What is a DSS tenant?

by | Nov 7, 2022

Introduction

A DSS tenant is a type of tenant some landlords choose to avoid. Other landlords choose to take them on. The law surrounding DSS tenants has changed a lot over the years so read on to get informed. From what a DSS tenant is to if you should accept one as a landlord. Everything to do with this type of tenant will be discussed.

What does DSS mean?

A Department of Social Security (DSS) tenant is a tenant who pays rent using housing benefits. Some people also call these types of tenants “Department for Work and Pensions (DWP) tenants. Either way, they both refer to the same thing.

DSS tenants have a negative connotation from landlords as they are considered to be more likely to pay rent late, not at all or conduct illegal activities within the building like subletting a home without a landlord’s permission.

A landlord speaking to a DSS tenant

How does a tenant qualify as a DSS tenant?

DSS tenants pay their rent using benefits. These benefits can be Universal credit or housing benefits. However, there are some changes that are coming into effect.

Housing benefits are paid by the Department for Work and Pensions to a tenant. This tenant will have to make an application for benefits to this government body and gain approval. If a tenant is currently receiving housing benefits that means they signed up before September 2022 when the rules around this changed.

If this is the case, a tenant won’t have to pay the landlord themself as the housing benefits go straight to the landlord.

However, a recent change to legislation in September 2022 has stated that these housing benefits will no longer be issued and by 2024 all rental payments for those on benefits will be paid using universal credit. 

Tenants will also have to pay their rent themself and deal with a landlord, in the same way, another person earning income without the help of universal credits would. Click here to find out more about these changes.

In general, in order to qualify as a DSS tenant, you will have to have one of the following circumstances:

  • Have reached state pension age 
  • Your partner has reached state pension age and started claiming Pension Credit
  • You are living in temporary housing
  • You are unemployed and claiming benefits
  • You are disabled and claiming benefits

Renting to DSS tenants

There is a lot of controversy around renting to DSS tenants because in the past landlords used to be able to not accept these types of tenants into their property and would sometimes actively display this on room advertisements with phrases like “no DSS tenants”.

This is due to the stigma that DSS tenants are higher-risk tenants who wouldn’t pay rent on time and are less likely to look after a property. The below headings talk about if this is really true and what the laws are like surrounding discrimination against these types of tenants.

Can a landlord refuse a DSS tenant?

Under the equality and human rights commission which governs England, Scotland and Wales, letting agents are instructed to not take purposeful action to discriminate against those applying for tenancies with benefits. So if a tenant is dealing with a letting agent or property manager on behalf of the landlord, they would have a right to make a complaint against the company.

Having said this, the action a tenant can take is severely limited because this advice from the Equality and Human Right Commission is only advice and the best a tenant can do is make a complaint and attempt to make it well known that the letting agent and their company haven’t followed the advice.

If your landlord is a public authority, on the other hand, there is more you can do and potential court action can be taken. Find more information here on how to do so.

A lawyer prosecuting a landlord for advertising a no DSS tenancy

So ultimately, whether it is morally right or even beneficial for a landlord to refuse a DSS tenant, they are well within their rights to do so and when there aren’t clear reasons given as to why one tenant is picked over another, proving a landlord has unfairly discriminated against a DSS tenant is both hard to prove and convict.

Is it illegal for landlords to include “No DSS” in letting advertisements

While proving and prosecuting DSS discrimination is difficult, there are rules around how a landlord can advertise a vacant tenancy. Overtly displaying this restriction can be detrimental for landlords as they are more likely to be prosecuted.

The reason that it is said to be unlawful is not because they discriminate against DSS tenants but because they discriminate against those who are more likely to be DSS tenants such as women and disabled people. Meaning groups of people in society are seen as discriminated against.

If a landlord is found to have evidence that they actively don’t allow DSS tenants into their property they can be fined and taken to court. For more examples of where this has happened click here

Having said this, prosecutions even for the overt advertisement of  “no DSS tenants” are rare and a landlord is still within their right to refuse a tenant for other reasons to justify their decision such as a credit check or employment history.

What should landlords do if a DSS tenant stops paying rent

If a landlord has a tenant who isn’t paying their rent, it can be useful to first understand where the tenant is coming from and attempt to verbally negotiate with them as to why they don’t have that money available and when it will be. This can be the best way to stay on good terms with a tenant, especially if it is rare for them to miss a payment or it is the first time they have ever had rent arrears.

If this doesn’t work, landlords can ask the tenant to apply for a managed payment which is where instead of the tenant directly paying the rent to the landlord directly, Universal credit would pay the landlord and the tenant would have to pay back universal credit over time.

If these steps don’t work out, a landlord has the right to evict the tenant under section 8 in the usual process of any other tenant by sending them a section 8 eviction notice. Within a few weeks to months, you should legally be able to evict your tenant, depending on how compliant they are and what type of tenancy agreement they have.

Does a DSS tenant need a guarantor?

A rent guarantor is someone who will agree to cover the rental payments for a tenant in the event they cannot pay. This is typical with DSS tenants because they are on lower incomes. This doesn’t matter if they are signed in a tenancy agreement for the letting type of a single let or a HMO property and aren’t in social housing – they are still considered higher risk.

Working out if a tenant needs a guarantor

As a result, it is completely legal for a landlord to ask for a guarantor if they are welcoming a DSS tenant to their property. Just as it is legal for them to ask to see credit scores, the tenant’s form of employment and other pieces of information affect the perception of how risky a tenant is.

Do councils pay landlords with DSS tenants directly?

