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7 things landlords might not know about LHA tenancies

20th February 2017

It’s a common phrase you see rounding off nearly every rental listing - “No DSS”. DSS – being the now-defunct Department of Social Security – refers to LHA tenants, the catch-all term for low-income tenants who claim Local Housing Allowance (LHA), named after the now-defunct Department of Social Security. 

LHA tenancies have become a bit of an enigma due to the lack of uptake on them. As such, they are an untapped market for many investor landlords, and offer a great opportunity to create a solid portfolio. 

Much is said of LHA tenancies in the lettings world – they’re unreliable lets, they’re a one-way ticket to rent arrears, and so forth - but it’s important to separate the truth from the myth. Here’s some facts you might not know about LHA tenancies:

1)    LHA is a capped flat rate allowance, calculated based on the size of a tenant’s property and the area in which they live. This means tenants need to source a property before their allowance can be calculated. Potential LHA landlord investors should research market values of low-income areas and make sure any properties they would like to let would qualify to be LHA-funded.

2)    Only 30% of available properties in a given area in the UK are affordable to LHA tenants with an even smaller percentage actually renting them due to “No DSS” policies. Due to supply and demand, if you have an affordable property, you could tap into a pool abundant with potential tenants.

3)    Landlords by default can have LHA paid directly to them if the tenant incurs 8 weeks’ arrears, but can apply for direct payment BEFORE this happens. Contrary to popular belief, local councils assess applications on a case-by-case basis and are open to paying landlords directly for a variety of reasons. If you have concerns about a tenant’s ability to pay, council help is always available.

4)    Many local councils, housing charities and letting agencies host direct letting schemes to introduce landlords to low income tenants. This means LHA tenancies are often easier and quicker to set up, which could benefit landlords dealing with vacancies and short-term lets.

5)    Some local councils in Northern England are part of the Empty to Plenty scheme, which helps house LHA-qualifying tenants by guaranteeing the safety and compliance of landlords. The scheme aims to reduce empty properties by assisting landlords with their lets, including options such as leases through housing associations or refurbishment loans for derelict properties of up to £15000. 

6)    As part of the Green Deal, LHA-qualifying tenants can also claim government benefits for replacing old appliances with new, energy efficient models. This means landlords could potentially have boilers, ovens and other expensive appliances upgraded at zero cost.

7)    If it is found that your tenant has been fraudulently claiming LHA and you have been directly receiving the payments, you will not be responsible for the repayments as long as you can prove you were not aware of any wrongdoing, so keeping of records is vital when handling LHA tenancies. 

Due to landlord reluctance, LHA tenants have developed a less-than-favourable reputation, but not all LHA tenants are the same – they can be employed or unemployed, disabled or fit for work, have families or be single. Specialising in LHA tenancies could prove to be a worthwhile investment – not only would you helping many people in need, but you could build a strong portfolio that generates regular cash flow. 

If you are interested in letting to LHA tenants, always have a full discussion with each applicant about their financial situation, what requirements they have for their property and request a full reference. If you’d like further help, you can get in touch your local Concentric branch, who can offer you further guidance and support on meeting LHA property standards and sourcing tenants.

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