No DSS clauses – a lazy and unnecessary practice?

With recent changes to the guidance from the Competition and Markets Authority (CMA), landlords and letting agents are being encouraged not to apply blanket “No DSS” bans for their properties. There is a clear risk that blanket bans will be discriminatory and unlawful. They may also breach consumer protection laws.

The CMA guidance accepts that blanket bans may be justified in limited circumstances, but even then, need dealing with in a transparent way. Specifically, if a landlord’s lease, mortgage or other contract includes any clause preventing the landlord from renting to persons claiming benefit, this information must be included in any advert for the property. Misleading applicants and falsely claiming that there is such a clause in place when one does not exist, will be an offence.

The issue of bans on tenants receiving benefits has grown in prominence with the lack of sufficient housing supply, and as many people in work now receive benefits to supplement their income. Arbitrarily excluding all those receiving benefits, irrespective of whether they can afford the rent, is considered unfair.

The question is why landlords and agents used these bans at all? Certainly, they are an easy rule of thumb. However, they are based on a view of benefit recipients collectively being problematic. This is not the case in our experience. They are also a legacy of a time when information on applicants was more difficult to obtain. Modern life comes with credit referencing, open banking and easier communication.  Screening is now routinely undertaken to ensure that an applicant can fulfil their financial obligations (payment of rent, bills etc), has a right to rent in the UK and that they appear to be a reliable/trustworthy tenant for instance by taking references from previous landlords. The landlords’ interest can be adequately protected through regular, best-practice tenant screening.

It is questionable however whether stopping general bans will sufficiently aid low income tenants. The new approach comes with its own rules of thumb. The most important of these is the use of pass/fail reviews by tenant referencing companies such as Rent4Sure. These tend to use a bright line test requiring available income of the applicant(s) to be a large multiple of rent. Often this 30 x times monthly rent (2.5 times annual rent). There are large parts of the country where people receiving benefits will never meet this threshold and will automatically be excluded from private rented housing. Our experience is that tenant referencing reports are a useful tool, but that they need to be approached with discernment and inquiry. In many cases the automatic fail in a referencing check from standardised tests used unthinkingly reduces the number of acceptable applicants.

During the referencing process each person is considered equally and on their own merits, and we feel that this approach should be applied to all aspects of the rental process. It is open for discussion as to whether or not blanket “No DSS” policies are discriminatory; we feel that there is a strong argument to say that they are. However, regardless of your opinion on that, as outlined above, with a rigorous and appropriate referencing system in place, it is entirely unnecessary to enforce this practice.