How to deal with tenants who pay rent with benefits

There’s a grey area over how to deal with tenants who pay rent with benefits. 

While you’re looking to make the right choice with your tenants through a thorough screening process and right-to-rent checks, you will also want to understand what DSS really means to your rental property income. 

What is a DSS tenant? 

A DSS tenant is a person who uses housing benefits to pay their rent. DSS stands for the Department of Social Security. Although it was renamed in 2001 as the Department for Work and Pensions (DWP), the term DSS has remained. The DSS was a government agency that managed benefit payments for tenants.

How does DSS work for landlords?

Usually, these payments are made within a few days of applications being made and are usually paid before the tenancy starts. Payments can be made directly to the landlord at the client’s [tenant’s] request. “Tenants should apply to the Housing Benefit team for this – it is a separate payment to the Universal Credit.

What is an ‘alternative payments arrangement’?

The alternative payment arrangement establishes a direct debit setup from the local authority directly into the landlord’s account. The main reasons for taking this arrangement could be to give the tenant peace of mind that their rent will be paid if they are likely to struggle with existing financial arrears. 

This solution gives both the tenant and landlord the confidence to pay and receive payment at a scheduled time by a governing body. The local authority will take care of the direct payment once the landlord has provided their details along with the tenant’s approval. 

Do landlords have to accept people on benefits?

By law, you can not disregard an application from a tenant who is offering to pay rent by using benefits. You are not allowed to discriminate against tenants who are in this situation if they pass their screening process. Having said that, if there is a red flag over their financial arrears, you may be able to offer valid evidence as to why they wouldn’t be a suitable tenant. 

Understanding that the DSS is set up to give both tenants and landlords the security of rental payments is key. Local councils understand that landlords need to be paid on time. While there is a stigma around the demographic of tenant that relies on DSS, landlords should not be put deterred. 

Does having a DSS tenant affect my insurance? 

While there are policies on the market that offer cover for DSS tenants, there are also some that don’t. The implications that can impact your income stream, property value and maintenance of the property can be affected by any tenant. In the eyes of some policies, the risk increases with DSS. 

Fortunately, CIA offers specialist landlord insurance for DSS tenants. We specialise in insurance backed by a panel of leading insurers that are able to offer low excesses as well as great rates for all of the basics, including buildings insurance, contents insurance and property owner’s liability.