Should landlords have the right to refuse DSS tenants?

by Dr Rosalind Beck

10:43 AM, 20th May 2019
About 2 years ago

Should landlords have the right to refuse DSS tenants?

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Should landlords have the right to refuse DSS tenants?

And so the onslaught against private landlords continues. Earlier this month, we were shocked to hear that a cornerstone of tenancy law in the UK was to be overturned, with the scrapping of Section 21. Farcically, we were told that a consultation would take place after the decision had been made.

This was an unexpected move, as in fact the Government had been conducting one of their ‘post-decision’ consultations on the idea of ‘3-year tenancies’ (something Shelter had been pushing for). Section 21s had not even been on the agenda. Such is the floundering, knee-jerk politics of today, that a completely different policy decision emerged from it.

The abolition of Section 21s had been called for by the anti-landlord organisation Generation Rent. As part of their campaign, they deliberately misrepresented Section 21 by repeatedly referring to it as a ‘no fault’ eviction – such that this phrase is now used by everyone, as though landlords evict the clients they are dependent on to cover the costs of their businesses, ‘for no reason.’

In fact, as we all know, often Section 21 is used because it is the least awful solution to dealing with rogue tenants. The anti-landlord representatives say it means landlords can evict ‘at a moment’s notice’ when in fact, although it is supposed to take 2 months, the average time taken is 6-7 months if the tenant does not want to leave. During this time, the tenant is often paying no rent.

The reason the only other possible Section – Section 8 – is not used as often is because the tenant can raise spurious defences, for example lying that the house is in disrepair.  The judge often then adjourns the case and the tenant gets even more months rent-free, while the landlord is pushed further into debt through no fault of their own – some even have to take out loans to cover the mortgage on the rental in which the tenant is living.

This is not only costly financially; a survey has found that private landlords’ mental health also suffers significantly because of, amongst other things, the way that the system is set up to enable these rogue tenants to ruin landlords financially, especially, as it is often the case they also wilfully wreck the property. Landlords’ mental health | National Landlords Association

This can cost landlords tens of thousands of pounds. No-one in Government is looking at this issue at all. The demonisation of private landlords has gone so far, hardly anyone in politics or the media is speaking up for them, despite them facing these gross injustices and the legal system completely letting them down.

And now, if, as is expected, the Government continues with its move to scrap Section 21, ‘charities’ like Generation Rent and Shelter will start pushing for the next punitive measure against landlords; the most likely contender for this is to somehow force landlords to take tenants on benefits, even if this is not the client group landlords wish to occupy their properties.

Shelter has been conducting a campaign on this for some time and various Government Ministers have jumped on the virtue-signalling bandwagon. Shelter has even been bullying landlords and letting agents into removing the words ‘no DSS’ from adverts and they also threatened to sue a letting agent, before the agent settled out of court, rather than face the stress and costs of a court case. Shelter now represents this as a legal victory and claims it is now recognised as discriminatory to specify ‘no DSS.’ It isn’t. Being in receipt of benefits is not a protected characteristic according to equal opportunities legislation. Settling out of court to avoid the stress and costs of a £60 million ‘charity’ hounding you through the courts does not create new law.

As part of their campaign on this, Greg Beales, Campaign Director at Shelter, has claimed that there is no evidence that tenants are benefits are ‘less-good’ tenants than others. There’s ‘no evidence that people on benefits are ‘less-good tenants’, says Shelter spokesman

He said that, given that, landlords and letting agents who do not accept those on benefits are engaging in ‘disgusting’ and ‘immoral’ practices. https://inews.co.uk/opinion/comment/housing-benefit-renting-no-dss-shelter/

Such rhetoric demonstrates his ignorance. Of course as Shelter provides no housing to anyone, they would not have first-hand experience of the issues involved. As landlords, however, we know that there are many reasons why it makes no sense to accept people on low wages and/or on benefits. No amount of banning landlords and agents from specifying ‘no DSS’ will change these facts.

Some of the reasons why it often does not make sense to accept people on benefits as tenants:

