Landlords' rental incomes could be at risk because of changes to the Government's housing benefit scheme, according to the National Landlords Association (NLA).
The NLA says the replacement of traditional housing benefit with a new local housing allowance (LHA) will have far-reaching implications for landlords who provide rented accommodation for those on benefits.
Current housing benefit is paid directly to the landlord by a local authority, whereas the new LHA system will mean tenants receive the cash and it is then their responsibility to pass on the allowance to their landlord. The NLA is concerned this might mean benefit tenants are tempted to use the money for other purposes and will fall into rental arrears.
David Salusbury, chairman of the NLA, says: “This leaves open the possibility that the tenant may be tempted to use the money for something else and not pay their rent. This might be because of other pressing financial needs, but it could lead to them getting into arrears. Ultimately that could threaten the security of their home.”
The new system also does not take into account the actual rent of a property but instead gives a flat rate allowance based on family size and the area where they live, meaning the amount their receive could be more or less than the cost of rent.
The Government is currently piloting the scheme and the NLA will be closely scrutinizing the pilot.
“In the pilot areas, it is probable a number of tenants have defaulted on their rent. If this were to become a widespread trend it would be a cause for considerable concern," says Salusbury.
If a tenant does go into arrears, then the landlord is entitled to ask local authorities to pay rent directly after eight weeks. The NLA says this is an important safety net but says landlords should be able to be paid punctually and efficiently without going to the local authority.
The new housing allowance is due to be rolled out nationally on 7 April 2008.
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