Local Housing Allowance (LHA) is the way that HB is worked out for most tenants in the private sector - it does not replace HB. It basically means that the HB Office ignore the level of rent actually being charged and use a rent figure that they assess based on the:

• Area in which the tenant lives - the Broad Market Rental Area, and
• The size of the property the tenant is deemed to require.
• NOTE the HB office only consider rents in the bottom 30th percentile of the appropriate size, in the area. That means the top 70% are unaffordable to private tenants.

The tenant's income and needs etc are worked out in the normal way.

The key features of the scheme are:

• The tenant's eligible rent equals the LHA figure that applies to them.
• This means that there are no ineligible services in the LHA scheme.
  
• For the majority of claimants, payment of HB is normally made to the tenant rather than the landlord.

And click here for the DWP's LHA Guidance Manual. 

Who is affected by LHA?

The LHA applies to all new claims / change of address notifications from tenants in the deregulated private sector only since 7th April 2008 (click here for more information): once on LHA the claim will be reviewed on an annual basis.

There are different rules depending on whether or not the LHA claim was made before 1st April 2011 or after.

Tenancies in the Social Housing Sector are exempt from the LHA, and there are also other types of accommodation that are exempt.

Those exempt from the LHA include:

• Council and other lettings where HB is awarded as a rebate.
• RSL tenancies.
• Pre 1989 tenancies.
• Shared ownership cases.
• 'Exempt accomodation' ie where the landlord provides care, support or supervision.
• Exceptional cases - caravans, houseboats, mobile homes, hostels.
• Board and attendance cases such as hotels.

Why did the government decide to introduce LHA?

On 17th October 2002, the Government announced a progamme of reform to HB, which included the running of a standard Local Housing Allowance (LHA) scheme in nine pathfinder areas, which was extended in March 2004 to include a further nine areas.
Following an extensive evaluation process, provision for the national implementation of the LHA was contained in the Welfare Reform Act 2007, and the LHA was introduced nationally for all new claims for HB made by private tenants (ie non council/RSL) on 7th April 2008.

The government hoped that the LHA would promote:

• Fairness,
  The scheme generally pays the same amount to tenants with similar circumstances living in the same area.
  
• Choice,
  Tenants are able to choose between paying more to stay in a property that is larger, or keeping the difference if they move to a cheaper property (to a maximum of £15 a week - a rule that has now changed).
  
• Transparency,
  It is easier for tenants and landlords to know in advance how much rent could be covered by HB.
  
• Personal responsibility,
  Paying LHA to the tenant gives the responsibility to them for budgeting and paying their rent themselves. Accepting this responsibility whilst on benefits will make it easier to manage the move into work.
  
• Financial inclusion,
  Most people will have their housing payments paid into a bank account and set up a standing order to pay the rent to their landlord.
  
• Increased work incentives,
  Greater certainty about what in-work benefit someone could receive is intended to remove barriers to take the step from welfare to work.
  
• Simplicity,
  There is no longer a need for complex rent determinations restrictions that contribute to the delay in processing claims.

Further reform of LHA has taken place from April 2011, and will take place from April 2012 and 2013. - click on the following link for more information from our ucnotes website. (Login with your hbnotes username and password.)

 In February 2011 the DWP produced a 'Two Year Review of Local Housing Allowance. The LHA scheme went national in April 2008: this report  investigates whether or not the LHA has achieved its objectives.