LHA reform aims to reduce benefit bill

Ministers claim that by excluding the most expensive rents in an area when working out the local housing allowance, they will cut payments of the benefit by more than a third in some areas. Local housing allowance is currently calculated using the median rent in an area.

Ministers have already made clear their intention to cut the soaring £17 billion housing benefit bill in the Department for Work and Pensions consultation on reforming the benefit, which closed last month.

Councils and landlords said the £250 million annual savings announced by chancellor Alistair Darling in Wednesday’s Budget would damage the private rented sector’s ability to accommodate the poorest tenants.

Mr Darling said: ‘The current approach pays very high rates to a small number of tenants in the most expensive areas. This discourages employment and is unfair.’

Mike Heiser, senior policy consultant at the Local Government Association, said: ‘The risk is that these reforms will be producing lower guideline rents which in turn could make it less encouraging for private landlords to operate in the housing benefit sector, which could have an effect on homelessness.’

The National Landlords’ Association also warned claimants would find themselves with a smaller choice of lower quality properties. Private landlords are also angry that local housing allowance continues to be paid directly to the tenant, which they say has caused a spike in arrears.

Sam Lister, policy and practice officer at the Chartered Institute of Housing, said: ‘If there are many very expensive properties in an area, removing the top few properties would have very little difference as there would still be a large number of high rents in the system.’

Philippa Roe, cabinet member for housing at Westminster Council, said the reforms would not go far enough to cut the number of families with LHA claims of more than £1,000 a week.

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