Can I rent to people receiving Housing Benefit? (DSS/LHA/UC)

It was not well known in the property investment community that, as a landlord, you can be prohibited in the mortgage contract from renting to certain people.

In a survey of 53 mortgage lenders at the time, we found that 43 had a "No DSS Tenants" policy — 81% of lenders forbidding renting to people in receipt of housing benefit. DSS is an old abbreviation of the former "Department of Social Services"; by 2020 this criteria was better known as forbidding renting to people in receipt of Local Housing Allowance (LHA) or Universal Credit (UC).

It was an important metric to tell your mortgage adviser about if that was your target market, often determined by property location.

We also saw purchases declined where the landlord had DSS tenants in other properties — the new lender was able to evidence this on bank statements.

Mortgages could also be declined even if you insisted you would not rent to DSS tenants, but the property surveyor thought the property was in a low-income area primarily leased to DSS tenants.

It was a fascinating subject: The Mortgage Works changed criteria in 2013 to forbid DSS tenants, not before a public relations mess that made them reconsider. It was believed to be a turning point, with more lenders expected to follow suit — and campaigns such as Shelter's 2018 #EndDSSDiscrimination kept up the pressure for lenders to drop the bans — but that shift had not happened by the time this article was written.

Why lenders restricted DSS tenants

Only 10 of the 53 lenders surveyed allowed DSS tenants, which limited a landlord's mortgage options:

• Pay more? You were no longer looking at the whole of the market to get the best product for your needs and circumstances.
• Lower rent? LHA was based on the 30th percentile of the local market rent — in simple terms, housing benefit was lower than the market rent in the area, and the calculation had been frozen for some time, the gap getting more significant.
• Higher risk? Housing benefit came with strings attached: payments could be put on hold while any "change in circumstances" was assessed, and councils could demand repayment of rent from the landlord if the tenant was later found not to have received it.

The takeaway at the time

• Mortgage lending to DSS tenants was restricted.
• You could rent to DSS tenants given the right mortgage.
• There were campaigns afoot, and all this could change.