30th November, 2015
As I’m sure you’ve already heard, George Osborne, Chancellor of the Exchequer, in his Autumn Statement to Parliament announced:
“Capping Housing Benefit in the social rented sector – The government will apply the relevant Local Housing Allowance (LHA) rates as maxima for Housing Benefit paid in the social rented sector, including the Shared Accommodation Rate for single claimants aged under 35, without dependent children. The cap will apply from 1 April 2018 but only to tenancies signed after 1 April 2016. “
So what does this actually mean?
LHA is part of the Housing Benefit scheme, which applies to tenancies in the private sector, created after 1st April 2008. The Valuation Office/Rent Officer produces the LHA levels effective from April each year, based on regional geographic areas, called the Broad Market Rental Areas (BRMAs) assessed on the 30th percentile or the lower 3/10’s of the market rents. The rates for 2015/16 for properties in the various BMRAs in England are included in an Excel spreadsheet attached. The Welsh equivalent is in another spreadsheet. The Scottish figures can be found in the following link http://www.gov.scot/Topics/Built-Environment/Housing/privaterent/tenants/Local-Housing-Allowance/figures
We’re still awaiting the finer detail, so we need to be cautious, but this could mean, that when determining the “maximum eligible rent” for post April 2016 tenancies, in relation to Housing Benefit and, most probably Universal Credit, effective from 2018, “renters” will have any “housing costs element” limited to the LHA rate, appropriate to the individual or family’s requirements in whatevever BMRA they reside. The size criteria in LHA is similar to the “Bedroom Tax” but includes at the lower end, the Shared Accommodation Rate (SAR), which applies to single people under 35 who have no dependents or non-dependents living with them. The SAR represents a figure, usually in the region of 40% less than the 1 bedroom rate; in London its even less. In LHA currently, it also applies to singles and couples over 35 who share accommodation (HMO etc.) with others, but I suspect, from the DWP statement, they intend using the more generous Universal Credit criteria, which would mean the SAR only applies to those single adults, under 35.
You may recall from my earlier “Summer Budget” bulletin, the LHA rates, UK wide, are being effectively frozen from April 2016, so the figures I’ve provided in the spreadsheets and associated link (Scotland) should give you a pretty accurate benchmark to compare with your own rental charges, including any annual increases you decide to factor in, moving forward. Pegging the rents in this way will undoubtedly provide the DWP with a stranglehold on housing cost levels, which, longer term, could seriously affect your tenants’ ability to meet their full contractual rent, your own cashflow, and ultimately your future business plans.
DWP should, in due course, provide more comprehensive detail and I’ll ensure you’re updated at that point. In the meantime, I hope this information is of assistance to you. As usual, please contact email@example.com or 07733 080 389 if you require clarification on any point.
UC Advice & Advocacy Ltd