There has been a lot of publicity recently about Newham council in London trying to move tenants hundreds of miles to cheaper areas of the country. Newham say they cannot find homes for these people in their borough because of the new rules on Local Housing Allowance. Some commentators have called this “social cleansing”.
Buy to let property expert David Lawrenson has written an interesting article about this issue and landlord clients might like to take a look at www.lettingfocus.com/blogs. David points out that in theory there should be sufficient properties available because the LHA rate is set at the 30% percentile of local rents so all else being equal three out of ten rental properties on the market at any time should be available to LHA tenants.
David believes that part of the problem is that landlords are very reluctant to take on LHA tenants. There are many possible reasons for this but we have commented before on the fact that it is no longer the case that the tenant can request that the rent is paid directly to the landlord. This means that the money normally goes to the tenant first and may not reach the landlord. Only if the tenant is substantially in arrears will the LHA be paid directly to the landlord. LHA rents are paid in arrears which is not very helpful if the landlord needs to keep his cash flow healthy so he can make his mortgage repayments on time. Another issue is that apparently some buy to let mortgage providers do not allow letting to tenants on LHA.
Many commentators are now calling for the government to make it more attractive for people to enter buy to let market. Changing the tax system so that property letting is taxed as a business rather than an investment is high on landlords’ wish lists. Enabling tenants to opt for direct payment to the landlord would be popular with landlords in the social housing area.