Changes from 1 April 2016 for new tenants
There are important changes if your tenancy starts on or after 1 April 2016.
From 1 April 2018, the way Housing Benefit or the Housing Element of Universal Credit is calculated will be changing.
What does it mean for you?
If you signed a tenancy agreement for general needs housing on or after 1 April 2016 or you renewed a fixed term tenancy, the amount of housing benefit or the housing element of universal credit that you will be entitled to from 1 April 2018 will be capped. This means there will be a limit to the amount of money you will receive. The new cap will apply if the rent and any service charge (although not personal service charges) for the property is higher than the Local Housing Allowance (LHA) rate for the area. The LHA rate is based on private sector rents in the area. The change means that if you claim housing benefit and your rent is higher than the LHA rate, you will only receive housing benefit equivalent to the LHA rate. You will need to find any shortfall.
The same will apply to sheltered and supported housing residents who sign a tenancy on or after 1 April 2017.
The LHA rate currently only applies to private rented sector tenants. The LHA rates for your area can be found at http://lha-direct.voa.gov.uk/Search.aspx
If you are under 35 years old and do not have any dependent children living with you, the amount of housing benefit or the housing element of universal credit you receive will be capped to a shared accommodation rate even if you do not share your home with anyone else. The rate for your area can be found at http://lha-direct.voa.gov.uk/Search.aspx
What if I swap my home with another tenant or sign a new tenancy agreement for the home I already live in?
The regulations governing this change have not yet been written, so we are awaiting the detail as to how exactly it will be applied.
There has been some uncertainty about how the cap would apply to mutual exchanges and where a tenancy moves from joint to a single tenancy, or vice versa. The Government has indicated that it’s their intention to apply the cap where a mutual exchange takes place and the levels of rent are higher than the local LHA rate.
The cap will also be applied where a new tenancy is created but the tenant does not move home. The rate of LHA at which the cap will be applied reflects the size of the household, rather than the size of the property.
Will you also have to pay for any spare rooms?
If you are of working age and have one or more bedrooms than you need for the size of your household, your rent and any service charges used in the assessment of your housing benefit, or the housing element of universal credit, is already capped.
If the difference between your rent and the relevant LHA rate for your household is higher than the reduction for spare bedrooms, only the cap will apply. Similarly, if the reduction for spare bedrooms is higher than the relevant LHA rate for your household, only the reduction for spare bedrooms will apply. This means that your entitlement will be capped to the lowest rate of benefit.
If you are of pension age, you will not receive a reduction in the rent used to assess your housing benefit for any spare bedrooms, but your rent will be capped to the relevant LHA rate for your household.
What should you do now?
If you sign a new tenancy or renew a tenancy after 1 April 2016, you will need to think about whether the rent you pay in the social sector is higher than that allowed for private rented sector tenants.
In particular, if you are in receipt of housing benefit or universal credit on or after 1 April 2018, you will need to consider how you will afford any shortfall in your rent. The website links above will help you to determine whether your rent is above the LHA rates for your area.
If you are unsure if this applies to you, please call us on 01305 216067 or email income management or contact your local authority.