Cap on Local Housing Allowance rates could cause problems if implemented

publication date: Dec 3, 2010
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

Cap on Local Housing Allowance rates could cause problems if implemented

The Coalition Government have started to realise that their cap on the Local Housing Allowance (LHA) could cause major problems within areas such as London if implemented.

Due to private landlords having potentially to turf out LHA tenants to make ends meet, the government have agreed to delay the implementation of the cap until January 2012 for people that are already claiming the benefit.

Caps for new housing benefit claimants will be brought forward though and all be introduced in April 2011 (instead of April 2011 and October 2011). The new caps that will apply are:-

  • £250 for a one bedroom property
  • £290 for a two bedroom property
  • £340 for a three bedroom property
  • £400 for a four bedroom property

On top of this, the Minister for Welfare Reform, Lord Freud has agreed to look at returning to paying landlords LHA directly. Lord Freud said:-

"We are looking to private landlords to respond to the need for lower rents and in return we are prepared to permit direct payments from the state. This incentive will bring an overall downward pressure on rents in the private sector. As these rents come down, more properties will become available to claimants and landlords will have certainty that their income will be protected."

However, according to Kate Faulkner, leading property analyst and commentator, this change in policy could just store up problems for the future. “The government are trying to reduce rents while in the market there is a distinct upward pressure which can only continue.” Kate explains “With little lending coming forward for buy to let investors and few new properties coming on the market, people are starting to shift from buying to renting while the market is uncertain and areas such as London have already experienced 10% rent increases in 2010. With little stock and high demand, the future of rental trends is upward”


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