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21 November 2016

UK Government to cap housing benefit at LHA rates

Community Housing Cymru (CHC), the organisation which represents housing associations in Wales, has criticised the decision to limit the money tens of thousands of tenants get to help pay their rent. It follows the announcement by the UK Government to cap housing benefit for social housing tenants at Local Housing Allowance (LHA) rates.

In a written statement, Damian Green, the UK Secretary of State for Work and Pensions, said there will be “a simplification and alignment of the application of the Local Housing Allowance policy for general needs accommodation, in light of the changes that have been made to supported housing.”

Stuart Ropke, Chief Executive at CHC said: “This policy is bad news for tenants. Many people will be forced to make very difficult decisions about how they could make up the shortfall between what they received in benefits and their rent. It is now crucial that transitional protection is available for all who need it and who will be affected by this policy in Wales”

“Our members will continue to support tenants, however it will also impact on them and their ability to invest in new and existing homes. In recent years, Welsh housing associations have led the way in providing much needed social housing. If their rental income is affected by this change to benefits they will undoubtedly have less money to spend.”

The cap will come into effect in 2019, a year later than previously expected. It will affect all tenants claiming Universal Credit and anyone on Housing Benefit who took on a new or re-let tenancy from 1 April, 2016.

Clarissa Corbisiero-Peters, Director of Policy at CHC, said: “We also have real concerns about the way the LHA rates are set, and that in many areas, it does not reflect the true cost of housing.
“The UK Government has also frozen the LHA rate until 2020 and today’s announcement will mean our work on ensuring the LHA rate reflects the local market will be more important than ever, as will ensuring any Welsh Government rent policy is fit for purpose. We need a new system that works for tenants and housing providers that genuinely reflects the local housing market.”

Note to editors:
The changes to LHA for general needs tenants announced today are as follows:
• The LHA will apply to existing UC claimants from 2019.
• The LHA will apply to new and relet tenancies signed after April 2016 with the reduction in benefit entitlement being implemented from 2019
• The LHA will apply to tenants moving from housing benefit to Universal Credit after 2019 but transitional protection will be applied.
• Tenants moving from HB to Universal Credit between now and 2019 will be subject to LHA rates. No transitional protection will be available.

239,980 people in Wales claim housing benefit, with an estimated 99,530 renting from a housing association.
The LHA was introduced in 2008 and is the housing benefit payment that is received by tenants in the private rented sector to help towards paying their rent. At the time rates were set at a level for the median or 50th percentile market rent for each category of dwelling within a broad market rental area (BMRA).
In 2011 reforms introduced by the UK Government restricted the LHA rate to the 30th percentile (i.e the bottom 30% of the market).
There are 22 BMRAs in Wales and for each BMRA there are 5 LHA rates as follows:
• Shared accommodation rate
• 1 bedroom rate
• 2 bedroom rate
• 3 bedroom rate
• 4 bedroom rate
The UK Government’s Department for Work and Pensions is responsible for setting the LHA policy framework with local rent officers collecting the rental data and calculating the LHA rates in line with the DWP policy. In Wales the rent officer is employed by the Welsh Government.
In the last UK budget, the Chancellor announced that LHA rates would be frozen for four years from April 2016.