DSS Tenants: a guide to housing benefits for landlords
Historically landlords have exhibited reluctance to let out their rental property to tenants that are currently receiving financial support for their housing in the form of universal credit. Naturally, many tenants believe this to be unjustly upheld and prevents a large portion of the UK’s, already vulnerable, renting sector unable to find their next home. However, landlords have defended the stance through multiple failures demonstrated in the support system itself. But, why do landlords not accept DSS tenants? And for those who are thinking of letting out their property out to these occupants due to the allure of arguably more certain rental payments, how does renting to DSS tenants work?
What Is a DSS Tenant?
Simply put, a DSS tenant is a renter that is in receipt of financial support from a government body, typically taking the form of housing benefit, or universal credit. The DSS itself refers to an out dated name for the government department that issues such welfare, the Department of Social Security. This agency was replaced by the Department for Work and Pensions or DWP in 2001, but has since become synonymous with the payment support it offered tenants.
Whilst housing benefit has also been replaced with Universal Credit, the principles are largely the same, with the specific amount the tenant receives in rental support varying depending on their specific circumstance. Whilst there has been some stigma surrounding landlords that do not wish to accept tenants into their rental that accept housing welfare, this is something prospective renters are typically transparent about, informing the landlord well before the tenancy agreement is signed.
Universal Credit will not inform the landlord if any of the residents of their rental properties makes a claim for financial support. However, if the application made by the tenant is successful, the landlord may be contacted for their banking information so that the appropriate payments can be made directly to them.
Can Landlords Refuse DSS Tenants?
In the past “No DSS” may have been common sight for tenants searching for their next home, with the number of rental property owners that would be happy to let to tenant receiving universal credit dwindling from 40% in 2011, to a mere 17% in 2017. Many members of the tenant community have historically voiced their outrage at these arguably unwarranted policies, established by landlords on generalisations and stereo types. Essentially, if a property was advertised with a “No DSS” policy in place this meant that the landlord would not consider any applications from prospective renters simply because they are receiving financial support. This is not to say the concerns of rental property owners are unjustified, after all they are dependent on the tenant to uphold their legal obligation to make the agreed upon rental payments, or be placed at an increased risk of being further exposed to buy to let mortgage repayments, alongside the costs of managing a property.
However, a ruling made by the courts in 2020 has put an end to these practices by landlord, deeming a blanket ban on DSS tenants to be unlawful. The district judge found that if a landlord was to reject a tenant application exclusively because they are receiving financial support in the form of universal credit to be in breach of sections 19 and 29 of the Equality Act 2010, due to the rejections peripherally discriminating against tenants because of their gender and disability.
Through the introduction of the Equality Act landlords are unable to discriminate, either directly or otherwise against a tenant or aspiring renter because of their characteristics or “protected attributes”. By denying those who claim universal credit an equal opportunity to find a future home, landlords that uphold “No DSS” advertisements for their property are in violation of the act as it would be found to disproportionately impede woman and the disabled as they are at an increased likelihood of receiving such financial support.
Why Do Landlords Not Accept DSS?
As mentioned there is no certainty that the amount he tenant will receive for the housing benefit allowance will actually cover the due rental payments in their entirety. Whilst this certainly doesn’t leave the tenant any worse off, it also somewhat fails to address the purpose of why a tenant would need to turn to the government for housing related support. It goes without saying that the landlord of the rental property will be dependent on receiving the agreed upon rental payments from the tenant; however, the residents and property owner fail to come to an agreement about reducing the future rental payments, if the universal credit doesn’t fulfil the expected amount, the tenant may start accumulating rent arrears. Naturally, this would only work to make the problem even worse, meaning that the landlord may move to reclaim possession of the property, or perhaps even issue the tenant with a CCJ.
Whilst this is of course not the case for the majority of landlords, there has been an undeniable stigma regarding tenant receiving finical support. This misguided reputation about DSS tenants being too irresponsible with money informed the outcome of many tenancy agreements. These notions did little but fan the flames when the housing support a tenant was eligible for didn’t cover the full rental amount, leaving the expectation for the tenant to be unable to afford the rent, and cover the difference themselves.
