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Landlord Action on the Local Housing Allowance

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Please see below another interview we undertook with Paul Shamplina from Landlord Action – an organisation that needs very little introduction growing to become the UK’s most popular calling point for issues related to the relationship between property investment owners and tenants.  We have focused the interview on the recent changes in the landscape of social housing, an area within which Paul is very knowledgeable – we discuss preconceptions of the Local Housing Allowance (LHA); new ‘austere’ measures being introduced by the new coalition government; the implications of the Comprehensive Spending Review; research and the role of the Valuation Office Agency (VOA); the role of the ‘floating tenancy support service’; recent comments by the Department of Work and Pensions on LHA landlords; Paul’s thoughts on the future of the property market amongst other topics.  We would also highly recommend a seminar focused on the subject of LHA run by Landlord Action which goes into what is discussed below in much depth.

1) Can you please introduce yourselves and explain your experience to readers who are unaware? Paul Shamplina, Founder of Landlord Action – an organisation that helps landlords and agents deal with problem tenants. I have around 25 years experience working within the legal field, previously working as a Clerk, Private Investigator and Certified Bailiff.  Now, I run Landlord Action with my business partner. We started in 1999 as fixed-fee tenant eviction specialist. The organisation has gone on to revolutionise this area of practice and we have acted on over 17,000 evictions since 1999.

2) What do you think are the main preconceptions that property owners have with regards to letting their property / properties to LHA tenants? Many will only hear and read about the horror stories in the media. The problem is that these aren’t representative of the entire sector. There are countless LHA tenancies where landlords have never had an issue with the tenant. Typically, these tenants are less socially mobile and, therefore, stay for longer periods within a property.  However, there are some common issues which we see at Landlord Action.

With about 1 in 5 of our new instructions being directly related to an LHA tenancy failure, we are in a unique position to see what is going wrong.  The biggest problem is rent arrears, and this relates to the fact that the tenant will receive the money for the rent (i.e. the housing benefit) and they then have a duty to pass it on to the landlord. The problem is that this is not working in practice, with many tenants not passing over the rent.  The landlord then faces the issue about securing direct payments from the Local Authority which can be like pulling teeth out.

3) Do you think they are justified? Partly. It is clear that there are issues with the way that Local Housing Allowance is paid. There are some administrative failings. For example: the issue to do with direct payments and the issue of overpayment to the landlord (where the tenant is not eligible for benefits any more, but the rent was paid to the landlord – in this scenario, the landlord will be liable to pay back any overpayments) are just some of the issues that put landlords off.

Then, there is the fact that, if your tenant is in arrears, the likelihood of the landlord getting any rent back is minimal. Prior to claiming housing benefits, tenants will undergo a rigorous means test – if they have any liquid assets, likelihood is that they will not get the housing benefit. The upshot is that if the tenant falls into arrears, how are they going to pay this back? Where does the money come from?

The problem is compounded by some of the advice that tenants are receiving. It is an open secret that organisations such as Citizens Advice Bureau, Shelter and even some Local Authorities advising tenants that if they leave the property voluntarily, they will not be eligible to be re-housed since they made themselves homeless. These organisations advise that the tenant wait until the landlord present them with a possession order. These days, it can take around ten weeks to get to Court. During this period of time, it is likely that the landlord will not be receiving any rent.

4) Can you talk through the main changes that the government has made with regards to the Local Housing Allowance (LHA)? We have entered the age of “austerity”. The Coalition Government came to power promising to reduce the deficit. The implication is that cuts will need to be made across all sectors. For the property sector, this directly translated into reductions on the levels of housing benefits that are paid out. Clearly, the ramifications of this will be felt by landlords. In many cases – especially the South of England and London – landlords will have a tenant who is receiving benefits which amount to less than the agreed amount of payable rent. Therefore, whilst the government is doing its work towards reducing the deficit, it most certainly isn’t doing all it can to effectively combat homelessness. It seems that the result is going to be landlords losing out again – something that they are getting very tired of.  The danger for the government is that this is going to put off many landlords from letting their stock to LHA tenants, which means that supply shrinks whilst demand is ever increasing. I am not an economics professor, but this is usually a recipe for pushing prices (i.e. rents) up.

5) In its new form – what do you see as the main advantages of private landlords renting to LHA tenants? The important thing is for landlords to understand that LHA tenants are different from ‘regular’ tenants. However, there are clearly advantages.  As previously mentioned, LHA tenants are less socially mobile and usually stay in a property for a longer period of time. Further, we are in an economic climate where many are becoming unemployed and having to receive benefits – for many of these tenants, they may not be claiming benefits for very long. Also, it is important to note that, most benefit tenants do not want to be on benefits forever. Most want to achieve financial stability.  Another advantage for the landlords is that there is a lot of demand for social property. The waiting lists for Council accommodation are long and the Government need private landlords to provide housing to ease the burden.

6) What do you think will be the major implications of the Comprehensive Spending Review for property investors and landlords? As usual, in terms of housing, landlords are going to be the ones to get hit the hardest.  Caps on LHA rates will mean that if a tenant is receiving benefits less than the amount of their rent, they probably will not have the means to pay the difference (they are on benefits, after all). Given that the majority of LHA arrears are practically unrecoverable, it looks like landlords are going to foot the bill… again.

7) In terms of researching a rental estimation for an area (wherever in the UK) – how can this be done? There are a couple of ways to do this properly. With the internet providing information at our fingertips 24/7, the first places to look will be on websites that allow tenants to look for rental accommodation. This will give an idea about market prices within a certain area.  Secondly, the Valuation Office Agency run a service called LHA Direct where you can get this sort of information that is specific to Local Authorities.

