Renting to LHA tenants: A landlord’s guide

Renting to tenants who receive Local Housing Allowance (LHA) can have lots of benefits, but can understandably come with a few concerns. Keep reading for advice on what you need to know and consider before renting to LHA tenants.

What is an LHA tenant?

• LHA (Local Housing Allowance): Sets the amount private renters can receive in housing benefits.
• DSS (Department of Social Security): An outdated term, sometimes still used to describe tenants who receive benefits. The correct terms are Housing Benefit (HB) or Universal Credit (UC).

Important: Not all tenants who claim benefits rely on them entirely. Many people working full time now rely on benefits of some form, so it’s important not to make sweeping generalisations.

Can landlords refuse LHA tenants?

Blanket bans are unlawful. Refusing all LHA tenants may count as indirect discrimination under the Equality Act 2010. While income and employment status are not protected characteristics under the act, women and disabled individuals are more likely to receive benefits, and therefore may be disproportionately affected.

Case-by-case checks are allowed. You can still assess a tenant’s financial stability, e.g. credit checks, references, affordability assessments.

Why some landlords hesitate to rent to LHA tenants

Financial stability - Risk of arrears if benefits don’t cover full rent or payments are delayed.

Rent payment method - Historically, housing benefits were paid directly to landlords which ensured that the income stream was reliable. However, changes in policy have resulted in benefits now being paid directly to tenants, which means there’s less assurance for landlords to claim rent payments.

Perceived risk - Some landlords believe benefit claimants are less reliable (often based on stereotypes). This perception, whether accurate or not, can make landlords hesitant.

Insurance restrictions - Some landlord insurance policies exclude LHA tenants or require higher premiums to cover perceived additional risks. This can make insuring properties more expensive and complicated for landlords who accept tenants on benefits.

Administration – The administrative process of managing tenants who receive benefits can potentially be more complex. Issues such as benefit recalculations, changes in tenant circumstances, and interactions with local authorities can add to the landlord's workload.

Benefits of renting to LHA tenants

Stable income: Benefits are a guaranteed monthly payment, which can be more reliable than income from employment.

Challenging misconceptions: LHA tenants aren’t automatically “high risk.” Many are good tenants with a strong payment history.

High yields in lower-value areas: Properties in less desirable locations can still achieve strong rental yields because levels are set for a large area, and will take into account rent levels in the sought after streets as well as those in less popular areas.

Larger tenant pool: Many renters rely on housing benefits, so being open to LHA tenants increases demand for your property.

Finding the right LHA tenant

Reference checks: You can request to perform a ‘soft search’ credit check - or, alternatively, ask the tenant to provide proof of bank statements and references to show a good rent payment history. Failing those, you may ask them to provide a guarantor.

Know local LHA rates: Check the allowance for your area to ensure rent is affordable for tenants.

Work with councils: Build relationships with local housing officers to resolve issues quickly.

Support tenants: Help them with claim forms and encourage early submissions to prevent rent delays. You will need your tenant's permission to speak to the council about issues relating to the property with reference to them, otherwise the council may quote the Data Protection Act and refuse to discuss matters with you. Keep copies of everything and make a note in your diary of who you spoke to, when and what was agreed.

FAQs

Q: Can LHA payments go directly to landlords?

A: Normally, payments go to tenants. However, landlords can apply for direct payments if the tenant is vulnerable or at risk of homelessness due to arrears.

Q: Are landlords liable for overpayments?

A: No. Overpayments are usually recovered from the claimant, not the landlord.