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DSS/LHA tenants

Scott T

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Hi all,


I've been considering for a while getting into BTL, and will probably be in a position towards the end of this year to buy my first property, so I'm considering my strategy.


I think my strategy will ultimately to have a fairly diverse profile in the Northeast of England, including student lets, flats for professionals (probably in Newcastle) and potentially letting to LHA tenants.


The area that I know best is the town where I grew up, Hartlepool, so I'm considering starting there. House prices are pretty low, and there isn't much of a rental market to professionals or students.


There is a significant number of people on housing benefit, however, and the figures seem to stack up on these. I am also keen to provide a high quality service and a nice home with a good relationship with the landlord to these tenants, who often find themselves in substandard accommodation (in my limited experience) and less able to stand for their own rights.


That being said, I'm slightly nervous at going in to the DSS market. My concern isn't particularly over the potentially higher maintenance costs - I understand that's probably going to be the case. My concern is that since the new system of DSS tenants being paid their housing benefit directly, I have heard a number of stories of this causing significant problems - difficulty getting rent through, rents not being paid for a couple of months and then houses being left trashed, and so on.


There are always horror stories out there - my question really is whether landlords have found a big increase in problems in letting to LHA tenants and if it's something I should avoid when just starting out? If not, what can I do to minimise my risk? Are there options for rent guarantee with LHA tenants? Do yellow lettings take on landlords who let to LHA tenants?


Thanks for your help - apologies for the length of this post!



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Hi Scott,

I rent to mainly LHA tenants and it terms of yield it really stacks up well v the professional market in Salford. It's not for everybody. The best way of ensuring rent arrears are kept to a minimum are getting paid direct. I am paid direct from the council for all of my LHA properties, the local council offers a bond scheme with another incentive for landlords is direct payment. There has been a lot of talk about the onset of Universal Credit - which would mean there would be no direct payments. However it will take some time before all claimants will claim through Universal Credit and even longer for existing claims to be migrated ( if this ever does happen after the next general election ). Recent meeting I have attended with the local council has showed a softening in this hard approach in that they now say there will still be several direct payments after full rollout of universal credit. 


Check with your local council who may operate such a scheme or have a landlord accreditation scheme which may give some preferential treatment . There is also some woolley clause which says ( and it seems to be down to each individual council how they interpret it ) if the claimant is vulnerable - payment can be made direct. So it may be wise to ask the LHA tenant to give the council some details/evidence as to why the payment should come direct to them.


I have never used rent guarantee for LHA claimants but I believe it does exist ( I'm sure at a premium ). I personally would not let directly to LHA claimants if I was not getting paid direct - I would prefer to use a rent guarantee scheme which some council offer which gives 75 - 80% rent guaranteed for 3/5 years with no voids - I did this with my last property ( as well as getting a grant for the refurb ) and its worked really well. This is true residual income - no hassle, funds guaranteed !!


The Manchester Meetup takes place on the first Thursday of every month, find out more here

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Hi Scott,


Some very good advice from Mark. You may want to investigate if your area has a Credit Union. My understanding of this is your tenants Housing Benefit is paid directly to the Credit Union who then pass the payment onto you minus a small admin fee. This way it helps to stop the likelihood of your tenant building up rent arrears as the money doesn't enter their bank account. I would also ask for the Credit Union to arrange for paperwork to be completed to enable them to speak directly to Housing Benefit should any problem arise with their payments...there is nothing worse than having a problem and HB refusing to speak to you due to Data Protection regulations.


A technique that I employ is if you are worried about LHA tenants then why not visit them in their own home as part of your due diligence, if they are not looking after that one then you can be rest assured they will not look after yours.


Hope this helps and good luck with your first investement

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Ring the council central number and ask for the landlord accreditation team or landlord advice team. Alternatively go on to your local council website and search on Landlord accreditation/advice - failing this ask for housing advice. Good luck !!


The Manchester Meetup takes place on the first Thursday of every month, find out more here

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