Government committee’s proposal clashes with Budget announcement
MPs: review LHA ‘lottery’ system
A cross-party group of MPs has demanded a review of the way local housing allowance is calculated because the current system makes access to a home a ‘postcode lottery’.
A report into local housing allowance published on Tuesday by the Work and Pensions select committee, recommends the government and the Valuation Office Agency review any broad rental market areas — which are used to set LHA rates — where rents vary greatly. At present, LHA paid to tenants is calculated based on the median rent in ‘broad rental market areas’, which can cut across boundaries.
The committee had heard evidence that rents within some BRMAs vary so greatly that claimants are priced out of certain parts of cities and towns. Access to low-paid work should be one of the criteria for setting BRMAs, the MPs argued.
Committee chair Terry Rooney said: ‘We recommend that the department asks the Valuation Office Agency to urgently identify and review those BRMAs where rents vary greatly and, as a consequence, may be distorting the local rental market and increasing barriers to work.’
The recommendations on BRMAs conflict with last week’s announcement in the Budget that the government will cut the housing benefit bill by £250 million by excluding the most expensive rents in an area when calculating LHA. While the BRMA reform suggested by the DWP committee would drive LHA up in areas where rents vary dramatically, the government’s plans could cut benefit payments by as much as a third in some of the most expensive areas.
Landlords and homelessness charities had claimed that the level of arrears had risen sharply since the introduction of direct payments to tenants in April 2008. However, the committee criticised the ‘scarce’ availability of data on whether arrears had actually risen, and recommended the DWP conducts more in-depth studies on the extent of rent arrears.
The National Landlords Association said any reform of BRMAs would need to be carefully tested to ensure the same problems did not arise again.
A DWP spokesperson said: ‘Our recent proposals for housing benefit will make sure that local housing allowance is fairer and acts as a clear incentive to work.’
The committee’s key recommendations
- Identify and review areas where the current broad rental market area system is not working.
- Retain the current system of direct payments to tenants, rather than giving tenants the choice to have rent paid direct to landlords instead.
- Change LHA rules to allow reasonable adjustments for disabled people who need an extra room for a carer.
- Ensure local authorities identify vulnerable tenants early to prevent a build-up of arrears.
- Conduct more in-depth research into the extent of arrears.
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