Councils to have temporary power to make direct payments to landlords

Local authorities will be handed discretionary powers to make direct payments to landlords if they agree to drop their rents, the government has announced as it confirmed a delay in the introduction of caps on housing benefit for existing claimants.

The Department for Work and Pensions claimed that this would help “drive private sector rents for Housing Benefit recipients down, and stop taxpayers paying over the odds”.

The Department said it was implementing all Local Authority Housing Allowance (LHA) measures announced in the emergency Budget in June 2010.

As part of the measures:

• Both the caps and the reduction in LHA to the 30th percentile will come into force in April 2011 for new "customers"
• Existing customers will be exempt for up to nine months from the date their claim is reviewed by their local authority. “This will allow them time to adjust to any reduction in Housing Benefit entitlement and in practice means many existing customers will not be affected until after January 2012,” the DWP claimed
• LHA will no longer be paid for five-bedroom plus houses
• LHA will be capped at £400 for a 4 bed home, £340 for a three bed home, £290 for a two bed home and £250 for a one bed home
• The £15 weekly Housing Benefit excess which some customers can receive under the LHA arrangements will be removed
• From April 2011, claimants “who meet the criteria” will also immediately become entitled to an additional bedroom space for a non residential carer.

The government will also make a further £50m available over the Spending Review period to support the measures; it had already allocated £130m over the next five years. This extra funding could be used to help local authorities negotiate lower rents and help those that need to move.

Minister for Welfare Reform Lord Freud said: "We are looking to private landlords to respond to the need for lower rents and in return we are prepared to permit direct payments from the state.

"This incentive will bring an overall downward pressure on rents in the private sector. As these rents come down, more properties will become available to claimants and landlords will have certainty that their income will be protected."

However, the DWP has made it clear that direct payments would only be part of a temporary agreement to provide an incentive to landlords to lower their rents. “[They are] by no means a return to direct payments being made to landlords as a matter of course,” it said.

London Councils’ executive member for housing, Mayor Sir Steve Bullock, welcomed the DWP’s announcement.

He said: “Delaying the implementation of changes to the way housing benefit is worked out for existing tenants is welcome and will give councils some leeway to help these people find alternative accommodation elsewhere. The temporary concession allowing landlord direct payment may entice landlords to reduce their rent to the new levels in some cases allowing existing tenants to stay.

“While these are steps in the right direction, these measures alone will not solve the problem of housing supply in London entirely. There must be wider recognition that it is more expensive to rent in London than other parts of the country. Otherwise there will be continued pressure on the supply of homes in the private rented sector and on council budgets, which are already feeling the strain.”