8)Can you give us an outline of the role of the Valuation Office Agency (VOA)? The Valuation Office Agency is instrumental within the administration of Local Housing Allowances. They value property for taxation and social benefit purposes – i.e. they set the rates of LHA. They are not an organisation that you should fear. On the contrary, we encourage landlords to provide them with information relating to the rents that they receive. The more landlords do this, the more accurate their data will be, which can only go some way to helping the situation. The VOA gave a great presentation to our landlords at our previous Local Housing Allowance seminar in the summer. John Craddock, who is the VOA’s head of lettings research in London, has agreed to give another presentation at our next seminar on the 29th October.

9) What is the ‘floating tenancy support service’ – and how can landlords take advantage of them? Their main job is to liaise with landlords and tenants in order to prevent tenancy failures. At our seminars, we go through the best ways to engage these floating support services since they can be invaluable to landlords with LHA tenants, often providing helpful information that is hard to come by.

10) What are the main differences between a ‘normal’ tenancy agreement and one drawn up for LHA purposes? In terms of the actual tenancy agreement, there is no difference (most being an Assured Shorthold Tenancy). However, landlords need to understand the behavioural differences – which are greatly affected by the economic situation of a tenant. As a result, there are a few other things that landlord’s should do if they have a tenant who is claiming LHA. There are far too many to list here, but one of the most underrated ones is keeping good communication lines open with tenants. This way, a landlord will always be up-to-date with the situation of the tenant and if necessary, can help them accordingly.

11) Should the worst case situation happen and eviction needs to be started with a LHA tenant – is the process any quicker than compared to a normal tenancy agreement? No, it is the same process. We feel that the process of eviction can take far too long – whether your tenant is an LHA tenant or a ‘regular’ tenant.  We feel that with cases where anti-social behaviour has been demonstrated or rent arrears, then eviction should be quicker and landlords should have better access to their own properties.  As a result, we have launched a campaign with Mike Weatherley MP, The Residential Landlord Association and the Southern Landlord Association to campaign for speeding up the eviction process. The petition already has over 2,000 supporters and many key organisations within the PRS are backing the campaign.  Please click here to sign the petition – the more landlords get behind it, the better)

12) In your experience, is eviction something that often needs to be done with LHA tenants? We’re not really in a position to comment on this fairly. With us, we only get a phone call from a landlord to evict a tenant when things have gone wrong. But, these calls aren’t representative of the bigger picture. However, although we are an eviction specialist, we suggest that eviction is always a last resort. It is always a good idea to try and work with the tenant to come to some arrangement, as opposed to going straight for eviction – this is true for ‘normal’ tenants and LHA tenants. For example, we have had many landlords try and work out payment plans for outstanding arrears that are getting unpaid rent back, but also, not putting a tenant under excessive financial pressure. Ensure to always have everything documented properly as to leave a paper trail. This can then be used as evidence at Court (if necessary). However, if no arrangements can be made, or promises are not kept, then landlords need to look to evict the tenant and get in a tenant who is paying on time. Remember, your property is an investment – although landlords should do everything in their power to help the tenant, there comes a point where lines must be drawn.

13) What was your response to the recent report by the DWP on landlords abusing the housing benefit system?  Do you think it is fair? There is always the temptation to blame landlords – we are an easy target. However, remember our role – we are providing accommodation to the government for social housing purposes – and we are are not doing anything wrong here. In fact, if anything, this is helping the government to address the problem of homelessness. Then remember, landlords are not investing for fun (although investing can be fun) – they are investing for profit (as all investors, not just landlords). To suggest that because of this, they are abusing the system is absolute nonsense. If rental prices are increasing, then the government should be doing more to increase the supply of affordable housing, which should theoretically bring down rental prices. If landlords are putting a premium on the rent they charge due to housing benefit tenants, then this is a reflection of what they perceive is extra risk. However, with the new caps, there is very little room for landlords to put a premium on the rent. With this in mind, it is hard to see how ‘all landlords are abusing the system’. We must accept that there always will be a small percentage of people who do abuse the system, the overwhelming majority are law abiding and aren’t doing anything wrong.

14) What are your thoughts on the future of the property market in the UK – particularly from a supply point of view? Although the housing market has seen a dip over the past couple of years, it is always important to note that property is a long term investment – and this is where it becomes a safe investment (especially when leveraged conservatively).  It is still the case that there is a lack of housing in the UK. It is harder for some people to get on the property ladder.  With increases in immigration over the past few years, combined with a generation of first time buyers who are priced out of the market (if you look at the earnings to house price multiple), this obviously represents an opportunity for investors. Just because people can’t afford their own home, doesn’t mean that they don’t need one. This is where landlords and investors come in.

15) Please can you talk through the up-and-coming seminar being run in London and how readers can find out more? Around about the turn of the year, we noticed that 20% of our new cases are related to LHA tenancy failure. It was clear that landlords needed help to make heads and tails out of the system. We then had two options – we could have either put a seminar ourselves, or, we could get the experts in to deliver the seminar. We chose the latter option. Therefore, we asked our partners at Settled Housing Solutions to deliver the seminar (they used to work within the public sector, now they consult to it). We also invited key organisations that are involved in LHA to speak at the vent – like the VOA. We are showing how to effectively manage LHA tenants, addressing some of the typical issues that landlords and agents face. Hundreds of landlords and agents have already attended our previous ones and their feedback has been great.

London, 29/October/2010 – Landlord Action Local Housing Allowance Extended Seminar

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