Housing Benefit and moving to cheaper rental area?

MissAdventure

Hi,

This is a mostly curiosity question resulting from a conversation with a friend, but if a person is a private tenant currently relying on Housing Benefit to pay their rent, could they get a nicer place from moving to a cheaper area?

My understanding was that if you move to a place with cheaper rents, you just get a lower LHA rate, so you still end up living in the bottom dregs of the rental market.

For example, I live somewhere that is fairly expensive, and to rent a place for the LHA rate (£320 a month for a single adult under 35) you basically have to live in a tiny room with peeling paint and mould on the wall... a medium sized room with a landlord that takes care of it is more in the £450-550 range. But would the situation be any better if you moved to a different area?

confuseddaughter_2

MissAdventure wrote: »

Hi,

This is a mostly curiosity question resulting from a conversation with a friend, but if a person is a private tenant currently relying on Housing Benefit to pay their rent, could they get a nicer place from moving to a cheaper area?

My understanding was that if you move to a place with cheaper rents, you just get a lower LHA rate, so you still end up living in the bottom dregs of the rental market.

For example, I live somewhere that is fairly expensive, and to rent a place for the LHA rate (£320 a month for a single adult under 35) you basically have to live in a tiny room with peeling paint and mould on the wall... a medium sized room with a landlord that takes care of it is more in the £450-550 range. But would the situation be any better if you moved to a different area?

Each area has a different HB allowance. The figure is generated by what the bottom third would be charging. Those claiming HB will always be offered what is at the bottom of the barrel no matter where they go if they want to match the rent charged to the HB paid.
The government believe that no one should be able to live in a property, in an area that belongs in the top 70% of rentals if they don't want to or can't top up their HB with money from other sources.
You can sort of understand this way of thinking. I wouldn't be too happy if someone had all of their rent paid for a nice property in a nice area when I couldn't afford to do the same because I worked and paid my own rent.

For those over 35 or a family with children, some would prefer to live in a 2 bed property in a nice area than live in a 3 bed property in a poorer area even though the law dictates that they should have 3 bedrooms.

Morglin

MissAdventure wrote: »

Hi,

This is a mostly curiosity question resulting from a conversation with a friend, but if a person is a private tenant currently relying on Housing Benefit to pay their rent, could they get a nicer place from moving to a cheaper area?

My understanding was that if you move to a place with cheaper rents, you just get a lower LHA rate, so you still end up living in the bottom dregs of the rental market.

For example, I live somewhere that is fairly expensive, and to rent a place for the LHA rate (£320 a month for a single adult under 35) you basically have to live in a tiny room with peeling paint and mould on the wall... a medium sized room with a landlord that takes care of it is more in the £450-550 range. But would the situation be any better if you moved to a different area?

You can google up the LHA rates for the area you are thinking of moving to.

Can't link at the moment, but google up LHA and then just put in the postcode.

Lin

MissAdventure

confuseddaughter wrote: »

You can sort of understand this way of thinking. I wouldn't be too happy if someone had all of their rent paid for a nice property in a nice area when I couldn't afford to do the same because I worked and paid my own rent.

Right, but I was talking about moving into a less nice area. In fact, if that is how it works, it would seem you would be better off as a housing benefit claimant to move to a more expensive area, than a cheaper one (assuming you know you will stay on benefits) - If its a choice between a not nice property in a not nice place or a not nice property in a really nice place, I know which I'd pick!

I'm just wondering if by picking your area you could get a place that wasn't entirely horrible. For example my town has a ton of student places, and I wonder if the bottom third of properties would be nicer in another town that didn't... or is the quality of bottom third housing always the same?

confuseddaughter wrote: »

For those over 35 or a family with children, some would prefer to live in a 2 bed property in a nice area than live in a 3 bed property in a poorer area even though the law dictates that they should have 3 bedrooms.

Is that really how it works though? I was under the impression that if you live in a property with 2 bedrooms you can only get given the 2 bedroom rate, even if you are 'entitled' to a 3 bedroom property.

confuseddaughter_2

MissAdventure wrote: »

Right, but I was talking about moving into a less nice area. In fact, if that is how it works, it would seem you would be better off as a housing benefit claimant to move to a more expensive area, than a cheaper one (assuming you know you will stay on benefits) - If its a choice between a not nice property in a not nice place or a not nice property in a really nice place, I know which I'd pick!

I'm just wondering if by picking your area you could get a place that wasn't entirely horrible. For example my town has a ton of student places, and I wonder if the bottom third of properties would be nicer in another town that didn't... or is the quality of bottom third housing always the same?



Is that really how it works though? I was under the impression that if you live in a property with 2 bedrooms you can only get given the 2 bedroom rate, even if you are 'entitled' to a 3 bedroom property.

Yes that is right, but the difference between the rent charged for a 2 bed and a 3 bed makes it impossible. You would have less to put to the 2 bed than you would for a 3 bed.


In my area these are the following rates:
Two Bedrooms Rate:£115.38 per week (£500 per month)
Three Bedrooms Rate:£144.23 per week (£625 per month)


Lower to mid range 2 bed properties rent out at about £650 a month, whereas 3 bed properties rent out at £900 a month.


To stay in a 2 bed you would have to put £150 a month to the HB, whereas you would have to put £275 a month if you wanted a 3 bed.
No matter where you looked in my area you would not find a lower to mid range 3 bed for £775 a month - they simply don't exist. There are some if you want to live amongst drug pushers etc!

BigAunty

MissAdventure wrote: »

My understanding was that if you move to a place with cheaper rents, you just get a lower LHA rate, so you still end up living in the bottom dregs of the rental market.

That's a crude but fair observation.

