How housing benefit – now transmuted into ‘local housing allowance’ – is calculated and paid has changed.

From 7 April 2008 the allowance will be based on the area in which the claimant lives and the size of his or her household. The allowance is intended for people who rent their homes from private landlords, who are on a low income, and need help to pay their rent.The new Local Housing Allowance will apply to all private sector tenants who make new claims for benefit and to existing tenants who change address or move into private sector accommodation on or after 7 April 2008.

The Department for Works and Pensions has tried the new system in 18 pathfinder areas and says it had been subject to extensive and independent evaluation.

Flat rate allowance

Local Housing Allowance is a flat rate allowance based on household size and location. Tenants living in similar circumstances will receive similar amounts. Local Housing Allowance makes it easier for tenants to find out in advance how much rent could be covered by the benefit.

There is no change to the entitlement rules, which will still be based on a person's income, savings, proof of rent and the like.

The amount of the allowance is not based on the property in which the tenant lives, but rather on:
• who lives with the tenant;
• which area the property is in;
• how much money the tenant has coming in; and
• what savings the tenant has.

The Rent Service will calculate individual LHA rates for different sizes of property based on the number of bedrooms in each ‘Broad Rental Market Area’. Local Authorities will continue to be responsible for the final benefit calculation for each individual entitlement.

The local housing allowance rates will be published each month and will be available on the DWP website.

Changes for landlords

The only change for landlords is that payment of the allowance will normally be made direct to the tenant. The tenant will be responsible for paying his or her rent to the landlord.

Local housing allowance affects any landlord who enters into a deregulated private tenancy agreement with a person awarded housing benefit; that is, a tenancy that has been entered into since 1989 and is not covered by one of the exceptions listed below.

But the introduction of the new allowance does not affect:

• local authority landlords who let to 'council tenants';
• tenancies with registered social landlords;
• some supported housing tenancies which started before 15 January 1989 (2 January 1989 in Scotland);
• tenancies in caravans, houseboats or hostels; or
• tenancies where the Rent Officer has decided that a substantial part of the rent is for board and attendance, such as hotel accommodation.

Increased tenant responsibility

The stated idea behind local housing allowance is that the new method will increase tenant responsibility, place choice firmly in their hands, and help develop the skills needed for them to make the transition into work. The objectives of allowance are:

• fairness – to pay similar amounts to tenants with similar circumstances;
• choice – to allow tenants to choose between price and quality of accommodation;
• transparency – it is easier for tenants (before they commit themselves to a property) and landlords to find out how much rent could be covered by local housing allowance;
• personal responsibility – making tenants take responsibility for budgeting for and paying their own rent;
• financial inclusion – to encourage tenants to have their housing payments paid into a bank account and set up a standing order to pay the rent to their landlord; and
• improved administration and reduced barriers to work – a simpler system helps to speed up the administration of housing payments giving tenants more confidence when starting a job that any in-work benefit will be paid quickly.

Local housing allowance will normally be paid to tenants instead of the landlords in order to encourage claimants to take greater responsibility for managing their financial affairs by paying their rent to their landlords in the same way as other tenants.