In July of 2020, the phrase “No DSS” was deemed by by the British courts to be illegal. This means that in the future, landlords and letting agents can not advertise properties with caveats such as “No DSS”, “No Universal Credit” or “No Benefits”. DSS stands for the Department of Social Security, a defunct department that was replaced by the Department for Work and Pensions (DWP) in 2001. By stating “No DSS”, a landlord or letting agent is effectively saying they will not let to anybody who receives housing benefit. A further change to the system, is universal credit. Under universal credit, all benefits are paid as one instead of separately. As part of the universal credit, if appropriate, a tenant will receive a housing element. This effectively replaces housing benefit, or DSS. This ruling by the courts to ban “No DSS” is seen by many as a victory for the poorest in society, but I think it is an insignificant ruling that will have no effect. Throughout this post, I shall refer to the housing element of universal credit as DSS as it is the common term used in the industry.
Why Landlords State “No DSS”
It used to be the case that DSS was paid directly to the landlord. The government changed this policy and today the current policy is that no DSS housing payments are paid directly to the landlord and it is the tenant’s responsibility to ensure that they are made. There are circumstances when the DSS housing payment is made to the landlord, however the universal credit website gives the impression that this is a difficult process for the landlord and generally involves asking the tenant to speak to the Department for Work and Pensions, as opposed to the landlord automatically getting the payment. If the tenant is in arrears of two months, then the payments can be automatically switched to you. In 2012, The Guardian posted an article stating 7 reasons why landlords state “No DSS” in their adverts. These were:
- No DSS payments are made in advance of the rent being due, they are made in arrears, compared to private tenants paying their rent a month in advance.
- Tenants reliant on DSS payments typically may not have enough money for a deposit. This is a risk for landlords if there is any damage to the property, and may be a condition for insurance
- The council are, unsurprisingly, an incredibly bureaucratic system with lots of red-tape
- Attitudes towards those claiming benefits are negative. Some landlords see them as unfavourable tenants.
- Letting to a tenant of benefits will either invalidate insurance, or cause the premium to increase substantially
- Mortgage lenders do not allow it in their terms and conditions
- The policy and rules regarding housing benefits are subject to changes, this is something that a landlord needs to constantly keep on top of.
From a financial perspective, the rabbit hole seems to end up at the mortgage and insurance companies
Why Banning “No DSS” Isn’t Good
On the face of this, this court ruling might make it seem that landlords can no longer declare “No DSS” and that they must accept tenants who claim DSS payments. This is not the case. It is completely unenforceable to stop landlords from not letting to tenants on benefits. A landlord is under no obligation to accept anybody who wishes to let their property. If a landlord does not want their tenants to be DSS claimants, instead of saying early on in the process that they do not want them, the tenant will be told at the final stage of the process that they are not a good fit for the area, or the landlord has arranged a different tenant privately already (which will suspiciously fall through). There are two effects that this will have.
- It wastes time
- Tenants will have to pay their deposits and wait to receive them back
Time is quite an annoying factor when it comes to finding a property to rent. You need to give your previous landlord notice before moving out, and there may be no going back after you make that decision. Furthermore, you can not look for your next property too early, as a landlord will not leave their property empty for months while they wait for you to finish your contract. Time is a precious resource, and if a landlord does not state outright that they will not let to you at the start of the process, your time is wasted with a property you think you will be renting.
Having to pay your deposit is a pain for tenants. The holding deposit to secure the property from other potential tenants can be substantial depending on the area you are renting in. This money pointlessly being elsewhere may mean you do not have the ability to look at any other properties, and you must wait until you have been refunded before you can move on.
Mortgage Lenders and Insurance Companies View on “No DSS”
As mentioned earlier, some landlords are forced to place “No DSS” on adverts because it can force insurance premiums to go up, or it may be against the terms of conditions of the mortgage on the property. It is unsure as to whether this ruling will invalidate these clauses but it is clear the effect that this will have for insurance premiums. Because of the perceived increased risk for the insurance company, landlord insurance premiums will go up, this will increase rents for everyone. The situation is similar for mortgage companies, they don’t want their landlords to default on their mortgage. Clearly, this reliance on mortgage companies and insurers has a knock-on effect on tenants.
What is the Solution to “No DSS”?
The UK government have been a bit too silent when it comes to the issue of landlords declaring “No DSS”. In my opinion, there needs to be an improvement in the housing benefit policy that enables landlords, mortgage lenders and insurance companies to have more trust in the system. If the DSS payment was paid directly to the landlord again, and there were more barriers in place to stop DSS payment claimants falling in to arrears, it will mean insurance premiums are not increased for having tenants on benefits. This will mean the need for landlords to state “No DSS” is removed.
There is no solution when it comes to changing people’s attitudes. Sadly, discrimination is common in the private rental sector. Short of complete nationalisation of housing and a system where whoever applies gets a property, it is impossible to force discriminatory landlords to not discriminate. It is completely within reason for a landlord to know the background and credit history of a tenant beforehand, this can disclose information such as the name and employment status of a tenant, which can lead to discrimination.
For a private landlord, the property is an investment, not a charity. The overly competitive housing market is not due to a landlord choosing to state “No DSS”, but instead due to government policy not allowing more people access to housing. Private landlords seem to be an unpopular group, perhaps it is in the governments favour to allow the blame to be shelved on to them.
I’d be keen to hear your experience when it comes to renting, whether you are a landlord or a tenant. Have you ever been affected by a “No DSS” clause?