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Benefit Reforms – Is this the death knell of benefits culture?

The much awaited Emergency budget came, and having digested its contents, the overall view is that “its not as bad as was feared”. I will qualify that with “in some quarters”.

Whilst I welcome the attempts being made to reign in the ballooning and ridiculously high benefits bill, I am concerned at the way its being done. Let’s face it, whatever the Coalition came up with, it would not have met with approval all round. No one size fits all.

The Local Housing Allowance, for instance, is to be seriously cut back.

From April 2011, the 5 bedroom rate will be scrapped which means the top end payment will be the 4-bedroom rate. Landlords with larger properties will be affected, as the LHA claimants may not be able to afford the top up necessary to make up the difference between the benefit and their rent.

Futhermore,  new upper limist will be introduced for the other property sizes, with upper limits set as follows:

o       £250 a week for a 1 bedroom property
o       £290 a week for a 2 bedroom property
o       £340 a week for a 3 bedroom property
o       £400 a week for a 4 bedroom property or larger

Whilst this might not affect landlords in northern regions of the country, it is bound to affect those further south where the rents rates are a lot higher, and the LHA rates have followed suit.

One positive change (to the claimant) is that the size criteria will be adjusted to provide for an additional bedroom for a non-resident carer where a disabled customer has an established need for overnight care.

Now for the even bigger change, and one which will definitely affect everyone. From October 2011, the LHA rates will be set at the 30th percentile of rents in each Broad Rental Market Area (BRMA) rather than the median, as it is currently.

This will have the very obvious effect of forcing LHA claimants to look for properties in the cheaper (and possibly more run down) parts of town. It may eventually force down rents, but market forces will dictate.

It promises to be interesting times ahead, as Landlords up and down the country re-assess their strategies and decide whether or not to continue to accept tenants claiming LHA. If more landlords leave this sector, then the Government will no doubt have a housing crisis on its hands.

Damned if you do, and damned if you don’t.

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    Posted in Government, Lettings and Management, LHA.

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