Can Landlords Refuse DSS Housing Benefit Tenants?

Understanding the legalities of renting to tenants who rely on benefits is crucial for private landlords in the UK. Some landlords wish to avoid renting to these tenants altogether, but it is important to meet the legal requirements when refusing to rent and avoid the risk of discrimination. Here, we explain when a private landlord or letting agent can refuse tenants who receive a DSS housing benefit, and the restrictions that apply.

In the ever-evolving landscape of the UK rental market, landlords face numerous challenges and responsibilities. One such challenge is navigating the complexities of renting to tenants who receive housing benefits, commonly referred to as DSS (Department of Social Security) tenants after the government department that used to issue the housing benefit.

As a landlord, understanding both your legal duties and industry best practices regarding DSS tenants is vital. Recent court rulings have made it clear that refusing to rent to tenants solely based on their receipt of housing benefits can be considered discriminatory and unlawful, which may then be associated with significant legal penalties.

In this blog, the landlord solicitors at Percy Hughes & Roberts will explore the legal framework surrounding DSS tenants, examine recent significant court cases, and provide practical advice for landlords to effectively manage their properties in compliance with the law. If you have any questions we have not covered, our landlord solicitors are able to answer your landlord law query. You can contact us by completing the enquiry form below or by calling 0151 666 9090.

What Does “DSS” Mean?

"DSS" refers to the Department of Social Security, a department of the UK government that was responsible for distributing benefits until it was replaced by the Department for Work and Pensions in 2001. Despite this change, "DSS tenant" remains a common phrase among landlords to describe tenants who rely on benefits, including Housing Benefit and Universal Credit, to pay rent for their accommodation.

The term is not ideal, however, as it fails to distinguish between the various types of benefit a tenant might be receiving, which may include housing benefits, disability benefits or child benefits. It does not delineate between tenants whose income is solely benefits compared with those who supplement benefits with part-time or full-time work. All of these factors should be considered by landlords and letting agents when deciding whether or not to rent to a particular tenant. 

Can Landlords Refuse DSS Housing Benefits or Universal Credit?

Landlords often hesitate to rent to tenants on DSS housing benefits due to concerns about financial stability and potential rent arrears. However, while landlords can assess individual financial stability, blanket refusals of DSS housing benefit tenants are considered unlawful. Under the Equality Act 2010, such a policy or decision may be considered indirect discrimination because it disproportionately affects women and disabled individuals, who are more likely to receive benefits, or may infringe on other protected characteristics.

Notable court cases in the York and Birmingham County Courts have established that refusing tenants solely based on their receipt of housing benefits is discriminatory. To comply with the law, landlords should evaluate each tenant individually, and consider alternative measures (such as guarantors) to better ensure rental payments are made if there are any concerns. You must also avoid discriminatory language (such as “No DSS” or "No benefit claimants") in advertisements. These two landmark cases have set crucial precedents in this area and clarified the legal stance on refusing tenants based on their receipt of housing benefits.

York County Court Ruling

In July 2020, York County Court ruled that a letting agent's blanket ban on DSS tenants was unlawful. The case involved a disabled single mother who was denied housing solely because she received housing benefits. The court found this policy to be indirectly discriminatory under the Equality Act 2010, as it disproportionately affected women and disabled individuals.

Birmingham County Court Ruling

In a similar case in September 2020, Birmingham County Court ruled against a letting agency with a “No DSS” policy. The court determined that this policy unlawfully discriminated against disabled people. These cases, while not binding in other courts, are highly persuasive and indicate a clear judicial trend against DSS discrimination and "No DSS" policies.

These rulings emphasise the importance for landlords to assess each application on its individual merits rather than implementing blanket bans. Private landlords in the UK can ask to examine bank statements or other evidence and to perform affordability checks to make sure the tenant has the means to pay rent. However, a tenant receiving Universal Credit or other benefits will not stop them paying rent and is not a legitimate reason by itself to refuse to rent. By avoiding blanket policies and taking care to evaluate each tenant individually, landlords can avoid potential legal pitfalls and ensure all prospective tenants are treated fairly.

What Is Indirect Discrimination? 

