Local Housing Allowances – Credit Unions to the rescue

The Local Housing Allowance Scheme, discussed in my earlier article regarding landlords from Blackpool, is due to be rolled out across the country in 2008. The main criticism from landlords is that under the new scheme the rent cannot be paid to them direct any more. It has to be paid to the tenant, unless either the rent is in arrears of eight weeks, or if the tenant is adjudged to be 'vulnerable'. However in both of these cases the direct payment takes some time to be set up, during which time arrears may be accruing making the tenant vulnerable to a claim for repossession.

Many tenants also are unhappy about not being able to elect to have the rent paid to their landlord direct. They would much prefer to know that this is being done and that their home is not at risk. If they want rent to be paid direct, it seems ridiculous that they should not be allowed to have it.

The reason given on the DCLG web-site for the enforced payment to tenants is

"Personal responsibility: Empowering people to budget for and to pay their rent themselves, rather than having it paid for them, helps develop the skills unemployed tenants will need as they move back into work"

However it is noticeable that this personal responsibility is not being encouraged where the landlord is a social landlord, or where the benefit is for mortgage payments. Only the poor old private landlord (with considerably less political clout than the social landlords and the banks) is going to be vulnerable to having his rent spent on drink and drugs in an effort to encourage personal responsibility among his tenants.

There may though be an answer. I attended a Landlords Forum meeting at Suffolk Coastal Local Authority recently where a lady from a local Credit Union told me that they are now setting up special accounts for tenants so the rent can be paid in and then paid out to the landlord. This is better than having the LHA paid to the tenants bank account because, as it is only being used for the transfer of the housing allowance, the money is not at risk of being swallowed up by the tenants overdraft or being spent by the tenant (perhaps in error, perhaps while under the influence) on other things.

Even more interestingly, we were told by a gentleman giving a talk on Local Housing Allowances, that section 94(3) of the Housing Benefit Regulations 2006, provides for the tenant to request that the benefit be paid to another person. This is the statutory authority for setting up the Credit Union payment, however he speculated that the tenant may also be able to use this section to request that the rent be paid to the landlord!

Looking a little closer at the regs, section 94(1) seems to be providing against this. If this is the case though, that means that the only person the tenant is not allowed to request the rent be paid to is the landlord – the person he is legally liable to pay the rent to! How mad is that? Are there any human rights ramifications here?

Still, the Credit Union idea seems like a very good one, and I commend it to you.