To some landlords, LHA is an area they don't want to get involved in. They steer clear of it perhaps because they don't understand it. But it pays to know the benefits of renting to LHA tenants versus renting to private tenants.
LHA can have a higher rental yield than private renting and if you do it correctly from the start, you can get paid directly and it's guaranteed. It can be an excellent cash flow strategy to generate income, also considering that LHA tenants tend to stay longer than private lettings tenants.
Granted, the government made cuts in April of 2011, reducing the rates somewhere between 7-10%. This led many landlords to wonder if the LHA was still going to be a higher rent value than private tenants. That is why knowing your area very well and finding out what sorts of properties are popular with LHA tenants is crucial. On the whole, LHA is still a lot more profitable and considerably higher than private rents by as much as 30% in certain areas. With the right know-how and by keeping in step with what the government are doing, savvy landlords adjust their strategy accordingly and continue to reap the benefits of LHA.
Once a tenant knows how many bedrooms he is entitled to for the size of his household, he can find out the maximum LHA rate for a property of that size in the area that he wants to live in. The rates are published on the Local Housing Allowance Rate section of the website, or you may check with your local Council office.
To give you an example, Greens Lettings is based in SE18 and here below are the LHA amounts as published by our local Council for the month of May 2014:
● Shared house, joint tenancy or single person under 35: £91.52
● One bedroom: £196.23
● Two bedrooms: £255.09
● Three bedrooms: £318
● Four bedrooms: £412.89
● Shared house, joint tenancy or single person under 35: £81.03
● One bedroom: £154.83
● Two bedrooms: £196.15
● Three bedrooms: £233.08
● Four bedrooms: £309.67
The basic rule under LHA is payment must be made direct to the tenant and not the landlord. This sometimes leads to rent not getting passed on. Two types of behaviour by LHA tenants with regard to the non-payment of rent are 1) intermittent or irregular arrears, which could be the result of a specific personal or financial crisis for the tenant, or 2) decisions to spend the LHA money on other things. But at Greens Lettings, we generally always manage to arrange direct payment to the landlord to avoid such risks.
If you are receiving LHA payments directly on behalf of your tenant, these will continue to be paid to you. The tenant lives in your property for 4 weeks, and then you get paid 4 weeks in arrears. But if the tenant has made a new claim, or changed address and moved to a new private rented accommodation, or has a break in his claim on or after 7 April 2008, then the LHA will be deposited directly into your tenant’s bank account. That way, they will be responsible for paying the rent themselves and in the process develop the skills they will need as they move back into employment.
There are circumstances wherein having the LHA paid to you directly would be to the tenant’s best interest. Payments will be made to you if:
Your tenant is considered vulnerable and has difficulty managing his own financial affairs
Your tenant is unlikely to pay their rent, has a history of fraud, has severe debt problems, or is unable to open a bank account
Your tenant has a history of rent arrears
Your tenant is having deductions made from Income Support or Jobseekers Allowance to pay off rent arrears
Each case will be looked at individually by the council, who has the discretion to pay rent to the landlord direct.
Claims are dealt with as quickly as possible and assessments are generally made within 14 days, as long as all supporting documentation is provided, but 28 days must be allowed before contacting the council regarding the progress of the claim. If information required is not complete, the processing of the claim might be delayed and the tenant could lose out on benefit. Greens Lettings can help tenants with their claim and see to it that the risk of delays and other subsequent difficulties are minimised with regard to receiving their LHA .
How do you know if a tenant is eligible in the first place? A tenant is eligible if he pays rent, is on a low income, or has savings below a certain amount, which is usually £16,000. With these conditions considered, a tenant may apply for LHA whether or not he is employed. But if the tenant lives with a partner, only one of them may claim LHA benefits. If the tenant is single and under 35, he can get benefits only for bed-sit accommodations or a single room in an HMO.
Some landlords are nervous about renting out their properties to LHA tenants, surmising that they might be more high-maintenance. Whilst others still believe that tenants claiming housing benefit are more likely to miss rental payments or to not look after properties properly. Greens Lettings is working to turn around that perception. It really depends on the quality of your property as it will determine the type of tenant you get. For example, if you have a 3-bedroom luxury house situated in a high-end area and you don't do repairs, then there’s only a certain type of tenant that you're going to get. On the other hand, if you have a refurbished house in a decent location and you as a landlord have been diligent with repairs and have kept the property at a high standard, then you will attract a combination of tenants that you can pick and choose from. It's about getting the right tenant and combining that with appropriate procedures like background and credit checks. If you do your due diligence, you can avoid the common headaches that some landlords associate with LHA tenants. But perhaps the best possible advice we could give you is to treat your tenants with respect, treat each one the same as the other, and be understanding of their situations.
If you have questions or would like to know more about LHA, contact us today.
Greens Lettings | Letting Agent SE18 | Property Management | Landlords | HMO Experts and Specialists
Greens Lettings is a property management company based in Shooters Hill, London. As your HMO expert in SE18, we continue to serve places in South East London such as SE2 (Abbey Wood), SE3 (Blackheath), SE7 (Charlton), SE9 (Eltham), SE10 (Greenwich South St), SE18 (Woolwich), SE23 (Lewisham) and SE28 (Thamesmead) — just to name a few. We are your local online letting agent specialising in HMO tenant find and full management. We offer free consultation and free property valuation. Contact Greens Lettings here.
