Background

In October 2002 the Government announced the introduction of a Local Housing Allowance (LHA) to replace housing benefit (HB) for private tenants. This paved the way for the introduction of nine pathfinder areas in 2003 to pilot significant changes to the way HB levels are assessed and how HB is paid.

The first of the LHA pathfinders went live in Blackpool in November 2003, and eight pathfinder areas were added in February 2004 in Lewisham, Teignbridge, Coventry, Brighton and Hove, NE Lincolnshire, Edinburgh, Conwy and Leeds.

From April 2005 a further nine councils started to implement the LHA, starting with Wandsworth, followed by East Riding, St Helens, Argyll and Bute, South Norfolk, Norwich, Pembrokeshire, Guildford and Salford.

The changes being piloted in the LHA pathfinders revolve around the introduction of a flat rate of benefit for private tenants. This flat rate is based on the area in which a person lives, the number of occupiers in the household and (as now) their income and capital. Rent officers in the pilots are responsible for drawing up Broad Rental Market Areas (BRMA) and setting rates for a range of properties in each BRMA.

Aims

According to the Department for Work and Pensions (DWP) the fundamental aims of the LHA scheme are to promote:

• fairness: by paying the same amount to tenants with similar circumstances living in the same area i.e. entitlement will not be based on the property but on accommodation needs
• choice: by allowing tenants to choose between paying more to stay in accommodation that costs more than the housing benefit they are entitled to, or paying less to stay in one that costs less
• transparency: by making it easier for tenants and landlords to find out in advance how much rent could be covered by HB, preventing people signing up to a tenancy that is not then covered by HB
• personal responsibility: by paying HB directly to the tenant
• increased work incentives: by providing more certainty about what in-work benefit would be received
• simplicity: by removing the need for complex rent restrictions and individual referral of rents to rent officers.

Safeguards

New safeguards have been built into the pilot to work alongside existing ones. Existing safeguards include direct payments to landlords if the tenant has eight weeks’ rent arrears and/or where some of the tenant's Income Support or Jobseekers Allowance is being paid to the landlord, and in some cases when the tenant has outstanding rent arrears from a previous tenancy. Another safeguard introduced by the pathfinder LAs will be the provision of money advice to tenants.

Vulnerability

In the pathfinder areas there is scope for HB to be paid directly to the landlord if the tenant is considered to be vulnerable (can't pay) or is unlikely to pay (won't pay). The DWP has produced guidance for local authorities to help them decide who can't pay or won't pay, Housing benefit Local housing allowance guidance manual (DWP 2003) (click on link above), but it has indicated that it would partially be relying on organisations and individuals to bring issues of vulnerability to the attention of the local authority. Examples of circumstances affecting vulnerability assessment outlined in the guidelines include drug/alcohol problems, learning disabilities and illiteracy. These examples represent vulnerability in the context of the tenant’s ability to pay rent, and tenants would need to produce evidence that they have the problem. One possible effect of vulnerability identified by the Department for Work and Pensions (DWP) is that the person is in receipt of help from a homelessness charity.

Concerns

Despite the safeguards, there are concerns that:

• more tenants will fall into arrears if they receive the benefit directly
• tenants may face increased harassment from landlords, as landlords will not know whether any delay in payment is due to a delay in housing benefit or due to non-payment by the tenant
• the choice of substandard accommodation for a lower rent may have a negative impact on people's health
• there will be no incentive for landlords to improve the quality of their accommodation, as the condition of the property will be taken out any assessment of rent
• rent levels will increase.

Social housing sector LHA?

There are also concerns expressed by members about the DWP commitment to introduce pilots in the social housing sector. In a meeting with DWP officials this month Homeless Link was told that the complexities of the social sector – including the nature of the clients and practicalities of setting rates in a fair and transparent way, and the fact that local authority tenants currently don’t receive direct payments – are well understood within the Department. They indicated that there are no concrete plans to introduce a pilot in the immediate future and that all plans will be made in consultation with all stakeholders.

Evaluation

During the pathfinder phase (lasting approximately two years) and afterwards, the pilots will be evaluated. The DWP has appointed a consortium of the University of Birmingham, the University of York, the University of Loughborough and the National Centre for Social Research to carry out the evaluation. The evaluation will be based on interviews out with landlords, tenants, pathfinder authority and Jobcentre Plus staff, rent officers and other key stakeholders in all sectors, and analysis of HB management data.

The evaluation will inform the national rollout of LHA and seeks to answer a number of specific questions. These include questions that are of particular concern to homelessness charities:

• Does the LHA have any impact on rent levels and the supply and quality of accommodation in the private rented sector?
• What effect has the restriction of direct payments to landlords had on claimants and landlords in the pathfinder areas?

Evidence gathered from pathfinder areas in April 2005 indicated that the new system was working and that the move to direct payments to tenants was not resulting in an increase in arrears. The DWP has cited that 90 per cent of benefit is now paid direct to the tenant in the pathfinder areas, without major problems. Although this figure may decrease with the national roll-out it is hoped that this will not be significant.

Homeless Link is currently looking at ways in which our members in pathfinder areas can input into the evaluation of the scheme. We will keep you updated on our progress on this.