In some cases, those on housing benefits (must have signed up before September 2022) can have the housing authority pay a landlord directly. Alternatively, while not the council, the Department for Work and Pensions (DWP) can have a payment agreement directly with a landlord if a tenant is on a “managed payment” plan. Have a read here on how this is set up.

Do you need landlord insurance for DSS tenants

If you asked insurance companies if a landlord should take out DSS insurance, they most likely would say yes to save you the hassle of a tenant not paying rent. Having said this, the majority of DSS tenants will most likely never have rent arrears. It is a small minority of tenants who ruin the reputation DSS tenants have.

If a landlord does the due diligence on the other factors that show if a tenant is a high risk or not such as employment checks, credit score checks and perhaps even having a conversation with the tenant so they know whether they are likely to move house soon or what their future plans are like, they can severely mitigate the risk of a tenant not paying rent.

What is landlord insurance

Landlord insurance can refer to any type of cover against the risks that come with the property they are renting out. When it comes to DSS tenants and whether you need landlord insurance for them, it will depend on your choice as a landlord.

There are certain insurance companies who will cover you for the associated risk of having a DSS tenant if you apply for it but this will differ depending on the company.

Aside from DSS tenants, having landlords insurance can be a great way to also cover costs in the event that anything other than rent arrears happened to the property. Lumping all associated risks of the property into one.

For example, if there is a flood or severe damage to the property, the landlord’s insurance would cover the costs of rehousing tenants and covering the missed rental payments while there is no house for the tenants to live in. This can prevent a landlord from filing for bankruptcy and losing the rental property completely.

        A landlord’s bank card with money from a DSS tenant

        Do I need loss of rent cover if I have DSS tenants?

        You don’t need it but it may be recommended by a lender. However, it is now against the law for a mortgage lender to only allow a landlord to house tenants who aren’t on housing benefits as the laws have changed. Therefore they cannot have this anywhere in their mortgage policy. Even when it comes to buy to let mortgages.

        Nonetheless, when it comes to mortgages, the rules can be bent and this is not to say that a mortgage lender can refuse a mortgage in the first place if it is clear a landlord would only by renting the property to DSS tenants. So, If you think you will be housing a DSS tenant, it may be a wise idea to take on the loss of rent cover or potentially have a rent guarantor in place.

        This will cost a landlord extra money but if it means the difference between being approved for a mortgage or not, it may be worth it.

        Should landlord insurance cover DSS tenants

        In order to determine if landlord insurance cover will protect against rent arrears from a DSS tenant, a landlord needs to check the specific terms of their insurance policy. Most of the time, the cover will protect you no matter who the tenant is.

        What to do if you’ve faced DSS discrimination as a tenant

        A tenant facing clear discrimination is never easy and it is hard to know whether a landlord is within their right to refuse to offer a tenant living space. So if you, as a tenant, think you have been discriminated against, the below headings guide you through what you can do.

        How to challenge DSS discrimination

        Most of the time, taking full legal action against a letting agent or landlord may not be seen as worth the time and hassle involved. In this case, making a complaint against the letting agent or landlord through trusted online review sites such as Tripadvisor or Google My Business can be a great way to gain some level of conviction.

        However, especially in cases where discrimination is clearer, if a landlord has advertised a house for no DSS tenants or a letting agent has rejected your application straight away because you’re on housing benefits. You can go through a small claims court and make a claim for inhumane treatment via the government website here.

        What if a landlord says there are mortgage restrictions?

        This may be seen as a more valid reason for rejecting a DSS tenant, however, there are laws in place that prevent mortgage lenders from having these terms in their agreement. As a result, even if a landlord says they have an older mortgage signed before the law change, the law still applies. A landlord cannot give a tenant this reason validly.

        What is a no DSS policy?

        A no-DSS policy is when a landlord doesn’t allow a DSS tenant to rent a room or rent a property in their portfolio. The term may also be used by letting agents as they source tenants and do tenant referencing for the clients.

        It is useful to note there are good tenants and bad tenants for a landlord and having a blanket no DSS policy may actually be harmful because you could refuse a tenant who would otherwise pay their rent on time and look after the property.

        Also, displaying a no-DSS policy is now illegal and you can be prosecuted in court for the act so if a landlord does have a no-DSS policy, they cannot tell the reason for not allowing a tenant into their property to them and even having this in writing anywhere in legal documents can have repercussions.

        Throughout the property industry, any form of discrimination against a DSS tenant is, therefore, a lot more ambiguous and not providing a tenant with housing due to their DSS status is done discreetly.

        A landlord discussing a DSS policy with a tenant

        To conclude

        The topic of DSS tenants is crucial to understand if you’re a landlord because there is the potential you can end up in court and be prosecuted for discriminating against those on benefits.

        There is a clear morality debate as to whether not accepting DSS tenants is discrimination or if it is simply a landlord protecting themself and their business. On one hand, it can mean tenants have a lack of housing and even the best tenants who have the best history and may have found themself on housing benefits cannot find somewhere to live.

        But for a landlord on the other hand, if they have a tenant with rent arrears, this can mean they default on their mortgage, lose their investment and potentially ruin their credit history or the future.

        As a result, in general, most landlords end up providing alternative reasons outside of the common “no DSS” policy in order to reject tenants they don’t want.

        Asking for things like a minimum salary that they know a tenant on housing benefits cannot have or asking for a guarantor are ways a landlord can easily get around not housing a DSS tenant or the risk associated with them.

        In addition, landlords have adapted to avoid court action by never writing the term “no DSS” in any formal document whether that be emails, advertisements or tenancy agreements when liaising with letting agents, tenants or even lenders.