Image credit: Daniel Chapman
Digs is a tenant support and empowerment organization for the renters of London borough Hackney. The organisation conducted a “mystery shopper” survey of 50 estate agents around Hackney. They claimed only one studio flat was available to tenants on housing benefits. The Tenants Voice cannot stand firmly behind that figure. However, it’s obvious that a lot of landlords and estate agents choose not to work with DSS tenants.
On the 27th of February, Digs launched the #YesDSS campaign. It aims to fight the widespread rejection of tenants on housing benefits. A gathering of 80 protested in front of the Hackey Town Hall. Afterwards, they moved on to local letting agencies, demanding they remove their “No DSS” policies.
So what’s really the problem ?
DSS tenants have always had a harder time finding decent accommodation. In a capitalistic economy, one can only guess so much. However, DSS tenants had a much better position before a major change in the housing benefits system.
When the Universal Credit was introduced in October, 2013, it changed how the councils paid the housing benefit. It used to be that landlords received the housing benefit payment directly from the local council. The Universal Credit now pays the monthly rent allowance to the tenant instead. The tenant is then responsible to forward the full rent payment to the landlord.
This change removed a core security for the landlords – they get paid directly by the authorities. The lack of security caused a multi-layered rejection of properties to tenants with Universal Credit.
To further worsen the issue, tenants cannot really get to the responsible person as there are so many in the chain.
Letting agents dislike DSS tenants because the process of reclaiming rent from local councils is complex. It takes time for local councils to process tenant applications and rent benefits. As a result, payments are often delayed with months. When tenants don’t work full time, it’s hard to cover the cost of life in the expensive urban areas. This leaves estate agents in a rough position to recover overdue rent payments and keep the business going.
When asked about the scarcity of properties available, letting agents usually don’t accept responsibility. Rather, they forward it to the landlord, as he holds the ultimate responsibility for the property. You might hear a response like the one Athos Kleanthos, a Sales Manager for estate agency Striling Ackroyd, gave to the Hackney Gazette.
“We do take DSS, but all of the landlords we work with don’t want tenants on housing benefit. When the Tories came to power they changed how much they were going to contribute to DSS tenants. They should be storming the Houses of Parliament not estate agents.”
Stirling Ackroyd quickly distanced themselves from their Sales Manager’s statement via twitter post:
— Stirling Ackroyd (@Stirling_London) March 2, 2016
Letting agents shared different viewpoints on the issues with housing benefits. Some refused to be interviewed and hid in their offices. Others, express strong sympathy for tenants with Universal Credit. The one thing that united all letting agents was universally shrugging the responsibility to the landlords. Landlords often don’t wish to let to tenants with Universal Credit.
For landlords, DSS tenants often correlate with higher cost versus insecure rental payments. DSS tenants often don’t work full time or at all. Without the direct payment from the council, tenants are not reliable to pay the monthly rent.
Due to this notion, most landlords just reject DSS tenants straight out of the box. The ones who don’t impose very strict criteria, which the tenants must cover in order to get the property.
“The Landlord” is a rather prominent landlord blogger. He shares , tenants and letting agents through his experience of letting numerous properties. In his blog post, “the landlord” argues that his experience with housing benefits tenants have been a 50/50 success. Or…failure, based on your point of view. Self-sustaining private tenants can turn out a bad deal for the landlord just the same as DSS tenants. In his point of view there shouldn’t really be too much discrimination based just on this one factor.
However, he makes another point. Landlords should be free to choose their tenant discretionary. DSS tenants must make efforts to show they are hardworking individuals and good paying tenants. Often DSS tenants are expected to have guarantors or put down a bigger deposit to secure a property for themselves. Check out his tips for DSS tenants.
Most landlords share the same view regarding their rights of exclusion. Private landlords and letting agencies are free do business that suits their best interest.
Tessa Shepperson, from Landlord Law supported this view in her blog. It’s not private landlords’ responsibility to house people with financial problems. It’s the social sector whose function is to “provide modest cost accommodation for people of modest means”.
Landlords though, don’t want to take the responsibility either. Instead, many suggest it’s property insurance companies, mortgage lenders and even local councils, who make it hard to to accommodate DSS tenants and do good business at the same time.
Insurance Companies and Mortgage Lenders
Landlord insurance is a must have for any rented property. Regardless of whom they rent to, landlords are practically obliged to pay for rental property insurance. Otherwise, they risk facing horrendous repair and renovation costs from tenants. It only takes one horrible experience to take most landlords out of business. Small time landlords are financially dependent on the income the property yields.
Landlord insurance providers evaluate DSS tenants as a bigger risk than normal paying tenants. To that account, they increase the cost of the insurance payments and premiums. Some insurance companies and banks even reject landlords with tenants on housing benefits.
Mortgage lenders are not making it easy on landlords too. As we know, most small landlords become such through a buy to let mortgage. Practically all banks and lenders will evaluate a DSS tenants as increased risk. Thus, many are restricting landlords who want to get a buy-to-let mortgage. There are special clauses that limit landlords from letting to tenants on housing benefits. They might not spell exactly “NODSS!”. However, they can set conditions about employment, guarantors, credit checks and other factors which DSS tenants find difficult to provide. Landlords who are willing to break the mortgage agreement face financial penalties. like increased interest and in rare cases even foreclosure.
The Mortgage Works, a subsidiary of Nationwide tried to change their policy to prohibit landlords to let to DSS tenants. Being one of the biggest BTL providers, many landlords were affected and forced into compliance. After heavy pressure from the National Landlord Association, the company amended the ban. Yet, this can only reaffirm that many mortgage providers will be reluctant to lend to landlords who let to DSS tenants.
Councils are sometime unbelievably unresponsive regarding the administration of a tenant’s housing benefit. Working with a DSS tenant often involves a lot of form filling and paperwork by landlords. It can be followed by more waiting and bureaucracy, while the rent remains accounted for.
Landlords face empty months, while they wait for the council to organise their tenant’s housing benefits. Local councils then have the power to change or stop a tenant’s housing allowance. And, they can do it without any prior notice or regard for the tenancy agreement. To top the cake, many landlords report enormous backdated over-payments. This means the council calculates the tenant is eligible to less benefit than they have been receiving for the last random period of time. Councils can claim back the over-payments from and the tenant is left with a bigger debt than they can pay.
Many landlords complain of councils advising tenants to fight evictions until the bailiffs show on the door. Tenants have to quietly obey. Councils can drag homelessness applications until the moment tenants are expelled by the bailiffs.
The worst case scenario is when a tenant has fraudulently claimed housing benefits. Local councils have a mechanism where they can require the landlord to return the money if their tenant was never eligible to receive the benefits in the first place.
While we can’t make any accusations, it’s crystal clear the housing benefit system is flawed. Every attempt to improve has so far created more confusion and frustration.
We’d like nothing more, at The Tenants Voice to see more tenants housed. While all of the above listed take their share of the blame, in the end, private individuals and companies can not be expected to do more abide the law. Ultimately it’s the government who needs to cater to people’s needs, including the needs of tenants on housing benefits.
We need to see major legislation changes to improve the housing benefits system and encourage the related parties to comply. We believe landlords and businesses should be encouraged by the government to work with DSS tenants.
The Tenants Voice is here to make renting better for everyone. If you need help with your tenancy, check out our tenancy advice section. We’ve prepared plenty of helpful articles to help you learn and digest your rights and responsibilities better. If you can’t find the answer there, we have professionals from the industry that can help you solve your renting problem in the forums.