This is not to say however that the argument against DSS should be dismissed, but rather realigned, as many rental property owners take issue with the government system and its implementation, rather than the tenants themselves. Perhaps one of the biggest issues that landlords take with the universal credit system is that the amount of monetary support he tenant can expect to receive each month can vary, making the amount the property owner can expect to receive each month uncertain, whilst also leaving the landlord in financial limbo until the figure is determined.
Only adding to the financial distress of rental property owners, there has also been numerous reports from landlords that have stated the payments due to them from universal credit to cover the rental payments have sometimes been stopped without any prior warning to the landlord, completely disregarding both their financial position and the legal obligation for the payments to be met.
Getting Landlord Insurance With a DSS Tenant?
Whilst there are some reports of landlord insurance providers stipulating the cover will not protect the landlord if they choose to rent to a tenant that is receiving universal credit, there are a range of insurance providers and packages that allow a landlord to take out appropriate insurance and still cater to this demographic. Alongside the landlord being unrestricted in their choice of tenant, these insurance packages do not come at an additional premium for the landlord.
With this being said it could be wise for a landlord to take out or even charge their insurance policy to cover renting to tenants that currently receive support through universal credits. Made particularly poignant with the dramatic increase in households receiving financial support on the back of the coronavirus, it goes without saying that tenants do not actively seek out to meet their rental payment obligations through these means. With this in mind a tenant could have been subject to reduced working hours and have an otherwise impeccable record of meeting their rental payments; if they receive universal credit the landlord’s insurance is now breached leaving the property owner in a far large headache than if they had taken out an opposing policy.
Will Renting to DSS Tenants Breach My Buy-to-Let Mortgage?
When the ruling was announced that a “No DSS” clause would be considered discrimination, and therefore be unlawful, many landlords expressed concern regarding the terms of their buy to let mortgage. Naturally a landlords should be cautious of this as if found in violation of their buy to let mortgage the consequences can be severe. However, whilst this may have rung true for many rental property owners only a few years ago, this is no longer the case, with no providers on the market currently offering a mortgage with this as a condition for the property owner. Even if we were to dismiss this Shelter found reported that 48% of landlords within the UK has outstanding mortgages of their rental properties, allowing them to potentially accept DSS tenants, irrespective of the ban now being redundant. However, with the “No DSS” clause found to be unlawful, any caveats regarding this within a buy to let mortgage would no longer be applicable.
How Does Renting With DSS Work
If an existing tenant wishes to begin to claim universal credit to aid with their rental payments, it is likely that they will have already discussed their financial situation and possibility of rent arrears with their landlord. With this in mind the landlord should make every effort to assist their tenant with their claim. Whilst some landlords may argue that this is not their responsibility, they do have a duty to provide the tenants with copies of the tenancy agreement and confirmation of the rent charges, proving that the claimant is indeed a tenant and they are liable for an agreed upon rental payment. Even in spite of this, if a tenant is unable to meet their regular rental payments, it is in the best interests of both the landlord and the tenant to have the tenancy period resume as normal, as quickly as possible; therefore coming to a mutual agreement over payment plan or temporarily reduced rent should be the first port of call.
It is also important for landlords to keep in mind that the amount of universal credit each tenant will be entitled to will be completely different , with the monetary support they receive being dependent on their existing income levels, savings, employment status, living costs, ect. With this in mind, there is no guarantee that the housing costs entitlement that they receive in order to cover their obligated rental payments, will actually reach the full amount, leaving the tenant to cover the remaining rent.
The housing costs entitlement segment of the tenant’s universal credit can be paid directly to the landlord, essentially guaranteeing the receipt of their monthly rental payment. However, regardless of whether or not the landlord is having the benefits paid directly, the tenant remains liable for the rental payments throughout the duration of the tenancy period. However, the tenant is also able to have the housing support paid directly into their own account rather than the landlord’s. With this being said, if the tenant is in excessive rent arrears, or is currently repaying the landlord for rent arrears, the universal credit must be paid directly to the rental property owner. Additionally if the tenant is paying back a benefit overpayment or budgeting loan, the universal credit payment is shared across multiple members of the residency, or the tenant has social fund or discretionary support debt the financial support will once again be given to the landlord. Whilst the tenant of the rental property will always be responsible for making the rental payments over the course of the tenancy period, if the resident’s housing allowance is being paid to the landlord directly, any overpayments made by universal credit must be settled by the landlord.
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