  1. Tenants on benefits often cannot afford the rent. This is partly because benefits have been capped and have not kept pace with market rents. Housing benefit on average only covers 57% of the cost of a private rental. https://speyejoe2.wordpress.com/2018/08/23/dear-polly/ What I want to know is: why would a person agree to rent a home to someone who so clearly cannot afford to rent it?
  2. The housing element of benefits, including in the new Universal Credit system, is paid in arrears, and landlords need the money in advance as that is when they pay their mortgages. Working tenants pay in advance and are therefore able to meet the terms of the tenancy agreement.
  3. If for some reason the tenant does not make the benefits claim in the right way, on time or at all, or if they do not turn up for an appointment, lie or make a mistake in reporting on any work they’ve done for example, the benefit can be stopped. The landlord then does not receive the rent because of something the tenant did or didn’t do. Large amounts of arrears can accrue in this way, which the landlord will not get back.
  4. If it is discovered that the tenant in some way claimed fraudulently, the authorities have been known to threaten the landlord and/or ‘clawback’ the money by not paying the rental element for another claimant the landlord is housing. A landlord was recently threatened with having to pay back 4 years of the housing element paid to him, because of a fraud by the tenant. What landlord wants to face this prospect, when they can simply house people in work?
  5. If a tenant does not pay the rent and is evicted owing a lot of arrears and/or having caused damage to the house and the landlord has incurred legal and court fees, with a working tenant they can apply for an attachment of earnings and eventually the debt can be repaid to them. With a tenant on benefits there is no employer on which to apply an attachment. There is therefore no way the landlord can ever recover the debt.
  6. If a tenant is on benefits and/or on low wages, they may struggle to heat the house. Without proper heating and ventilation, the house may fall into disrepair. If the Environmental Health Officer then calls around, they will most likely blame the landlord for the disrepair. So the landlord’s home is adversely affected and they then face possible fines.
  7. People on benefits naturally spend more time at home. This increases wear and tear on the property.
  8. Often insurance companies and lenders specify that they will not accept tenants on benefits. In such circumstances, if the house burnt down for instance, the landlord’s insurance would be invalid. In terms of contravening the lender’s requirements, the landlord could face the liquidators being called in if the lender finds they have contravened the terms of the mortgage. The landlord could face a demand to immediately pay back the capital; this will usually be impossible. The landlord in this situation would face huge losses, purely because they had accepted as a tenant someone on benefits.
  9. Because of the Government’s fiscal attack on private landlords – most outrageously and absurdly in Section 24 of the Finance (no.2) Act 2015, which means landlords now cannot offset the finance costs of their businesses before calculating profit – it is imperative that landlords select the tenants with the greatest means and get the rents as high as they can go. This is not for the landlords’ benefit, but rather to pay the huge new tax liability, which can exceed 100% of actual profit. This is explained in a briefing paper I wrote for the Institute of Economic Affairs with the economist and professor Philip Booth. Taxation without justification — Institute of Economic Affairs
  10. Also, if Section 21 is scrapped, landlords face tenants being granted lifetime tenancies. If this is the case, then landlords will want the best possible tenants to occupy their properties – ones who have no problem paying the higher rents forced on the sector by the Treasury and ones who, as mentioned, can afford to look after the house properly. This will greatly restrict the options for those on benefits. As the economist Ryan Bourne has stated: “The results of this policy are therefore obvious to anyone who understands basic economics. First, landlords will be far less likely to rent to tenants they consider high-risk. The incentive to engage in serious vetting, demanding extensive guarantees from tenants, will skyrocket. https://www.telegraph.co.uk/business/2019/04/26/no-fault-evictions-ban-epitomises-paucity-tory-economic-thinking/

This final point demonstrates how various forms of Government interference in the private rented sector are having the opposite results to the alleged intentions. One change causes landlords to not be able to take on tenants on benefits; the next tries to ban them from not taking on tenants on benefits. We all know the next will be rent caps. It is like trying to shove a lid on a boiling pot when it is about to boil over.

And at the same time that they are trying to ‘disallow’ landlords from having control over their own assets, are ‘disallowing’ landlords from offsetting their finance costs, and ‘disallowing’ landlords from choosing the tenants they want, they leave the social sector completely alone despite 61% of eviction notices actually coming from this sector 24housing and despite the fact that this sector also is moving away from accepting tenants on benefits.

As an expert on this said: “Shelter and the National Housing Federation are engaging in deliberate known deceit in their combined campaign over NO DSS in the private rented sector – A campaign that is so superficial it shames them both…Social landlords… do routinely operate affordability tests and they do refuse to accommodate the benefit tenant and thus they operate the same NO DSS practices as the private landlord.” https://speyejoe2.wordpress.com/2018/08/23/dear-polly/

Where is the hue and cry about that?

No. They turn a blind eye to this, because they are fixated to an almost manic degree on private landlords; a fixation which is already starting to wreck people’s lives by pushing them out of housing.


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Comments

Seething Landlord

17:49 PM, 16th June 2019
About A year ago

Reply to the comment left by Mark Shine at 15/06/2019 - 22:00
What Amelia has described is a business strategy that is time-consuming but deserves to be rewarded with far fewer problems than might be experienced by those who do not take the trouble to diligently vet potential tenants and then maintain regular contact so that problems can be nipped in the bud.

Mark Shine

19:19 PM, 16th June 2019
About A year ago

Reply to the comment left by Seething Landlord at 16/06/2019 - 17:49
From what I saw it looked like Amelia self manages her properties? I do the same. I could be biased, but like to think I’m a very decent honest thorough person and can and do respond and resolve issues pretty much 24/7/365 ... so based on the size of her portfolio I think she appears to have been rather unusually lucky indeed even with her careful tenant vetting / selection process that was previously outlined.

ameliahartman

2:10 AM, 17th June 2019
About A year ago

Obfuscated Data

Jonathan Clarke

4:05 AM, 17th June 2019
About A year ago

Reply to the comment left by ameliahartman at 17/06/2019 - 02:10There is a balance to be had between morality and business. Some tenants spend on stuff other than rent . If that is on basics like food , water , clothing, heating etc then i have sympathies for them and i will arrange budget plans . If however it is on non essentials like holidays and trips to a theme park I am less sympathetic. But likewise I understand that many people are not as good as others on financial management. So I cut them some slack and sometimes they learn . Some though are selfish and just deliberately dont pay out of choice. I try to educate them but if they ignore my advice is it my role to teach them that actions have consequences and that could mean eviction . Possibly yes but possibly not . And that is where my boundaries get blurred and my only selfish needs will more likely kick in . So even if they are deliberately not paying the rent for purely selfish reasons I may still not evict as its not my job to `teach them a life lesson` . It may be more cost efficient for me to write the debt off and start again with them to prevent a potentially larger debt occurring. They think I am doing them a favour which arguably I am . But I am doing myself more of a favour.
Proportionally I find my DSS tenants are less able to manage their finances than my working tenants. So i incorporate that weakness into my overall investment strategy when electing to enter the DSS marketplace with a specific property

ameliahartman

18:20 PM, 20th June 2019
About A year ago

Obfuscated Data
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