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Should you target DSS tenants?

Notwithstanding the fact that the Department of Social Security ceased to exist in 2001, it’s not uncommon to see statements akin to ‘No DSS’ in rental adverts.

This restricts choice for housing benefit claimants, while limiting the pool of potential tenants for the landlords. So could you actually be more successful by accepting housing benefit claimants?

Here we look into DSS tenants in more detail.

What is Housing Benefit?

It’s a benefit designed to cover the cost of renting a property, and prevent people becoming homeless.

Claimants renting from a council or housing association receive Housing Benefit. If they’re renting from a private landlord (like you), they instead get local housing allowance (‘LHA’).

LHA is not a fixed amount, and is instead based on the cost of property in the local area. In essence, it’s means-tested.

LHA rates are based on the cost of renting in the cheapest 30% of the local market. For instance, a family of four (two adults, two children) living in a three-bedroom house in Cambridge can claim up to £173.50 per week. The same family renting a similar house in Rotherham can claim up to £101 per week.

If your rent is set above this rate, they will have to make up the shortfall themselves. So your property may not be suited to a DSS tenant if it’s towards the top end of the market.

How many people claim housing benefit?

Government figures [LG1] from May 2018 indicate that over four million Brits currently claim housing benefit. And of these, more than 1.2 million are living in the private rented sector.

More claimants live in London (720,000+) than any other region, followed by the Northwest (497,000+). The fewest claims come from Wales (219,000+).

Why do some landlords say ‘No DSS’?

There are several reasons we can speculate about, including prejudice, and the perception that DSS tenants are financially irresponsible. Whereas in fact, many housing benefit claimants are in work, and [LG2] rely on housing benefit to top up insufficient wages.

Some of the other reasons are more practical. People claiming housing benefit may not have a deposit available, and the administrative side of things can take time to work out.

In addition, some insurers charge more for insuring a property with a housing benefit tenant, and some buy-to-let mortgage providers also expressly prohibit the house being rented to ‘DSS’ tenants.

You should take all of this into account when considering accepting applications from DSS tenants.

Is saying ‘No DSS’ legal?

It’s not actually clear.

A ruling in February 2018 stated that lettings agents and landlords with a blanket ban on tenants claiming housing benefit were breaking equality laws. The case, brought by a single mother from Birmingham, was brought on the basis that claimants are disproportionately likely to be female.

She was successful and was awarded compensation.

How do you collect rent from DSS tenants?

Housing benefit is paid in arrears, every two weeks, four weeks, or monthly – depending on when the rent is due. In the past, it could be sent directly to landlords, but now is paid to the claimant into their bank account or a credit union. They’ll be responsible for paying you.

The situation becomes more complicated if you’re in an area where Universal Credit has been rolled out.

The council must intervene and send the rent directly to the landlord if the tenant has fallen into arrears, and can pay directly to help someone secure a tenancy (for instance, if they struggle to manage their money, or have a history of rent arrears). Shelter have more information here.

How do I know a DSS tenant is reliable?

With so many landlords refusing to accept DSS tenants, there are often many for you to choose from. If you want to ensure a reliable tenant, consider asking for references from past landlords. You can also ask for a guarantor.


[LG1]https://www.gov.uk/government/statistics/housing-benefit-caseload-statistics

[LG2]https://www.independent.co.uk/news/uk/politics/number-of-people-in-work-claiming-housing-benefit-soars-9647752.html

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