Whether you have tenants on Housing Benefit (paid direct pre-LHA) or under the LHA system, there are difficulties for landlords.
For pre-LHA tenants, we notice the housing benefit office would stop the rent, simply because they needed a piece of paper from the tenant. It takes them 5 months to re-start the rent, but when they do, they only pay the last 3 months rent. HB office don't reply to letters, emails. 45mins on the phone, to get through, but they tent to cut off before you even speak to someone. I don't know if this is a delibrate on the parts of HB, to withhold rent. Letting Agents in my area, say this is becoming more common, but I think this is foolish, as my tenants are on really old cheap rents. So it is silly for HB office to try to scam.
With LHA system, the tenant receives the rent. So if the tenant stops paying to the landlord, it is another problem.
When you want to get rid of a bad tenant on HB, it is not a simply a case of sending them notice. They are told by the local council, to ignore the notice and wait until the landlords takes you to court. Even after you win judgement, you can't get the tenant out and you have to wait until Court bailiffs are appointed. It can take up to 8months and cost £1,000 (which can never be recovered).
For all the problems, I can understand, why landlords reluctant to rent out to HB tenants.