LHA - How to get tenants

[Twig]

Hi, I've never rented to LHA tenants before, so where do I begin? The LHA rent is higher than privately renting in my area, so how do I do it? Is there a register or anything like that I need to be on, do I contact the council, or do I just place an advert for a tenant on gumtree, and then the rent part comes via them? Where do I start? Thanks.

[leaseholder64]

In general, the tenant gets paid UC/LHA these days, not the landlord. The powers that be may well challenge claims that exceed the open market rent.

I would wonder if any arrangement that favours a rent set to the full allowance, when it is more than the market rent, might be treated as collusion by the landlord.

From your point of view, the only considerations should be whether rent you charge covers the increased risk of default (there will be a significant delay before you start getting direct payments), the difficulty you will have in evicting (councils will advise tenants to hang on until the bailiffs arrive), and that such tenants are statistically more likely to cause other problems.

[Twig]

Okay, thanks for that. If I still wanted a LHA tenant, would I just go ahead and advertise it on gumtree or similar, and then the tenant signs an AST the same way that a professional tenant would?

[JK0]

LHA rates are higher to entrap gullible landlords. Don't be one of them.

[nukecad]

It's unusual for the LHA to be higher than market rents, but it can happen.

The thing to remember is that LHA is the maximum that a council will pay in Housing Benefit.
If the rent is lower then they only pay the rent amount, if the rent is higher then they only pay the LHA and the tenant makes up the difference.

If your rent is higher than other similar properties in the area then the council will be asking why, and checking if any fraud is going on.
Inflated rent to make money from the benefits system is benefit fraud.

[RayG]

LHA rates are higher to entrap gullible landlords. Don't be one of them.

I strongly endorse that. It's all about quality when seeking a tenant. Sorry to say but benefit claimants pose a greater default risk and all L should be wary. This recent Shelter challenge is a farce. L must have the right to choose and this challenge will get nowhere. My question is WHY do you want to incur the extra risk of these tenants defaulting? It makes no economic sense.

[loanarranger]

Before you make the quantum leap into letting to a LHA, check that your lenders is prepared to allow you to Let to such persons and importantly your insurers as many will not accept such Tenancy arrangements and if they do the premium will possibly be much higher.

I too find your assertions that the rate is higher than that for private renting given that the amount has been frozen for some period of time and shows no sign of this being relaxed.
Better safe than sorry.

[theartfullodger]

..... Sorry to say but benefit claimants pose a greater default risk and all L should be wary. ..............

Keep pointing this out but MOST UK adults are benefit claimants (CB, CTC, WTC, PiP, JSA, ESA, DLA, HB, UC etc etc etc...). And some 1million working people are in receipt of HB or the housing element of UC. There are unsuitable tenants from the rich, the highly paid as well as benefit claiments.

Artful, 70, in receipt of 6 benefits thank you you generous taxpayers you....

[boletus]

There are unsuitable tenants from the rich, the highly paid as well as benefit claiments.

There are, but benefit claimants are nearly 3X more likely to be in arrears.

It is a high risk market and landlords need to be 100% aware of what they are getting in to.

[boletus]

It's unusual for the LHA to be higher than market rents, but it can happen.

I too find your assertions that the rate is higher than that for private renting.

The LHA rate is usually higher than equivalent market rents.

There are exceptions but generally speaking;
If you have a property that is in the lowest 1 percentile of market rates, charging a 30th percentile rent, it may be worthwhile doing.
If you have a property that is at the lowest 30th percentile of market rates and charging a 30th percentile rent then you are a mug (or very altruistic).
The skill comes in assessing and managing that risk between the two extremes.
IMO, when it was set at median rent (50th percentile) it was worth doing on some lower end properties, now it isn't.

If your rent is higher than other similar properties in the area then the council will be asking why, and checking if any fraud is going on.

No they won't and no they don't. Council's are fully aware benefit tenants are higher risk (and more work) and rents are priced in to reflect that higher risk. That is why many councils are offering landlords willing to take on benefit tenants Golden Hello Handshakes (AKA used tenners stuffed in a brown envelope).

Inflated rent to make money from the benefits system is benefit fraud

Higher prices to reflect higher risk is standard business practice.

given that the amount has been frozen for some period of time and shows no sign of this being relaxed

This is a very good point. What was a rent at the lowest 20th percentile may now be at the lowest 15th.

[Welshie]

Interesting thread, but take this scenario (it is real btw).

A family of 5 with 1 working adult who earns over £40k per year. Renting a 2 bed property and the rent is not that high for the area. They still receive Housing Benefit, which currently covers 20% of their rental liability.

Their rent x salary is over 45x, which would more than satisfy any affordability checks.

Says something about the market when the above scenario means they are still in need of financial assistance.

[JK0]

Welshie,

You let a family of 5 rent a two bed property?

[Welshie]

It's not my property, so no I didn't let a family of 5 rent a 2 bed property.

As a Housing Benefit Assessor, I don't really have any say in where someone lives.

[loanarranger]

I suggest social services might have something to say about 5 renting a 2bed house if children are involved.

[Jon66]

In my experience social services are so snowed under they wouldn't raise an eyebrow at 5 in a 2 bed, but the family could have made a homeless application to the LA as the property is unsuitable due to overcrowding. Not that it would make much difference. Join the queue.