me to go with this new professional market demand and fill the houses with law abiding, rent paying via standing order tenants who read and abide by the AST and wash their sheets weekly.  My life will be calmer yet poorer through the lack of tenants educating me on the true meaning of survival and refusal to conform to society’s expectations.

Please, bring back direct payments to landlords so our business heads no longer discriminate against the unemployed.

8 Comments

Filed under being a landlord, Future of HMOs, Rent

8 responses to “Why I Can’t Afford LHA Claimants Any More

  1. Tony Balmforth

    Absolutely right. The gov claims that paying HB to tenants encourages responsible money-handling by tenants but it doesn’t work properly and is a reckless misuse of taxpayer money, given that it is intended to cover rent. The self-congratlatory Grant Shapps should do something useful, for a change, and get this practice reversed ASAP.

    • I agree Tony, and thank you for reading. I wish the LHA powers-that-be could experience the real effects of their policy making. The system doesn’t need to be complicated just fair and accessible! I once offered to talk to our local Housing Benefit team along with a real life tenant to show them what happens when claim delays occur. I thought it would prevent them from de-personalising things but maybe that’s how they get through the day and not take their work home with them.

      It won’t save the accommodation crisis but may just make HB claimants more attractive to landlords!

  2. But LHA payments can be made direct to landlords. The government regulations changed way back in April 2011 because of the failure of the previous governments policy. If you say a new tenancy would be invalid unless it is paid direct or you say it will secure the existing tenancy to prevent eviction then my council will pay direct. The regs apply countrywide. I simply add an appropriate clause in my AST and fill out the appropriate section in the application to `pay landlord direct` form and they are all now paid direct again just like they were in the good old days! If your council is not paying direct I would point them towards the relevant act and section of the government regs and challenge them as to why they are not complying.

    • Thanks for the heads up, Jonathan. Our claim forms seem to be left over from the old days and there’s a section where the tenant can elect for direct payment to landlord. We’ve tried this and, when challenged, the council ask for proof that LHA shouldn’t go to the tenant e.g. because of substance abuse, previous homelessness, gambling, etc. It’s not easy to get the acceptable paperwork to fulfil their criteria. My main point behind this article was to demonstrate how easy it is to choose a worker paying monthly upfront over an LHA claimant due to changes in market demand. Trust me, I don’t feel any better for it but many landlords don’t have the inclination to chase the claim through the system.

  3. Kim stones

    Hi HMO Land lady I really do like your site and what you do keep up the great work..I am with Jon on this one although sometimes we do have a bit of a challenge getting the right result so I like to look at it like selling widgets ..if you were selling widgets you would have to invoice the buyers sometimes you don’t get paid sometimes I look at it like if I can collect 90% plus of what I should get LHA tenants I have a good business although half of my tenants are workers and I would advise anyone starting up to focus on towns with graduates from a university and workers as these are easier to work with.
    Best wishes .
    Kim Stones
    http://Www.kimstones.co.uk HMO Rent to Rent Course

    • Thanks, Kim. I agree with you where the student demand is high and the contracts are over 10 months long (we’re still struggling to get 11/12 month contracts). I’ve just found out that the LHA rates have decreased from £72 for a room in shared accommodation to £65 per week. Bearing in mind the average room rate is £80 a week, that’s quite a top up to find from Job Seekers Allowance. It’s another reason that, if I feel brave enough to go down this route, I would offer the smaller rooms to LHA claimants so they’re not spending their living money on top ups. Thank you for your comments and for reading.

  4. Pingback: A Practical Guide to Managing a House of Multiple Occupation

  5. Pingback: Hats Off To Housing Benefit, But Brace Yourself For The Cameron Effect! | A Practical Guide to Managing a House of Multiple Occupation

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