Two Year Review of the Local Housing Allowance February 2011 Contents List of Figures and Tables ............................................................................4 Executive Summary.....................................................................................10 Introduction ................................................................................................10 Choice ........................................................................................................10 Personal Responsibility ..............................................................................11 Fairness .....................................................................................................12 Transparency .............................................................................................13 Improved Administration and Reduced Barriers to Work............................14 Conclusions................................................................................................14 Chapter 1 Introduction ................................................................................15 1.1 Overview of the Local Housing Allowance ...........................................15 1.2 LHA Pathfinders 2004-2008 .................................................................16 1.3 The National Roll Out of the LHA .........................................................18 1.4 Changes Made or Announced in the First Two Years of Operation of the LHA ............................................................................................................19 1.5 The LHA Policy Objectives...................................................................21 Chapter 2 Economic Context for the Review and Characteristics of the Local Housing Allowance Caseload...........................................................22 2.1 Introduction...........................................................................................22 2.2 HB Caseload and Expenditure .............................................................22 2.3 Characteristics of the LHA Caseload....................................................27 2.4 Conclusion............................................................................................39 Chapter 3 Choice .........................................................................................40 3.1 Introduction...........................................................................................40 3.2 Landlord Responses to the LHA...........................................................40 3.2.1 Landlord Rent-Setting Behaviour, Impact on Prices and Affordability of Accommodation ..................................................................................40 3.2.2 Willingness to Let to Tenants on Benefits ......................................48 3.3 Tenant responses to the LHA...............................................................54 3.3.1 Impact of the £15 Excess on Decisions about Housing .................55 3.3.2 Over- or Under-Occupation and Trading Off Quality and Size of Accommodation versus Price .................................................................57 3.4 Conclusion............................................................................................59 Chapter 4 Personal Responsibility.............................................................61 4.1 Introduction...........................................................................................61 4.2 Direct Payments and Rent Arrears.......................................................61 4.2.1 Development of Direct Payments...................................................61 4.2.2 DWP Administrative Evidence on Direct Payments, Rent Arrears and Operation of the Safeguards............................................................63 4.2.3 Rent Arrears ..................................................................................69 4.2.4 Success of Safeguards in Protecting People in Vulnerable Situations................................................................................................73 4.3 Method of Payment ..............................................................................80 4.3.1 Method of Payment to Tenants......................................................80 4.3.2 Method of Payment to Landlords ...................................................83 4.4 Financial management by tenants........................................................84 4.4.1 Features of HB or LHA Inhibiting Good Financial Management ....87 4.4.2 Use of Money Advice Services ......................................................92 4.5 Conclusion............................................................................................93 Chapter 5 Fairness.......................................................................................95 5.1 Introduction...........................................................................................95 5.2 Comparison of LHA Rates to Contractual Rents for Different Groups..96 5.2.1 Excesses and Shortfalls by Region and Entitlement Based on Property Size ..........................................................................................98 5.2.2 Shared Accommodation Rates ....................................................106 5.2.3 Entitlements Based on Six or More Bedrooms.............................111 5.2.4 Excesses or Shortfalls By Diversity Characteristics.....................113 5.3 Geographical Areas over which LHA Rates are Set...........................116 5.4 Conclusion..........................................................................................118 Chapter 6 Transparency............................................................................120 6.1 Introduction.........................................................................................120 6.2 Transparency to Tenants and Their Advisers.....................................120 6.3 Transparency to Landlords.................................................................121 6.4 Conclusion..........................................................................................122 Chapter 7 Improved Administration and Reduced Barriers to Work.....123 7.1 Introduction.........................................................................................123 7.2 Processing times ................................................................................123 7.3 Fraud and error ..................................................................................127 7.4 LA Work on Safeguards, Reorganisation, Tenant Queries, Landlord Interactions and Homelessness ...............................................................129 1 7.4.1 Safeguards and Eight Week Arrears Rule ...................................130 7.4.2 Reorganisation.............................................................................131 7.4.3 Queries from tenants ...................................................................132 7.4.4 Landlord Interactions ...................................................................134 7.4.5 Homelessness.................................................................................135 7.5 JCP awareness of LHA ......................................................................137 7.6 Movement into Work ..........................................................................137 7.7 Conclusion..........................................................................................138 Chapter 8 Conclusion................................................................................139 Introduction ..............................................................................................139 Choice ......................................................................................................139 Personal Responsibility ............................................................................139 Fairness ...................................................................................................140 Transparency ...........................................................................................140 Improved Administration and Reduced Barriers to Work..........................141 Annex A Data Sources ..............................................................................142 A.1 Introduction ........................................................................................142 A.2 Single Housing Benefit Extract...........................................................142 A.3 Housing Benefit Review.....................................................................143 A.4 Family Resources Survey ..................................................................144 A.5 LA Omnibus Survey ...........................................................................145 A.6 Tenants’ and Advisers’ Early Experiences of the Local Housing Allowance National Rollout.......................................................................146 Research Design.........................................................................................146 Consultation with Advisers.........................................................................146 Consultation with HB-LHA Tenants..........................................................147 Research limitations....................................................................................147 A.7 Private Landlords and the Local Housing Allowance System of Housing Benefit ......................................................................................................148