Understanding DSS tenantsThursday 27 August 2009, by The landlord guy
If you’ve been looking for new tenants you may have come across a type of person known as the ‘DSS tenant’. Or perhaps you’ve noticed DSS mentioned in property adverts, with some ads stating ‘No DSS’?
Well, here’s some guidance about DSS tenants and the pros and cons of renting to them.
What is a DSS tenant?
DSS stands for Department of Social Security, which means DSS tenants receive financial housing benefits from the local council, also known as Local Housing Allowance (LHA). The allowance will contribute towards their living expenses
It is worth noting that DSS was actually dissolved in 2001 but is still the most commonly used term used to refer to tenants who receive benefits.
DSS tenants have the financial backing of the council, and therefore a reliable source of income, so you’re pretty much guaranteed that your tenant will have money to pay their rent.
It can even be possible to get the local council to pay their proportion of the rent directly, meaning there’s little risk of your tenant going into arrears, a problem that can occur with professional tenants.
A lot of landlords and lettings agents refuse to deal with DSS tenants but there are often clear financial advantages for those who buck the trend, not to mention the feel-good factor of helping benefit claimants who might otherwise struggle to find accommodation.
LHA levels are often set for a fairly large area that encompasses disparate property values – including pricier properties in sought after areas. This can mean that landlords are sometimes able to achieve a better return on a smaller capital outlay.
On the flip side, DSS tenants are seen as high-risk, because of the historical view that they have poor credit history and don’t look after the place they’re living in.
Typically DSS tenants also have to cover a shortfall each month. For example, if the tenant’s rent is £500pcm, they may receive an allowance of £400 per month. In that case, your tenant will have to cover a shortfall. Bear in mind that a lot of DSS tenants aren’t employed, so it’s important to investigate how the tenant will cover this shortfall.
It’s also likely that landlords renting to DSS tenants will have to pay higher insurance premiums.
There’s good and bad in every kind of tenant, and although DSS tenants get a lot of negative publicity, they should be treated like any other tenant.