Housing Benefit (LHA) is paid using LHA rates provided by the Valuation Office Agency. Since 1 April 2011 LHA rates are worked out using a 30% mark ('the 30th Percentile') which means only three out of 10 properties in the area will be affordable to people receiving benefit. So yes, that's the bottom third cheapest properties across the UK.

It used to be set at the 50th percentile, a more generous rate, that meant that half of properties, the bottom half, should have been affordable to HB claimants but it was slashed so this has potentially reduced the pool of affordable properties by 20%.

More things to note -

LHA has upper caps so at some point there are areas, particularly in the south east and especially in London, where large areas are unaffordable to HB claimants as the general rental market is so expensive.

Property typeMaximum rate Shared Accommodation£250 a week One bedroom property£250 a week Two bedroom property£290 a week Three bedroom property£340 a week Four bedroom property£400 a week
Also, there are overall benefit caps now in place that cap benefits for non-working households to the national average wage. In the past, this did not exist meaning that unemployed households could live in the most affluent areas in the most luxurious areas to a standard they could not afford even if both parents earned above average wages.

https://www.gov.uk/benefit-cap

Most landlords do not accept HB claimants so a very large percentage of properties on the rental market will not have benefit claimants as tenants.

Finally,many people dispute that the LHA calculations are anywhere near true market rents, that there are many areas where there is next to no, or none at all, properties available to rent at that price, that the LHA percentile is a fantasy.

BigAunty

MissAdventure wrote: »

Right, but I was talking about moving into a less nice area. In fact, if that is how it works, it would seem you would be better off as a housing benefit claimant to move to a more expensive area, than a cheaper one (assuming you know you will stay on benefits) - If its a choice between a not nice property in a not nice place or a not nice property in a really nice place, I know which I'd pick!

.

Possibly but there is a risk that the rent breaches the upper caps that are in place for all LHA claimants, that they are affected by the overall benefit cap for their type of household because it includes HB and it may make their transition into employment much harder because more of their disposable income gets swallowed up in rent when they are used to their property being 'free' so to speak, under HB.

Also, if they are at the upper end of their LHA entitlement, an increase in rent by the landlord can be catastrophic and unaffordable as the rate is generally fixed and never automatically tracks the increase in price of an individual property.The tenant has to find the difference between the LHA and the rent out of their other benefit income.

Finally, the more affluent the area, my guess would be, the less likely it is for a landlord to accept a HB claimant because of demand/supply imbalances.

MissAdventure

confuseddaughter - ah, I get what you mean now. I wasn't thinking of people who could afford to pay more on top, just those who only have the housing benefit to go on.

Lin - I know you can do that, but short of searching for every area in the UK manually then checking out the house listings it doesn't answer the question.

Out of curiosity I searched for a non-student area down the road from me to compare, found the single under 35 LHA rate, searched for that on Rightmove and found exactly 0 properties available in that price range.

BigAunty

MissAdventure wrote: »

Is that really how it works though? I was under the impression that if you live in a property with 2 bedrooms you can only get given the 2 bedroom rate, even if you are 'entitled' to a 3 bedroom property.

AFAIK, a household gets a set LHA rate based on their composition (age/sex/number of occupants) that determines how many bedrooms they are entitled to and are free to live in smaller or bigger properties than that. If the rent is cheaper than the LHA, it is capped at the rent, if the rent is dearer than their LHA they must pay the top-up themselves.

Therefore, if they were entitled to £200 a week for a 3 bedroom but decided to live in a 2 bed property costing £190, they would receive £190. If they decided they wanted to live in a 4 bedroom property costing £300 a week, they'd need to pay that extra £100 shortfall out of their employment income/JSA/income support, tax credits, child maintenance and so on.

BigAunty

MissAdventure wrote: »

Out of curiosity I searched for a non-student area down the road from me to compare, found the single under 35 LHA rate, searched for that on Rightmove and found exactly 0 properties available in that price range.

Rightmove mainly deals with self-contained properties (studios, 1 beds and so forth) and not shared properties (i.e. individual room rentals). The shared accommodation rate tends to cover room rental in a shared property rather than an entire property itself. Rightmove doesn't have that many ads for sharers because it's expensive to advertise on.

Sharers tend to look on websites like the Gumtree, Spare room and similar.

Even then, most landlords don't want HB claimants, nor students for that matter.

MissAdventure

BigAunty wrote: »

Possibly but there is a risk that the rent breaches the upper caps that are in place for all LHA claimants, that they are affected by the overall benefit cap for their type of household because it includes HB and it may make their transition into employment much harder because more of their disposable income gets swallowed up in rent when they are used to their property being 'free' so to speak, under HB.

The benefit caps only really affect people in certain areas of London and/or with big families. As a single person living anywhere else you never come close to one.

You are also assuming that the person is temporarily on HB, when I was considering the case of someone who will be on it long term.

BigAunty wrote: »

Also, if they are at the upper end of their LHA entitlement, an increase in rent by the landlord can be catastrophic and unaffordable as the rate is generally fixed and never automatically tracks the increase in price of an individual property.The tenant has to find the difference between the LHA and the rent out of their other benefit income.

But you are no more or less likely to be on the upper end of your LHA entitlement in a higher or lower LHA area. (as an aside I've pretty much never seen rents that were actually less than the LHA for an area). And if 'being forced to move when the rent goes up' is 'catastophic' then my life has been full of catastrophes

BigAunty wrote: »

Finally, the more affluent the area, my guess would be, the less likely it is for a landlord to accept a HB claimant because of demand/supply imbalances.

This could be the case. But I've see plenty of filthy rundown places up for rent where the landlord says 'no DSS', so I suspect that prejudice happens everywhere.