In November 2015, the former Chancellor announced in the Autumn Statement that the amount of rent that Housing Benefit will cover in the social rented sector would be capped at the relevant Local Housing Allowance (LHA) rate.
NIFHA has carried out research into the potential impact the LHA cap will have if it is applied to the social rented sector in Northern Ireland. This research has highlighted several concerns including the adverse impact the LHA cap will have on tenants; the future viability of sheltered and supported accommodation; the disproportionate impact on rural areas and the feasibility of future social housing development.
In order to better understand these concerns and to provide accurate and up to date information, NIFHA continue to carry out detailed research. This research has been shared with the Department for Communities (DfC) and the Northern Ireland Housing Executive (NIHE). This promotes a sector-wide approach when developing potential solutions to the various challenges posed. As well as research and collaborative working, NIFHA are engaging with elected representatives to highlight the potential impacts of the LHA cap and to lobby for mitigation measures so that housing associations can continue to provide new homes and deliver high-quality services.
Read more about the LHA cap and the potential impacts below.What is Local Housing Allowance?
The Local Housing Allowance was introduced in April 2008 for people living in private rented accommodation. It is a rent assessment scheme which sets the maximum amount of Housing Benefit that tenants are entitled to. These amounts are set at the 30th percentile of local private market rents across eight Broad Market Rental Areas (BRMAs) in Northern Ireland.
Broad Market Rental Areas (BRMAs):
BT1, BT2, BT3, BT4, BT5, BT6, BT7, BT8, BT9, BT10, BT11, BT12, BT13, BT14, BT15, BT16
Lough Neagh Upper
BT29, BT36, BT37, BT38, BT39, BT40, BT41, BT42, BT43, BT44, BT45, BT46, BT80
Lough Neagh Lower
BT25, BT62, BT63, BT64, BT65, BT66, BT67, BT69, BT70, BT71
BT51, BT52, BT53, BT54, BT55, BT56, BT57
BT47, BT48, BT49, BT82
BT32, BT34, BT35, BT60, BT61, BT68
BT17, BT18, BT19, BT20, BT21, BT22, BT23, BT24, BT26, BT27, BT28, BT30, BT31, BT33
BT74, BT75, BT76, BT77, BT78, BT79, BT81, BT92, BT93, BT94
The LHA rate awarded to a household depends on which BRMA they live in and the number of bedrooms they are deemed to require under the size criteria. The size criteria sets out the size of property that a tenant needs for their household.
One bedroom is allocated for:
- Every adult couple
- Every other adult aged 16 or over
- Any two children of the same sex
- Any two children regardless of sex under age 10
- Any other child
Under the LHA cap single claimants under the age of 35 years without dependent children would be awarded a “shared accommodation rate.” This would be regardless of the number of bedrooms, or if they are actually sharing. Where families have separated, only one parent would be able to claim “bedroom allowance” for any children. The other parent is regarded as single.
LHA rates have been capped at the 2015/16 levels until April 2020. This means maximum LHA rates will stay the same until April 2020. However, the LHA rate can reduce if the 30th percentile of private market rents is below the current LHA rate.
The current LHA rates are available on the Housing Executive website.
The Government has announced that the LHA cap will be applied to the social rented sector from April 2019. Social security is a devolved matter and legislation will be required for this to occur in Northern Ireland. However, the parity principle means that this is a strong possibility.
In Great Britain, the cap will affect all tenants claiming Universal Credit and anyone on Housing Benefit who started a new tenancy or relet from April 2016. Universal Credit is being introduced in Northern Ireland in two phases from September 2017.
The transition phase will introduce Universal Credit by postcode area between September 2017 and July 2019 for new claims and claimants who report a change in circumstances. Claimants who are part of the transition phase will have the housing element of their benefit capped at the applicable LHA rate regardless of their tenancy commencement date.
The migration phase will transfer existing benefit claimants to Universal Credit between July 2019 and March 2022. Claimants who are part of the Universal Credit migration phase will have the housing element of their benefit capped at the applicable LHA rate regardless of their tenancy commencement date. Transitional protection arrangements will provide an extra ‘transitional’ amount to top up the Universal Credit award so that the claimant is not worse off when they move over to the new benefit. This will include any reduction because of the LHA cap being applied. This protection will remain in place until there is a change of circumstances or if the claimant breaches their claimant commitment.
With over 70% of housing association tenants in Northern Ireland dependent on some level of Housing Benefit, the introduction of the LHA cap to social housing tenancies has the potential to adversely affect a large proportion of social housing tenants.
The shared accommodation rate for single claimants who are under 35 will extend restrictions already in place for private tenants to social tenants. However, unlike the private rented sector, housing associations provide relatively little general needs shared accommodation. This could mean that single under 35s with no dependents would no longer be able to afford to live in social housing.
A housing association home is not just a roof over your head, but a catalyst to improved wellbeing. Housing associations operate programmes which expand the employability, financial inclusion and health and wellbeing of tenants. These programmes are particularly valuable to the tenants who may be affected.
In September 2016, the Department for Work and Pensions (DWP) confirmed that people living in supported housing will be exempted from the LHA cap until April 2019. With no decision taken on the extension of the LHA cap in Northern Ireland, there has consequently been no announcement concerning this funding for sheltered and supported accommodation.
For costs above the LHA rate the Government will provide additional “top up” funding to providers where necessary, reflecting the higher average costs of offering supported accommodation. In Scotland and Wales, this funding will be provided and it will be for local administrations to decide how best to allocate this. We would expect that Northern Ireland may be in a similar position to the other devolved administrations.
The introduction of the LHA cap to sheltered and supported accommodation along with the current pressures on Supporting People funding put at risk the tenancies of vulnerable people who require these services, including sheltered housing and people with learning and physical disabilities, addictions and people fleeing violence. These proposals also put at risk future housing development as supported housing services become financially unviable.
To address housing need, housing associations acquire land and build properties, financed through a mix of Housing Association Grant (HAG) and private finance. To secure private finance, housing associations must provide detailed financial data with assurances of future viability to repay loans. Rent comprises the bulk of housing association income and thus is tied directly to their ability to repay loans.
As a result of the LHA cap, more tenants who rely on Housing Benefit to meet their rent may need to find other sources to make up the shortfall. If rent arrears increase, funders could deem housing associations as less credit worthy. Housing associations may then be forced to borrow at higher rates. In which case it may not be economically viable to build at all.
The LHA cap will have a disproportionate effect on rural areas. In our analysis of LHA rates and the average rent of general needs accommodation in 2016/17 it is clear that tenancies in rural areas will be particularly vulnerable to the LHA cap.
Rent charges for social housing in rural areas may be higher than in urban areas. This is for several reasons including the stock in rural areas having generally been built more recently and smaller scale developments in rural areas losing the economies of scale that can be factored in to larger urban developments.
LHA is tied to the local private rental market. Therefore, higher demand for private rented accommodation in urban areas results in higher LHA rates. This contrasts with the higher rents found in rural social hosing developments.
There may also be impacts on future development. If tenants are unable to meet their rents, housing associations will find it challenging to fund further development in rural areas through the existing mixed funding model. Housing associations may therefore be unable to meet housing need in rural areas.
Further information is available to NIFHA members by logging into the Member’s Area.