Am I getting the most rent out of Housing Benefit?

Reply to the comment left by "Peter Johnson" at "07/11/2015 - 18:52":

I don't think it is the system you are abusing.

I do wonder about the 8 people you hope to squeeze into your 3-bed house though!

Reply to the comment left by "Peter Johnson" at "08/11/2015 - 12:41":

The HB regulations deal with LHA/HB entitlements, it does not determine what rent you decide to charge for your property. If a landlord of a 10 bedroom mansion decides to let the property for £10,000 pcm to a family that would be entitled to the 3 bed rate of HB (say, £1200 pcm), then that is the landlord's choice. The landlord would expect there to be rent arrears, but it is his choice, the HB Dept cannot say that he cannot do this. Likewise, if I choose to let a 1 bedroom flat at twice the normal LHA rate, to a tenant that would only get the LHA rate, then again that is my choice (and I would expect the tenant to fall into arrears and be unable to pay, but nevertheless I am free to let the property at that rate and suffer the consequences).

You do not need to justify the rent you charge, and indeed it is best if you do not try to do so. Whatever family you let the property to, and whatever their circumstances, and whatever the rent is, it makes no difference to the HB calculation, the family will only ever receive the HB level that they are entitled to.

The only exception to this is if you collude with the family to somehow force up the rent so as to take advantage of the HB system, (this could perhaps be a "contrived tenancy"), but simply charging a rent that is higher than the LHA rate for that size house definitely does not bring you into that category.

What you need to remember is that the LHA rate is NOT the "market rent" for a property, The LHA rate is set at the 30th centile of the market rent for that size property as determined at a particular date which could have been many months ago (up to 12 months ago). This means that if the LHA rate for a 3 bed property is £1500, then 70% of 3 bed properties in the area are being let at more that £1500 pcm.

As the LHA rate is only the 30th centile, this means that only 3 out of every 10 properties of that size and in that area are being let at a rent that would be affordable to a household entitled to the 3 bedroom rate of LHA. (It does not even mean that many are actually available to LHA tenants). This could mean that the average market rent for a 3 bed property may be £1800 (for example), in which case, letting your property at £1650 pcm, you would still be offering your property at considerably below the average market rent, AND doing the social good of making it available to DSS/LHA tenants who may otherwise be excluded from obtaining a property of that quality.

- In this situation you are offering a high quality property at a rent level that is affordable to the family that wish to rent it. It is costing the HB (taxpayer) no more than if they rented a bigger property or a similar quality property in that area. - Sure, they could perhaps choose a grotty horrible 3 or 4 bed property and pay a lower rent, or move to a cheaper area, but this would be depriving the family of choice. (and they always have this option (i.e. moving elsewhere) at any point in the future).

You also need to bear in mind, that letting to DSS tenants is higher risk than letting to a well paid professional family, as it is virtually impossible to recover debts from DSS households, so the potential cost to your business is higher. This is why I suggested the extra allowance for insurance and maintenance, to mitigate these potential risks.

Reply to the comment left by "Puzzler " at "08/11/2015 - 13:23":

If the tenant only receives the LHA rate that they are entitled to, then how is this a detriment to the HB coffers, - they get exactly the same amount of Housing Benefit whether they choose a poor quality 4 bed house or a top quality 3 bed house. The HB coffers remain the same.

When the benefit cap came into force we evicted about 12 tenants who had 4 bed entitlements. Their HB reduced to 50p per week from nearly £200. Through no fault of their own they were made homeless. The next bout is coming is coming in 2017 when it drops again. We are currently not accepting anyone on full housing benefit with more than 2 children as we fear they will be affected too. We are also very wary of taking large families full stop because if Mr, or Mrs loses their job, they will have no help from the HB system if they have no other income. Worrying times, as much for the tenant as for the landlord.

