What’s the difference between Housing Benefit (HB) and Local Housing Allowance (LHA)?
Basically, a tenant receiving financial aid from the council is either on Housing Benefits (HB) or Local Housing Allowance (LHA). The difference can be somewhat crucial for a landlord.
Local Housing Allowance (LHA)
LHA was introduced in April, 2007. It’s is a new way of calculating Housing Benefit (HB) and is based on the area the customer lives, number of occupiers in the property and household size. LHA is a much fairer way of calculating HB, as it ensures that tenants in similar circumstances in the same area receive the same amount of financial support for their housing costs.
Housing Benefit (HB)
So, if LHA is the new way of calculating HB… Yes, you guessed it. HB is the original predecessor. HB is very similar to LHA in the sense that If you’re on a low income and need financial help to pay all or part of your rent, you may be able to get Housing Benefit. However, unlike LHA, HB doesn’t take into account all the variables, so someone living next door to you, in the same position as you, maybe receiving more benefits. So it’s not as fair or as well calculated, hence why it’s been replaced by LHA.
Not everyone has switched over from HB to LHA as yet. If a tenant is already on HB, they will not be affected by LHA unless they change address and move into accommodation rented from a private landlord- that’s when they will be moved onto LHA.
Eventually, HB will be completely abolished, and those landlords taking on new DSS tenants will get LHA tenants, not HB tenants.
How is this relevant?
It’s relevant because the main difference between HB tenants and LHA tenants for a Landlord will be the loss of security. Yes, that’s right. Let me explain…
A few days ago I wrote an article about The Positives Of DSS Tenants, and one of the points was that landlords get paid directly. But apparently that’s not ALWAYS the case anymore…
Those on HB can choose to have their Housing Benefit paid:
- directly to your landlord
- to you by cheque
- by Direct Payment into your bank or building society account
But as I mentioned, HB are past their expiry date, so only landlords that have been holding DSS tenants from before 2007 April have tenants on HB.
Those on LHA will normally have their benefits sent straight into their account (if they have one) or by cheque. Payment is not normally made to the landlord. It is up to the Tenant to pay the rent to the landlord.
If the tenant is worried about managing their money, they can ask their local council if they can help. In some cases they may be able to pay their benefit directly to the landlord.
Did you happen to spot the significant difference between the two?
Landlords with DSS tenants on HB have the luxurious option of having payments being sent directly to them, while the new LHA scheme requires the benefits to be sent directly to the DSS tenant.
BOOM, there goes the landlord’s security, and one out of the two pitiful positives of taking on DSS tenants (other positive being that they’re free).
Apparently the new arrangement is meant to encourage tenants to become independent and manage their own money. I’m pretty sure that a large portion of people on social benefits are on benefits because they are BAD at handling money. So why take the risk? If they want to practice the art of being responsible with money, the council should buy each DSS tenant a game of Monopoly. That way they can practice with fake money and not fuck with real peoples lives!!
DSS tenants are already hard enough to house because of their bad rep; now they’ll be even harder to house due to the loss of security for landlords. It would be interesting to see data on this- how many Landlords have evicted DSS tenants since April 2007 compared to the previous years? I’m assuming the line graph shoots up like an erection…
I know it says that under special circumstances the council will pay directly into the landlord’s account if the LHA tenant is worried about managing their money, but the word on the street is that arranging that is extremely difficult, and rarely happens.
What a pile of crap.
Disclaimer: I'm just a simple landlord blogger; I'm not qualified to give legal or financial advice. Any information I share is my opinion based on my personal experiences as an active landlord, and should never be construed as legal or professional advice. For more information, please read my full disclaimer.