LHA Payment Policy Review?

Residential rental arrears have had a massive negative impact on private landlords in the UK.  The introduction of the policy by the then Labour government in April 2008 for LHA payments to go direct to the tenant, rather than the landlord has had a detrimental effect on the private residential sector.

Pre-election, the Conservative Party announced that should they become the next government, they would re-instate the right for tenants to direct payments straight to their landlord.  The emergency budget on June 22nd will disclose new government policies, including the much worrisome hike in capital gains tax and a likely vat increase.

Up to the end of 2009, there were 675,000 LHA tenancies and rent arrears in this sector were considered to be in excess of £220 million.  Currently there are 3.3 million households accommodated by the private residential sector and the total extent of rent arrears is as yet unknown.

While landlords are struggling to make mortgage payments, little consideration is given by banks for landlords who are suffering through defaulting tenants.  Other tenants themselves are falling behind with rent payments due to the countries financial situation and it’s unemployment ramifications.

As a consequence of rental arrears, landlords are now withdrawing from LHA tenants, which in turn is having a serious impact on the PRS, as more consumers are either by choice or for financial reasons renting rather than buying, leaving the sector in short demand for quality housing.  More stringent tenant referencing is enforced as landlords try to protect themselves from defaulting tenants.  As the housing shortage continues, a review and reform of the current LHA payment policy would be very much welcomed.

Madalena Penny

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