Pros and cons of letting to ‘DSS’
Many, many landlords automatically rule out tenants on benefits while others have built large portfolios of properties let exclusively to ‘DSS’ claimants.
If you want to know more about what letting to DSS tenants means, here’s a good blog from the online letting agency Upad, whose founder James Davis rents a number of properties to tenants claiming benefits.
As he says, whether you want to go down this route is up to you ( I’ve thought about it a few times but always shied away), but to help you make your mind up, here’s a list of some of the main pros and cons:
Pros of ‘DSS’ tenants
- Councils are desperately short of accommodation to house DSS tenants so if you open up your property to those on benefits, you will have plenty of demand.
- As all or some of the rent is paid by the council, there’s no danger the tenant won’t have the money – although if it’s paid directly to the them, there’s no guarantee they will pay you!
- Tenants on benefits are likely to stay for several years, mainly because they don’t have a lot of choice.
- Following the introduction of the benefits cap, which has restricted the rent councils can pay, some are offering one-off bonus payments to landlords who accept DSS tenants. For this reason, it’s best to get in touch with your local council and ask them to provide a tenant, rather than trying to find DSS tenants independently.
- You can sometimes let directly to your local authority, which will find tenants, guarantee to pay you rent even when the property is empty, manage the tenancy and maintain the property. You will usually be asked to sign over the property to the council for a minimum number of years, after which it will return it to you in its original condition, or extend the lease. You’ll get less rent than if you manage the property yourself, but this is an easier option.
- Councils will take unfurnished properties, but they usually insist that the landlord has a professional electrical safety check and takes out a boiler maintenance contract.
- Councils will usually provide 4 weeks deposit – or a guarantee of 4 weeks rent.
Cons of DSS tenants
- Tenants on benefits are responsible for the greatest proportion of rent arrears; the problem has become worse since the law changed in 2008 to ensure councils pay rent to tenants, rather than directly to landlords. However, you can insist in your tenancy agreement that the rent is paid direct to you, but if your tenant changes their mind and subsequently asks the council to pay them instead, there is nothing you can do about it.
- You’re likely to find it hard, if not impossible, to get insurance to guarantee the rent as most policies exclude DSS. For peace of mind, you could ask the tenant to provide a guarantor instead.
- Your BTL mortgage might prohibit letting to DSS tenants, although if you want to do this it’s worth discussing with your lender as you might find they will waive this clause in the tenancy agreement.
- Your landlord insurance might not cover DSS tenants or it might charge a higher premium, but this isn’t necessarily the case.
- One of the biggest problems with DSS tenants is that it can be a problem repossessing your property. As councils often don’t have anywhere else to house the tenant, they are notorious for telling them to stay in the property until they’re evicted by the landlord. This means that it can take several months and hundreds of pounds to get a DSS tenant out.
- If the tenant claims housing benefit to which they aren’t entitled, the council could try to reclaim over-paid rent from the landlord. This is most likely if the council has paid the landlord direct.
- If the tenant’s financial circumstances change, their benefits could stop or be reduced, possibly leaving them unable to afford the rent.
- If the tenant doesn’t pay their rent, the council is unlikely to discuss the problem with the landlord due to Data Protection laws.
- There is sometimes quite a lot more paperwork involved in letting to council tenants than private tenants; also, if the only part of the rent is paid by the council, you will have two lots of admin.