Ministers Offer Direct LHA Payments

By: Madalena Penny

Speculation surrounding the delays to government housing benefit caps was confirmed this week by the DWP.

The cuts, which were due to be introduced next April and October will now only apply to new applicants in April 2010, while existing applicants will not be affected until January 2012.

In response to the announcement, the social security advisory committee said:

“In our view this is a high-risk policy that may have far-reaching adverse consequences, affecting not only the ability of people on low incomes to find decent affordable housing, but the workings of local labour markets and public services.”

The time-scale changes was decided by ministers amid warnings that tenants would need longer to find alternative affordable housing, especially in London where the caps would affect tenants in the private rented sector the most, making 93% of all rents out of reach to LHA claimants.

Douglas Alexander, the Shadow Work and Pensions Secretary said:
“Labour will maintain the pressure for further changes to this ill-thought through housing benefit package, not least their plans to punish people who have been unable, despite their best efforts, to find work for a year by cutting their housing benefit by 10%.”

Ministers also announced a further £50million has been allocated over the Spending Review period to support these measures and offered a direct LHA incentive to landlords. Up until the end of 2009, rent arrears in the LHA sector were estimated to be in excess of £220million due to tenants failing to pass housing benefit payments on to landlords.

In a statement this week, the Minister for Welfare Reform, Lord Freud said:

“We are looking to private landlords to respond to the need for lower rents and in return we are prepared to permit direct payments from the state.

“This incentive will bring an overall downward pressure on rents in the private sector.  As the rents come down, more properties will become available to claimants and landlords will have certainty that their income will be protected”.

Under the current policy, housing benefit payments are made direct to the tenant.  The new incentive would allow housing benefit payments to be made direct to the landlord.  But ministers are clear this is likely to be a temporary agreement to provide an incentive to landlords to lower their rents and is by no means a return to direct payments being made to landlords as a matter of course.  However, pre-election, the conservatives agreed to reform housing benefit policy and allow tenants the choice to have payments made direct to their landlords.

It is as yet unannounced how the rent reduction incentive will be governed and what applicable reduction is suggested by ministers.