Over the last few years, there have been a number of high-profile court cases in which renters took action against letting agents for refusing to show them available properties – solely because they received benefits.
In 2018-19, 20% of private rented sector (PRS) tenants - over 900,000 households - received housing benefit towards the payment of their rent, according to the English Housing Survey. It's therefore no surprise that this has become such a significant issue for the industry.
The government has spoken out against the policy taken by some agencies of barring tenancy applications made by tenants receiving benefits, known as 'No DSS'. A number of mortgage lenders and major property portals have also taken action to try and stop this kind of discrimination.
So, what do agents need to know about 'No DSS' lawsuits, bearing in mind that the coronavirus pandemic have an impact on the number of tenants receiving benefits moving forward?
Recap: Tenants take action against agencies over 'No DSS' policies
In February, two single mothers won out-of-court settlements from letting agencies on the grounds of indirect discrimination relating to 'No DSS' policies.
The first said she found it challenging to find a rental home after she informed letting agencies that she was receiving housing benefit, despite offering to pay up to a year's rent upfront.
Her case was eventually settled out of court, with the agency agreeing to pay £3,000 in compensation, £10,000 in legal costs and write a public apology. The other renter received £3,500 in compensation, £2,500 towards legal costs and a public apology letter.
Last year, following an earlier high-profile lawsuit, the government announced that it intended to change the law around rental homes being advertised with the phrase 'No DSS'. The Ministry of Housing, Communities and Local Government pledged at the time to clamp down on the blanket exclusions of benefits tenants.
Property portals Rightmove and Zoopla subsequently banned the phrase 'No DSS' from listings, while several buy-to-let lenders - including NatWest, Nationwide and The Cooperative Bank - loosened their lending criteria around accepting tenants in receipt of housing benefit.
Key points to consider when it comes to tenants on benefits
Following reports of the two lawsuits in February, several agents reported that more tenants were making similar complaints and looking to take them to court. The recent cases show that if renters are successful in seeking compensation over 'No DSS' policies, the cost for agencies can be high.
Some insurance providers have subsequently warned that they may need to increase premiums to cover the increased frequency and size of court payouts – a move that would also affect agencies that have been complying with the rules.
Despite the clear risks for agencies and the measures taken by the portals, there is still a large number of 'No DSS' property listings, according to Shelter. The group's research, undertaken last year, analysed over 7,000 online lettings adverts from a range of websites and found that more than one in 10 contained 'No DSS' or similar phrases.
Many agencies will have come up against resistance from landlords, who often aren’t aware of the law. A recent YouGov survey found that 86% of landlords thought 'No DSS' was lawful or were not sure, while almost a third did not currently let to housing benefit tenants.
This reluctance to take housing benefit tenants can be for a range of reasons. In the past, landlords’ insurance policies or buy-to-let mortgage agreements often ruled out tenants on benefits. While most mortgage providers have now stopped this practice, landlords may not be up to date.
Another issue that puts landlords off accepting tenants receiving benefits is that they are paid in arrears. However, last year, then-Minister for Family Support, Housing and Child Maintenance, Justin Tomlinson, reminded agencies and landlords that they can receive rent payments from housing benefit and Universal Credit directly to their accounts. Recently, the Department of Work and Pensions also launched a new online system to allow landlords to apply for these direct payments more quickly.
It's important for letting agencies to update their landlords on current 'No DSS' rules, the myths surrounding tenants on benefits, and the rise in the number of tenants seeking compensation.
The impact of coronavirus and future government intervention
The coronavirus pandemic has affected many people’s finances already and will continue to do so over the coming months. It has been suggested that this could cause a surge in the number of people claiming benefits.
This, combined with agencies' reports that more benefits tenants are threatening legal action, means there could be a spike in ‘No DSS’ lawsuits throughout the remainder of 2020 and into 2021.
The government has previously stated its intention to outlaw blanket bans on tenants who receive benefits, while The Property Ombudsman has pledged to update its Code of Practice to rule out ‘No DSS’ clauses.
The immediate impact of coronavirus means these changes may be put on hold for now, but the high profile nature of the issue means that future legislation is likely.
Moreover, 'No DSS' will remain an important issue for housing charities and politicians, which means it will continue to generate headlines – raising awareness among tenants that they may have a case against agents.
Agencies need to consider their property listing strategies carefully and communicate the issues around 'No DSS' policies to their landlords in order to protect themselves and their clients.
*Neil Cobbold is Chief Sales Officer at PayProp