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The Labour Government piloted a new flat-rate Local Housing Allowance (LHA) based on area and family size in 9 local authorities from November 2003 (later rising to 18 authorities). Alongside this flat-rate allowance the Government required these pathfinder authorities to only pay HB direct to private landlords in certain limited cases. It had increasingly become the norm for landlords to require tenants claiming Housing Benefit (HB) to agree to the benefit being paid direct to them as a condition of granting a tenancy.

Subsequently the LHA was introduced for all new HB claimants in the deregulated private rented sector from 7 April 2008 – except in certain exceptional cases this benefit is paid direct to claimants. This move away from paying HB direct to landlords is controversial – a key concern of landlords is that it has resulted in increased rent arrears. Direct payments to claimants will continue when the Universal Credit is phased in (phasing is expected to begin in October 2013).

This note sets out the legal position in relation to HB direct, discusses the pathfinder programme and evidence of the impact of direct payments to date. It goes on to consider the arrangements that will apply when the LHA/HB is replaced by the housing element of Universal Credit.

The Work and Pensions Select Committee carried out an inquiry over 2009-10 on the LHA which was published in March 2010. The report of the inquiry stated that direct payments were the most controversial aspect of the LHA and the one on which the Committee received most evidence. The Committee supported the continuance of direct payments to tenants as the default option “as long as the necessary financial advice and vulnerability safeguards are in place.”

Changes to the calculation of LHA rates announced in the June 2010 Budget (implemented from 1 April 2011) again focused private landlords’ concerns on the direct payment of this benefit to claimants. The Government announced some temporary flexibility for local authorities in relation to LHA payments following the reduction of LHA rates from April 2011. Guidance for local authorities on the implementation of these flexibilities was published in HB/CTB Circular A4/2011.

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