Understanding the Financial Costs of Private Renting

Financial concerns are one of the biggest reasons that homeless people can be wary of entering the private rented sector. Renting privately can be affordable, and this page aims to give an overview of some of the financial support available. It's also important that clients have a bank account, are able to budget and manage their finances independently before moving into the private rented sector, and staff should offer support with addressing any debt issues and calculating an affordable budget before making the decision to move.

What are the costs of moving into the private rented sector?

Service users moving into the private rented sector need to consider and plan for the following costs above and beyond their usual cost of living:

• the cost of weekly rent, and whether this will be met by Local Housing Allowance (LHA). See below for more details.
• the cost of a deposit and rent in advance, usually adding up to about 8 weeks worth of rent. See below for more details.
• where the property has been found by a lettings agent, there may be a one-off letting agent's fee.
• the cost of a removal van, and any redecorating or furnishing costs. People receiving Income Support or Jobseekers Allowance may be eligible for a Community Care Grant to cover some of these costs.
• service users should consider whether moving home will impact on the cost of utility bills, transport, food and other necessities. Service users moving out of supported accommodation may be particularly unused to budgeting for some of these costs.
• people who are already working or want to start work will have additional financial considerations to take into account; see the page on 'Understanding the practicalities: the private rented sector for people who want to work` for more details.

Local Housing Allowance

People on benefits or low incomes will usually qualify for Local Housing Allowance (LHA) to cover all or part of their rent. This payment has replaced housing benefit for people in the private rented sector and aims to offer tenants better choice of tenancies, a more transparent and equal allocation of housing payments, and control of their finances.

• Claimants are paid a standard allowance based on average rents in the local area. The LHA Direct website search functions allow you to work out how many bedrooms you are eligible for, and find LHA rates by local authority or postcode. This information will be helpful in searching for a property at an appropriate rent level.
• Tenants who rent a property at a level below their LHA rate are entitled to keep the excess of up to £15 per week, which will not normally affect their entitlement to other benefits. They can also top up their rent if they choose a property above the LHA rent.
• LHA is paid to the tenant directly, not to the landlord, and tenants are expected to take responsibility for paying their rent. In exceptional circumstances, to safeguard the interests of a vulnerable tenant and/or where there is evidence that rent is unlikely to be paid, tenants can request that the LHA is paid direct to their landlord. Landlords can also apply for direct payment if eight weeks of rent arrears have built up.
• Delays in the local authority processing claims for LHA can result in arrears. Services and service users need to submit an LHA claim as soon as the rental agreement is signed. Some local authorities have been able to develop protocols to ensure swift processing of new claims, and services should consider building a relationship with the relevant team.

Rent deposits and rent in advance

Most landlords request a deposit, usually set at the rate of a month’s rent, to cover any damage to the property or rent arrears. This is repayable when the tenant leaves the property and now has to be kept by a neutral tenancy deposit protection scheme in order to prevent disputes.

Landlords often also ask for rent to be paid four weeks in advance. LHA is paid in arrears and it may be worth checking whether landlords who accept LHA would be willing to waive rent in advance in your case.

Service users looking for a rent deposit should check with their local authority whether there is a rent deposit scheme in their area that may be able to help. Alternatively they may need to save for a deposit or consider a credit union or bank loan. Your local credit union may be able to help with access to credit as well as developing saving habits. People receiving Income Support or Job Seekers' Allowance can apply for a budgeting loan to cover rent in advance but not rent deposits, and anyone experiencing a crisis which threatens their health and safety (including homelessness) can apply for a crisis loan to meet costs such as a rent deposit or rent in advance.

Return to the main page on the Private Rented Sector.