Indirect discrimination occurs when a policy or practice that appears neutral on the surface disproportionately impacts a particular group of people who share a protected characteristic under the Equality Act 2010. Unlike direct discrimination, which is overt and intentional, indirect discrimination can be more subtle but equally damaging.

In the context of DSS tenants, a blanket “No DSS” policy may seem neutral but can disproportionately affect women and disabled individuals. Women are more likely to be primary caregivers and therefore rely on housing benefits, while disabled people often depend on benefits due to their inability to work full-time. 

As a result, such policies can indirectly discriminate against these groups by making it more difficult for them to secure housing.

Why Are Landlords Reluctant to Accept DSS Housing Benefit Tenants?

Landlords' reluctance to accept DSS housing benefit tenants often stems from a variety of concerns, many of which revolve around financial stability and administrative challenges. However, there are legally sound solutions to all of these concerns that avoid unlawful discrimination but can still protect property owners from financial difficulties.

• Financial stability: Landlords worry that tenants receiving benefits may have less stable incomes, increasing the risk of rent arrears. While benefits provide essential support, fluctuations in payments or delays can create financial uncertainty.

• Rent payment methods: Historically, housing benefits were paid directly to landlords which ensured that the income stream was reliable. However, changes in policy meant that benefits are now often paid directly to tenants, who must then pass the rent on to landlords. This shift led to concerns about tenants using the funds for other expenses.

• Risk: DSS tenants may be perceived as higher risk due to stereotypes about financial management and reliability. This perception, whether accurate or not, makes landlords hesitant to rent.

• Insurance:  Some landlord insurance policies exclude DSS tenants or require higher premiums to cover perceived additional risks. This can make insuring properties more expensive and complicated for landlords who accept tenants on benefits. Rent Guarantee Insurance (RGI) is harder to obtain for properties rented to DSS tenants. Many insurance companies are reluctant to offer RGI to landlords with DSS tenants, or they may charge higher premiums, reducing the financial security for landlords.

• Administration: The administrative process of managing tenants who receive benefits can be more complex. Issues such as benefit recalculations, changes in tenant circumstances, and interactions with local authorities can add to the landlord's workload.

Speak to the expert solicitors at Percy Hughes & Roberts for advice on your legal rights if you are concerned about renting to tenants because of their financial circumstances. We can help to find solutions that will keep both the landlord and tenant happy, or advise you on meeting every legal obligation and avoiding indirectly discriminatory behaviour when turning down a tenant.

What Happens if Landlords Refuse DSS Tenants?

Refusing DSS tenants can have significant legal and financial repercussions for landlords. Here are the key potential consequences:

• Legal consequences: Landlords who implement blanket bans on DSS tenants risk being taken to court for indirect discrimination. As demonstrated by recent court rulings, such policies can violate the Equality Act 2010 by disproportionately affecting women and disabled individuals.

• Financial penalties: If found guilty of discrimination, landlords may be required to pay compensation to affected tenants. This compensation can include damages for emotional distress and financial losses incurred due to the discrimination.

• Reputational damage: Engaging in discriminatory practices can severely damage a landlord's reputation. Negative publicity can deter prospective tenants and reduce trust among current tenants, potentially leading to higher vacancy rates and lower rental income.

• Regulatory scrutiny: Persistent discriminatory practices may attract the attention of regulatory bodies and housing authorities. This increased scrutiny could lead to further penalties or other failings being identified.

Landlords are advised to evaluate each tenant application on an individual basis, focusing on financial stability and reliability rather than benefit status, to find the best tenant without falling afoul of discrimination laws.

How Can Percy Hughes & Roberts Help?

Private landlords in the UK must understand the potential legal pitfalls should a landlord refuse to rent to DSS tenants or anyone in receipt of benefits. While blanket refusals of DSS tenants can lead to serious legal and financial consequences, adopting a fair and compliant approach ensures that you remain within the law and will help you to find the most reliable tenants.

By evaluating each application on its individual merits and avoiding discriminatory practices, landlords can foster positive tenant relationships and safeguard their investments.

At Percy Hughes & Roberts, we are dedicated to supporting landlords in managing their properties effectively and lawfully. Our expert team is ready to assist with any queries or legal needs you may have. For more information on our landlord services, do not hesitate to contact our expert landlord solicitors today. Call us on 0151 666 9090, or send us your query by email by filling in our online contact form.