Local Housing Allowance Tenants

One of the largest groups of tenants are those who receive Local Housing allowance from the Government because they would be unable to meet rent payments without this assistance.

There is a growing need for this type of rental property and the Local Authorities are coming to private sector Landlords to fulfil the demand for flats because they simply can’t meet the demand with their own properties alone.

The new regulations which give greater control to the tenants by paying them instead of the Landlord makes the tenant responsible for paying their rent each month. Not such an attractive prospect for the Landlord.

What’s the idea behind the change from paying the Landlord to paying the tenant? The Government is trying to encourage individuals to fend for themselves. They are being trained in money management, social skills and tenancy issues. Helping them to become independent leads to long term benefits for the individual and the communities in which they live.

The Government is guaranteeing to continue supporting these tenants and to provide direct Liaison with Private Sector Landlords to ensure that this system works.

When you consider that rents might be delayed because of a time lag in the tenants receiving payment from the Authorities and that they have a history that hangs over them of money issues and a lack of some social skills they won’t automatically seem as attractive as professional tenants. However there is a far greater demand for these 1 and 2 bed flats, which means more tenants available and as we know this is a numbers game.

As a Landlord you may feel reluctant to rent to this sector, however if you take up or continue to rent to this sector then you would be provided with a Liaison officer and training which help Landlords understand the system and how to manage their relationships both with the tenants and their Local Authority.

There are voluntary organisations who act as Management Agency and Letting Services for this rental sector, such as CARE. There is a guaranteed rent band so that the tenant is not fighting for the lowest rent, and they don’t deduct a commission charge. You will also have a choice as to the property you provide relevant to the amount of rent you can charge. The tenant has the opportunity to keep any allowance which exceeds the rental payment or to add to the amount if they want a more expensive flat. From a Landlord’s perspective it might be prudent to have properties to rent that are within the allowance amount so as not to invite the possibility of the tenant not having enough money to pay on time.

The tenants still need to provide references but it is still crucial for the Landlord to get a copy of the agreement and the references from the letting agency. You should also phone the referee and check if there is any further information that they would like to add that they were not prepared to write down.

There are certain Local Authorities who will lease properties directly from Landlords which would give a more secure method of renting to this sector, and this would also bypass the situation of the Local Housing Allowance being paid to the tenant as your agreement would then be with the Local Authority rather than the individual.

Most importantly of all you should be aware of your intentions with your properties. Are you looking for capital growth, do you want cashflow and passive income, or are you just renting out a couple of properties to cover a pensions shortfall? The answers to these questions will help you to decide whether the properties you need to rent that have been purchased (or that you will purchase) in areas suitable for this rental sector will provide you with the outcome you want. They may be cheaper, and the rents may stack up, but in the long term do you have the time to manage them, do you need to have fewer lower mortgage properties that bring in higher cashflow each month or are you stuck behind a desk and need the easy option of renting out properties with less hassle and possibly lower yields? The choice is yours, but before you make any decision as to whether you are in or out on these deals make sure you have worked out your own motivation for renting in this sector.

The motivation of the tenants is also an important factor in making these rentals work for you. The more motivated the tenant to achieve freedom and independence the better their relationship with you and their ability to pay on time. Do some homework and find out how they are motivated. What incentives will work for them?

We are all motivated by two factors. Firstly we like to have a positive to work towards and if we know the result of our hard work or sacrifices then we have a positive goal to work towards. If you are giving a reward for swift payment for example then you will need to make the reward in a timely fashion, otherwise the joy in receiving it is diminished. Secondly we are motivated negatively by realising the consequences of not achieving something. Some tenants will be sufficiently motivated by the threat of eviction that they will pay up on time. For others there may be other negative motivation steered by what will happen if they fail to pay or cause damage to property. If you can make these consequences and rewards clear in your agreement with them, or using a separate document, then your chances of success with them is far higher.

At the end of the day you need to feel some affinity with your tenants, so if you really perceive the worst in any tenant coming from the LHA sector then find another group to rent to. LHA tenants won’t suit you, and you won’t suit them.

If you can perceive the good in them and start positively as you mean to go on, then you will easily override all the issues that are thrown at you and will find this a rewarding sector to have both your houses and tenants working for you.

So how do you decide if renting to this group of tenants is for you or not?

Let’s assume that you’re interested but can foresee some problems:

• The tenant won’t pay you at all
• The tenant won’t pay you on time
• This type of tenant wrecks property
• Evicting bad tenants is difficult
• You don’t want the hassle of having to collect the rents yourself

Then consider the following:

• Treat the tenant with respect and help them to take responsibility for their own rents. This will be new to them, so they may need some incentive such as free pizza vouchers or cinema tickets in return for paying on time.

• Get all the help you can from the LHA as they are providing courses on how best to engage with tenants. They’re paying your mortgage after all.

• Keep the communication channels open – it’s always the same with building any relationship. Help them to feel empowered, not embarrassed.

• Use a 3rd party for rent collection. There are several organisations that will do this for you, or you could use software to flag up who has paid and who hasn’t.

• Act swiftly and be firm. Don’t let two weeks go past and then chase up the non-payment. The tenant will know that it’s not critical to you and won’t feel the need to pay on time.

• Set up your contract with them clearly so that they understand the consequences of non-payment and late-payment.

If you want to find out more about how to overcome issues that arise from an emotional perspective as well as a practical one, then call me on 01733 689567 to discuss how coaching can strengthen your negotiating skills and your confidence in dealing with difficult situations. Log onto my website: www.YvonneEmeryCoaching to request my Free Special Report.