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What’s DHSS, Why many Landlords won’t accept it, and why it’s the 1st choice for others?

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Published: 28/03/2019   Last Updated: 07/05/2019  
Author: Empire Estates    Tags: DHSS, Lettings, Tenants, Landlords

Recently we have made some changes to align with recommendations from NLA and RLA relating to the prevention of blanket bans against tenants in receipt of housing-related benefits (commonly known as DSS or DHSS). These changes will be implemented by the end of April 2019.

We believe that all tenants looking to rent a property deserve the chance to be fully assessed for their suitability and matched to a home that suits both their and the landlord’s circumstances. While change is never easy, we are leading the way on this issue to ensure that we provide our clients and tenants with a service that is fair.

The dilemma of whether to accept tenants on housing benefit is one which many landlords struggle with. Others resolutely refuse to do so whilst some landlords welcome DSS tenants. As with anything, there are arguments for and against.

The Benefits of letting to tenants on Housing Benefit

The biggest benefit is that Tenants on DSS often stay longer. Unlike a young professional who may be on the move every six months, tenants on benefits tend to want the stability of a long-term lease. Long-term tenants are easier to manage and provide constant cash flow. If the tenant moves off benefits they are still likely to stay on.

Guaranteed income is an obvious attraction. The local authority pays the rent. It is this promise of steady cash flow which appeals to many landlords. However, there are also downsides to this which we'll mention later.

Constant occupancy is also a reason to consider tenants on housing benefit. Social housing cannot meet demand. This means there is always a queue of DSS tenants for the private landlord willing to accept them. It is this demand which appeals to landlords who may have invested at the lower end of the market and may be struggling to find tenants. Even the less salubrious locations will be in high demand from DSS tenants.

The Negatives of letting to tenants on Housing Benefit

An imperfect system, it's fair to say that most issues arise not because of the tenant but because of the system. Anecdotal evidence suggests landlords face a struggle with the way the housing benefit works for tenants who rent in the private sector.

The Local Housing Allowance is paid by the local authority which administers the system. And it's fair to say standards and operating procedures vary around the country.
Landlords have reported problems such as payments being irregular. That staff can be difficult to deal with and there is a lot of form filling. Rent payments can also be an issue. It is the tenant and not the landlord who receives the rent payment. It is then their responsibility to pay the landlord.

Another barrier to the positive cash flow which we described earlier as a benefit is that often the benefit paid to the tenant will not be for the full amount of rent. It is up to the tenant to make up the shortfall. Some will not be able to do this leaving the landlord out of pocket. In the vast majority of cases, this won't be an issue but if you are unlucky enough to have a bad apple the tenant may simply pocket the cash.

Many tenants will not be able to pay a full deposit. And local authorities are unlikely to be able to help. Letting to tenants on benefits may mean you having to accept a reduced deposit.

There is a widespread preconception that all DSS tenants will either default with the rent or trash the property. Undoubtedly there will be some tenants like this. Just as there are amongst any other group of renters. But to disregard all tenants on housing benefit for the actions of others doesn't make sense.

Other things to consider include insurance and your mortgage agreement. Some buy to let mortgages preclude landlords from renting to tenants on housing benefit. Insurance premiums can be higher for DSS tenants. Obvious this needs to bear in mind when deciding whether to accept tenants on benefits.

So, Should you rent to tenants on Benefits?

Without wanting to be accused of sitting on the fence this really is a decision for each landlord. DSS tenants will suit some but not others. But make your decision on business principles. Not on presumption and scare stories.