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3.15 Housing Benefit, Local Housing Allowance and Universal Credit

Persons on low or no income who have a liability to pay rent may be entitled to housing benefit which is currently being replaced in phases by Universal Credit.

3.15.1 Housing Benefit

Housing benefit provides help with rental payments for people on no or a low income. How much a tenant will get is usually based on:

  • the Local Housing Allowance Limit in the area
  • their income – including benefits, pensions and savings over £6,000
  • individual circumstances

3.15.2 Local Housing Allowance

Local Housing Allowance (LHA) is a flat rate allowance paid to housing benefit claimants. It is updated annually, each April.

LHA applies to private sector tenants who make a new claim for housing benefit or those claiming housing benefit who change address. It also applies to tenants on housing benefit who move from the social sector into private sector accommodation.

Rent Officers determine 5 different LHA rates for the following categories of property: Shared accommodation (room in a shared property), 1 bedroom, 2 bedrooms, 3 bedrooms and 4 bedrooms.

3.15.3 How Is the LHA Calculated?

The Rent Officer maintains rental information for each category of LHA rates. These are the list of rents.

Mathematical calculations are applied to the list of rents to determine the LHA rate which is set as the lower of:

  • the 30th percentile on a list of rents in the Broad Rental Market Area
  • the existing LHA plus an uplift of 1%
  • the existing LHA plus an uplift of 4% (only selected LHA rates in specific BRMAs set out in the regulations)

LHA rates can not be higher than the following maximum weekly rents (correct June 2018) :

  • £260.64 for one bedroom exclusive use (or a shared room)
  • £302.33 for 2 bedroom accommodation
  • £354.46 for 3 bedroom accommodation
  • £417.02 for 4 bedroom accommodation

The list of rents is a representative sample of private sector rents paid across the BRMA, including those from the lower end through to the upper ends of each rental market.

A graph showing the list of rents for each applicable LHA category can be found on the LHADirect – Local Housing Allowances (LHA) webpage – https://www.gov.uk/government/publications/understanding-local-housing-allowances-rates-broad-rental-market-areas and the rental information is provided to Rent Officers by landlords, letting agents and tenants.

3.15.4 What Is a Broad Rental Market Area (BRMA)?

The BRMA is the geographical area used to determine the LHA rate. It is an area where a person could reasonably be expected to live taking into account access to facilities and services for the purposes of health, education, recreation, personal banking and shopping.

When determining BRMAs the Rent Officer takes account of the distance of travel, by public and private transport, to and from these facilities and services.

Rent Officers consult with local authorities when they determine and review the BRMAs. The boundaries of a BRMA do not have to match the boundaries of a local authority and BRMAs will often fall across more than one local authority area.

VOA Rent Officers provides the local authorities with information that identifies the BRMAs and which properties fall into them.

3.15.5 Number Of Bedrooms

The maximum LHA that someone is allowed to claim is dependent on the size of their household. This is worked out as follows:

If the claimant is under 35 years and single, that person will only be entitled to a maximum of the shared room rate. Otherwise, claimants are entitled to one bedroom for:

  • every adult couple
  • any other adult aged 16 or over
  • any two children of the same sex under 16
  • any two children under 10 regardless of sex
  • any other child

(This would be the maximum LHA that a claimant could receive. What a claimant will eventually receive when their claim is assessed is dependent on their household income).

3.15.6 Non-dependants

The council may reduce someone’s Local Housing Allowance if they share their home with adults who are not dependent on them – for example, adult sons or daughters, parents, relatives or friends. It is assumed that they should pay something towards the rent, whether they do so or not.

3.15.7 Benefit Cap

There is an overall benefit cap affecting all benefits a person / couple receives which means they can never receive more than what is specified in the legislation at the appropriate time.

For the current limits, please see the appropriate GOV.UK website page here: https://www.gov.uk/benefit-cap/benefit-cap-amounts.

3.15.8 Direct Payment

In most modern cases, the initial assumption is that payment of housing benefit is made directly to the tenant. It is only possible to be paid directly to landlords in certain cases.

3.15.9 Mandatory Direct Payment

A local authority must pay a landlord direct if the tenant is the equivalent of 8 weeks or more rent in arrears. The landlord must notify the local authority about the arrears before payment to the landlord can be made.

Where the rent is payable monthly in advance under the tenancy agreement, it is confirmed by the current Government guidance that direct payment should be made after one month and one day of non-payment as that is the equivalent of 8 weeks arrears – see paragraph 4.060 Local Housing Allowance guidance and good practice for local authorities https://www.gov.uk/government/publications/local-housing-allowance-guidance-and-good-practice-for-local-authorities.

Direct payment is also available when a tenant is receiving Universal Credit but is known as a “managed payment”. The tenant should be two months or more in arrears and an application for a managed payment must be made to the central handling department. Further guidance and a form is available at https://www.gov.uk/government/publications/universal-credit-and-rented-housing.

3.15.10 Discretionary Direct Payment

There are a number of circumstances where the local authority may make direct payment to a landlord if they choose. However, even if the circumstances exist, they still don’t have to make direct payment because these rules do not have to be followed and are discretionary only:

  • the local authority considers that the claimant is likely to have difficulty with the management of his financial affairs; or
  • the local authority considers that it is improbable that the claimant will pay his rent; or
  • a direct payment has previously been made to the landlord after being 8 weeks or more in arrears; or
  • the local authority considers that it will assist the claimant in securing or retaining a tenancy.

Similar discretionary payments will also be available where the tenant is claiming Universal Credit.

3.15.11 Processing Claims

In order to make a claim, tenants will have to provide proof

  • 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
  • the name and address of the landlord/agent.

Local authorities should 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 often 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.

3.15.12 Universal Credit

Universal Credit will sweep away the current benefits system and provide a single monthly payment for people on a low income or are out of work. It will include support for the costs of housing, children and childcare, as well as support for disabled people and carers. Universal Credit will replace:

  • Income-based Jobseeker’s Allowance
  • Income-related Employment and Support Allowance
  • Income Support
  • Working Tax Credit
  • Child Tax Credit
  • Housing Benefit

Universal credit will be centrally administered by the Department for Work and Pensions but local authorities will be able to assist claimants with the on-line claim procedure and advice.

3.15.13 When Will Universal Credit Be Introduced?

Universal Credit is being rolled out in stages throughout England and Wales. It is currently available in most areas although it will likely be only single first time claimants that can apply at the moment. Some areas will start to allow couples to apply and slowly increase the situations as to who can apply.

An up to date list of all the jobcentre areas where Universal Credit can be claimed is available at https://www.gov.uk/guidance/jobcentres-where-you-can-claim-universal-credit.

3.15.14 How will Universal Credit Be Paid?

In most cases the whole benefit including the housing element will be paid directly to a claimant’s bank account.

There will be limited circumstances such as the 8 weeks arrears rule similar to current housing benefit where it may be possible for direct payment. This is known as an Alternative Payment Arrangement and a landlord will need to contact the DWP to ask for direct payment to be made.

Universal Credit will be assessed monthly (no longer will payments be four weekly) and the amounts will be paid monthly in arrears.

3.15.15 How Much Will a Tenant Receive?

Universal Credit will include a housing element and the amount of that element is based almost entirely on the current local housing allowance system. The claimant will be entitled to the maximum of the local housing allowance rate based upon the number of bedrooms they are entitled to depending on their circumstances.

3.15.16 Where Can I Get More Information?

The DWP have produced a useful FAQ – Universal Credit and Rented Housing Frequently Asked Questions available at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/275875/universal-credit-rented-housing.pdf.