Not all landlords feel comfortable renting out to benefits claimants, but millions of households in the UK get government help paying their rent. With that in mind, it’s important not to disregard DSS tenants when it comes to renting out your property.
- What is a DSS tenant?
- What’s the difference between DSS, housing benefit and Universal Credit?
- Why are some landlords reluctant to rent to DSS tenants?
- Are buy-to-let mortgages affected by DSS tenants?
- How do DSS tenants pay landlords?
- Does landlord insurance cover DSS tenants?
- What can landlords do if DSS tenants stop paying rent?
- Considerations when renting to DSS tenants.
A DSS tenant is someone who pays their rent with housing benefit.
DSS stands for Department of Social Security which was a government agency that managed benefits payments. The DSS was renamed Department for Work and Pensions (DWP) in 2001 but the term DSS has remained.
Fundamentally there’s little, if any, difference. The term DSS is still used to describe anyone claiming housing benefits even though the DSS no longer exists as an organisation.
Bear in mind that housing benefit is slowly being replaced by Universal Credit which combines six different payments into one. Therefore, Universal Credit can include housing benefit if the claimant is eligible.
Unfortunately, there is stigma attached to DSS tenants. This is often down to the stereotype that tenants who receive benefits are ‘worse’ at managing their money or are unemployed which makes them financially unstable. As a result, many historical adverts for rentals would specify ‘No DSS tenants’.
In reality, non-DSS tenants can lose their job and become financially vulnerable, if not more so, than anyone eligible for benefits. It’s also recently been ruled unlawful to discriminate against tenants who pay their rent with benefits.
Most buy-to-let mortgages do not restrict who you can rent your property to. However, make sure to check the terms of your buy-to-let mortgage agreement in case there are any terms and conditions in relation to this.
In most cases tenants in receipt of housing benefit will pay you directly according to the tenancy agreement.
In some cases, your tenant’s rent can be paid directly to you out of their housing benefit or Universal Credit payment. This could be because your tenant has had issues covering their rent in the past or because they’re not comfortable managing money. In these circumstances, cases are dealt with on an individual basis so you (and your tenant) will need to apply to organise a Managed Payment arrangement. You can find out more about Managed Payments and how to apply at GOV.UK.
Most landlord insurance policies will provide cover regardless of who your tenant is.
You’ll typically be asked about your ‘tenant type’, for example, whether they are in full-time work (professionals) or whether they’ll be paying most of their rent with benefits. This can affect the cost of your landlord insurance premium but it’s highly unlikely that a policy will be denied on this basis alone.
If you’re particularly concerned about your tenants’ financial vulnerability (regardless of how they pay their rent), there are additional policies you can add to your landlord insurance cover. These include:
- Rent guarantee – covers rental payments if your tenant defaults, up until they are evicted. Read more: The importance of rent guarantee insurance
- Legal expenses – pays for professional advice and fees related to legal proceedings, such as eviction notices. It’s typically combined with rent guarantee insurance but is also available as standalone cover.
- Accidental damage – compensates you for damage caused unintentionally.
- Malicious damage – most policies already cover this if the damage is the result of a break-in, but won’t automatically cover you if tenants (or their guests) are responsible. Read more: Guide to reducing and insuring against malicious damage
If your tenant receives housing benefit or Universal Credit and stops paying rent, you can apply for a Managed Payment. This will mean you receive their rent directly from the DWP.
To make a claim, your tenant will need to have missed at least two months’ worth of payments.
If you decide to evict the tenant you’ll have to follow the usual procedures (for instance, with a Section 8 notice).
As a landlord it’s your responsibility (or your managing agent’s) to check potential tenants can afford their rent – regardless of how they pay it. This can include running an affordability check and asking for references from previous landlords. You’ll also need to make sure they have the right to rent in the first place.
If a potential tenant has had a problem keeping up with rental payments in the past it’s worth investigating the Managed Payment route before dismissing their application.
If you’re interested in renting to DSS tenants let the housing team of your local council know. Most local authorities no longer have their own housing stock and rely on private landlords to cover accommodation needs. This could provide you with a steady source of tenants. Similarly, if you’re advertising online make it clear that you’re open to applications from DSS tenants.
Landlord insurance to suit your needs.
No matter how your tenant pays their rent, it’s crucial to have landlord insurance that covers your needs. Policies don’t just protect you from missed payments and malicious damage, they cover the building itself and any contents you provide.
At Alan Boswell Group, we appreciate that when it comes to insurance, there’s no such thing as once size fits all. That’s why we offer tailored advice and create policies that fit around you and your property. To find out how we can help, head to our landlord insurance hub or speak to a member of the team on 01603 218000.