Reply to the comment left by "Ross McColl" at "09/11/2015 - 08:42":

This is very true, and I've had similar situations with some of my tenants, BUT if the families are working sufficient hours so as to avoid the Benefit Cap, then the HB can continue. For example, one of my tenants was receiving £725 pcm HB prior to the Benefit Cap, then when the UC Benefit Cap came it the HB would have dropped to about £100 pcm, but the tenant started work as an Avon rep (self-employed), and this took her out of the Benefit Cap and she continued to get £725 pcm HB (as her self-employed earnings were very low, but she was putting in sufficient hours to overcome the Benefit Cap). - Self-employment as an Avon rep, Kleeneeze, Betterware, or Utility Warehouse distributor, etc (or combination of these), could suffice to take tenants out of the Benefit Cap, but they would have to put in the hours and really work at it. Thus, really it is only those that are unwilling to work, that will be stuck with the Benefit Cap, those who are willing and able to work (even if they can't get a job with an employer) do have a solution to the Benefit Cap problem via self-employment.

All that said, you are right to be wary, and it does take some sifting of potential tenants to find the ones that can/will avoid the Benefit Cap.

Reply to the comment left by "Puzzler " at "08/11/2015 - 13:23":

Thanks Puzzler for your input but I respectfully disagree. In my case, if I am going to accept "market rent" for a highly demanded, fully refurbished 3 bedroom property, where I have excellent transport links, shops and services then frankly, given the red tape, financial risks (i.e. HB clawbacks etc) and bureaucracy involved in renting to housing benefit tenants I'd much sooner rent my property to a RELATIVELY hassle free private tenant. So the tax payer looses out because that HB family continue on in emergency housing at a rate much higher than the rate i'm proposing. In order to attract a 4 bedroom qualified tenant to accept my 3 bedroom property I 'up my game' and offer them a long term, good quality, family home. Surely this is better value for the tax payer than the short term, insecure, often sub standard (occasionally unsafe) temporary accommodation that the tax payer picks up the bill for anyway ? In my part of London I can't imagine anyone who has a property THAT IS A DECENT STANDARD renting to HB for the same rate as they'd rent privately - we suffer very little voids and can attract good referenced tenants so on the basis of risk and reward economics I feel that a higher rate for HB tenants is justified while still maintaining win, win, win, win for all concerned !

Reply to the comment left by "H B" at "08/11/2015 - 17:29":

Hi, its not such a problem if the kids are relatively young as bunk beds etc are fine as far as rooms go and as long as rooms are of a generous size as mine are, all rooms are double bed sized rooms with large reception and dinner and 3 toilets

Reply to the comment left by "Robert Mellors" at "08/11/2015 - 20:34":

Thanks for so much detail Robert and I get what you are driving at in terms of a landlord being able to charge whatever market rent he/she wishes and that HB is based on a families entitlement but if I am getting a lack of knowledge from the HB department regarding what we and they should know, is there any information on the internet I can point them to that clearly spells out what we (and they at HB) should already know about HB entitlement and that a landlord can charge whatever rent he likes as this is not relevant to a HB claim ?

Reply to the comment left by "Peter Johnson" at "09/11/2015 - 16:55":

Hi Peter,

The landlord is free to set whatever rent he/she wants. The Housing Benefit Dept will assess the tenants entitlement to HB, usually based on the LHA rate for that size household. There is no book or web page, that says the landlord can set his/her own rent, that is just common sense (the free market). It is your house you can charge whatever rent you want. Whatever rent level you charge makes no difference, the tenant's HB entitlement remains the same. It does not matter about the Housing Benefit staff's lack of knowledge on rent setting, it is nothing to do with them, their job is not to set rents, their job is to assess a household's HB entitlement. You do your job and set a rent you are happy with, and let them do their job and assess the tenant's HB entitlement.

All that said, if you want a good starting point for learning the Housing Benefit regulations, the book from Shelter entitled "Guide to Housing Benefit and Council Tax Rebates" is an excellent resource. (The copy I have is the 2013-14 copy by Sam Lister and Martin Ward). If you really want to get into the nitty gritty of the rules and regulations (including interpretations of terms etc), then you can download mountains of information from the internet, e.g. all the relevant legislation from Legislation.gov.uk, or you can even download DWP Guidance manuals and Circulars, or even the masses of HB caselaw, but if you don't know what part of it you are looking for (or how to interpret it all), then this mountain of information would be useless to you.

Reply to the comment left by "Peter Johnson" at "09/11/2015 - 12:23":

Put aside the cost of temporary accommodation and how the entitlement is calculated.

To the person in the street this appears to be saying I will rent to a HB tenant providing I can charge sufficiently more than I can to somebody in employment and paying the rent themselves to justify accepting a HB tenant.

That does make landlords look like they are exploiting the system.