LHA Increase to trigger rent increase?

Hi. I think it's a very valid question. The LHA rates were due to increase on 1st April 2020 as we came to the end of the 4 yr freeze on rates. But that increase was aprox. 3%. Then the Chancellor in his speech around 25th March, as I understand it (apologies if I get it wrong!) he changed the way the LHA rate is calculated from the 30th Percentile to 50th Percentile averages. This meant that rates in some areas shot up by 20-25%.

If like me, you have tenants on LHA rates, which previously was on average 20-30% below private rental rates, then I see no harm in increasing the rents where the increase will be picked up by the benefit system. It will help balance against a possible loss of income from tenants who cannot afford the top-up (if there is one) or those who pay themselves and can no longer afford to as they are out of work. It also brings the rents inline with what the property should rent for.

It's a discussion you should have with your tenant and reassure them you are not looking for them to pay the extra.

Moving forward, it's impossible to say what the Government will due post Covid19, but I can't imagine they would reduce the rates. I'm not aware of that ever happening in the past, but we are in unprecedented times and it's a lucky dip as to 'what happens next' so to speak!

Some may criticise increasing rents at this time, I get it, but I can't claim furlough, or a grant or any other sort of self-employed help from any of the schemes so by increasing rents (paid for by the benefit system and not the tenant) is just a work around in my opinion.

We are going to increase our rents by half the increase. We have the expenses of the electrical testing coming in and if and when some of are tenants go on LHA there will be late payments due to universal credits which lump it all together

Reply to the comment left by Paul Goulder at 23/04/2020 - 11:23
Has the electrical testing Bill been put on hold I think it was due to become law on 1st April ?

In oxfordshire the LHA rates are about 50% below the private rental amount, especially in HMOs . The councils / DHP response is to let the arrears amount up and evict them . Not ideal in current lockdown .

Hi Reluctant landlord
Originally, the Government planned to increase the rates by no more than 1.7%, a rather measley amount, given the rates had been frozen for 4 years beforehand.
Out of the blue, and directly related to the COVID crisis, the Government changed tack, by its decision to restore the 30th percentile rate (not 50th). The reason for the large jump can be directly related to the 4 year freeze and significant increase in rental charges, in some parts of the country.
Many landlords were surprised by the rate of increase in some instances. Nevertheless, those LHA/UC tenants who were already being charged a contractual rent, equal to or greater than the LHA rate have already been awarded increases to the new rates, without doing anything.

Contrastingly, other landlords have since started the process of increasing their contractual rents, to partially cover the gap, whereas, others have made the jump in one step. Having done so, their tenants need to advise the Council (LHA) and/or DWP if Universal Credit is being claimed. A similar situation to April 2008, when the LHA scheme as first introduced, rent levels for the first time were specified in this way, causing an £800M hike in LHA costs that year!
The UC "housing costs" rules, as far as HMO's are concerned, are potentially more generous than HB/LHA, as they simply use as a yardstick, the age of 35. Anyone under 35 (unless they fall into an excepted category) is paid the Shared Rate, Whereas, those 35 + should receive the 1 bed rate, simply because of their age. Those under 35, for example, receiving PIP (Daily Living), DLA (Care), or previously spent 3 moths or more in a homeless hostel, again qualify for the 1 bedroom rate (rather than the SAR).
I agree with Prakash's view that the Government is unlikely to remove the 30th percentile next April but what it may do is simply freeze the rate.
Bill

Bill has put what I was just about to type.
Great minds think alike.

Some Landlords are now putting them up cause they've kept them far too low trying to look after existing tenant when LHA rates wasn't enough.

I have theories to why the chancellor put the rates up.

It's been far too low with the benefit freeze since 2016 as we know.

He can now please the benefit tenants & get some votes off them without cheesing off the workers who don't like benefit tenants, saying they need help cause of the Coronavirus.

Also we got 500,000 (at the time) working Let's call 'em posher people coming onto benefits Universal Credit LHA. And once they received the 'rent' Housing Element part, they'd say What u having a laugh, How can I pay my rent out that pittance. They'd kick up a fuss, complain more than the existing UC tenants & the Media would pick up on that much more. Hence he had to act as to not be seen to be too cruel cause we all know for last 5+ years, benefit tenants haven't been able to afford the cheapest houses almost anywhere.

Thanks all. In some cases some direct rent direct payments have already been increased automatically, in others not yet so I will have to wait next months payments to be sure exactly what the status is for each tenant. At that point I am afraid I will be putting up the rents accordingly. For most of my tenants the rent is fully paid by HB/UC but where a tenant is paying a top up I wont in increase their contribution - but I will increase the rent so it is up to the LHA rate.

Just thought of another question - if a rent increase will not effect the tenant at all in regard to any top ups (they currently do not pay anyway) - can I notify HB/DWP myself direct? If it is not for the benefit of my tenants, asking them to contact the department about the rent increase will fall on deaf ears....

Looks like we all agree with what's happened and how to deal with it. The only thing I would add to what I said earlier is that many tenant's are on a Benefit Cap. If that's the case they won't get any more support even in the rents are hiked up to the new LHA rates. Well, UC may change the amount of HB they get but then reduce the same from their other benefits with no net increasing effect. In that situation, you won't receive any additional income, unless you charge the tenant which we all agree we don't want to do.

Also, the Councils should automatically increase the payments where the rent was set to a level higher than the previous LHA rate based on their entitlement. BUT if (like me) you was only charging LHA rates (yes, I do only charge LHA rates in London!) then you will need to increase the rate by way of a letter / addendum to the AST and inform HB or have the tenant update UC through their online/app account as Bill suggests.

Reply to the comment left by WP at 23/04/2020 - 18:19
If they're on HB you can inform the LA HB department by way of email. If they're on UC, only the tenant can do this through their online/app account. You still need to inform them of course. If you explain you need their assistance to maintain their tenancy and there should be no net disadvantage to them, they should understand and be willing to co-operate. I didn't have any issues.