While many property adverts have finally stopped using the outdated "No DSS" terminology, in many cases the same principles still apply.
Only today, property ads say "No Housing Benefit" or "No Universal Credit" tenants instead of "No DSS".
Who's really to blame for this?
In January 2019, the Ministry of Housing, Communities, and Local Government (MHCLG, formerly the Department for Communities and Local Government, or DCLG) released its English Private Landlord Survey (EPLS) 2018 results.
These results included questions that had been asked around the willingness of landlords and letting agents to let properties to tenants in receipt of housing benefit and/or universal credit.
How Willing are Landlords and Agents to Let to Tenants in Receipt of Housing Benefit or Universal Credit?
The EPLS results showed a split in respect of this question.
With regards to housing benefit:
- 52% of landlords said they would be unwilling to let to housing benefit tenants.
- 37% of letting agents said they would be unwilling to let to housing benefit tenants.
With regards to universal credit:
- 47% of landlords said they would be unwilling to let to tenants in receipt of universal credit.
- 33% of letting agents said they would be unwilling to let to tenants in receipt of universal credit.
Exploring the Disparity in Numbers
Given that letting agents work for landlords - except in the small number of cases where letting agents themselves own property - it is perhaps surprising to see a disparity in the results. It could even be said that it's surprising to see that letting agents were unwilling at all. To what extent should letting agents be unwilling to let to any tenants if the landlord is happy to have them in their property?
Could the numbers also be hiding a different story? Is there potential for landlords to be unwilling to accept housing benefit or universal credit tenants, but instances where letting agents accept them anyway? 10% of landlords and 4% of letting agents said they didn't know whether or not recent tenants were in receipt of housing benefit, so it's likely that in some cases these tenants are living in properties even when they've been advertised as "No Benefits Allowed".
What the Law Says
There have been a number of high profile news stories in the last two years around court cases where the use of terms such as "No DSS" have been judged discriminatory and in breach of tenant human rights.
Although there is no specific legislation outlawing the use of such terms in property adverts on the horizon, more than one judge has said they believe their use to be illegal.
So Who is Really to Blame?
In discussing this issue in the past, Upad has noted that it may not always be the landlord's
fault or choice.
Buy-to-let mortgages and rent guarantee insurance policies may have terms that invalidate them in the event of tenants being in receipt of housing benefit or universal credit, however in the survey only 25% of landlords and 40% of agents who wouldn't be willing to let to these tenants cited this as a reason.
It was far more common for both landlords and letting agents to cite other reasons, such as delays in payment while claims were processed, the fact that benefit is paid to the tenant rather than direct to the landlord or agent, and the risk of the benefit not fully covering the rent amount.
Over 40% of both landlords and letting agents stated that demand for their properties was such that they simply didn't need to address whether to accept housing benefit or universal tenant credits because they could let their properties without needing to consider these.
Many Would Accept Housing Benefit and Universal Credit Tenants if Things Changed
While 20% of landlords and letting agents said that nothing would encourage them to reconsider their stance, many said they would be open to accepting housing benefit and universal credit tenants if things changed.
- 65% would accept these tenants if benefit was paid directly to them.
- 64% would accept these tenants if benefit was paid in advance.
- 50% would accept these tenants if local authorities processed claims and paid benefits quicker.
- 35% would accept these tenants if the tenant referencing process was easier, allowing them to get a true picture of the tenant's financial behaviour irrespective of whether they received benefits or not.
These numbers highlight the business side of buy-to-let and also the challenges faced
by landlords in running this.
The high percentage of landlords who won't accept tenant benefits for reasons driven primarily by finances, as well as the percentage who would if the dynamics around benefit payments changed, show that many landlords are under pressure to pay their buy-to-let mortgage. While there's still a perception of landlords making huge sums of money, the reality for the majority of landlords is that they make a small return on their investment, and are reliant on rent being paid on time in order to pay their buy-to-let mortgage. A late rent payment, or going for weeks without receiving anything while benefits claims are processed, can leave a landlord in difficulty, so it is understandable why many choose not to accept these tenants.
Will Things Change?
It remains to be seen to what extent the universal credit roll-out will continue, or whether legislation will be brought forward that looks to outlaw the use of terms such as "No DSS" in property ads, although that is likely to open a can of worms that may take years to fully address and formulate into a sensible piece of legislation.
While it is clear that landlords and letting agents would be happy to let properties to housing benefit and universal credit recipients under the right conditions, as things stand we are a long way away from a situation that would make these conditions a reality.
By joining Upad's Landlord Club, you can access a range of helplines, including one specifically to help you help tenants with their universal credit claims.