Renting to Recipients of Housing Benefit or Universal Credit

Renting to tenants who receive Housing Benefit or Universal Credit (UC) has become an increasingly common scenario for many landlords. These government support schemes are designed to help individuals on low incomes. For landlords, renting to tenants receiving social security payments potentially introduces several practical and regulatory challenges. Issues such as payment delays, rent arrears, benefit shortfalls and legal obligations must all be carefully considered. At the same time, opportunities exist for potentially reliable, long-term tenancy arrangements.

Housing Benefit and Universal Credit Explained

Universal Credit and Housing Benefit are two key forms of financial assistance provided by the government to help individuals and families on low incomes. Universal Credit is a monthly payment that combines several legacy benefits, including Jobseeker’s Allowance, Income Support and Housing Benefit, into a single payment. It is designed to simplify the welfare system and is paid directly to the claimant, who is then responsible for budgeting and making rent payments themselves.

Housing Benefit, which is being phased out gradually and replaced by UC, still applies to certain groups such as pensioners and those living in supported or temporary accommodation. It is administered by local authorities to help people on low incomes with their rent payments. In many cases, as Housing Benefit does not cover all of the claimant's rent, tenants have to make up the shortfall themselves. Both forms of support aim to ensure that eligible tenants can potentially afford to live in privately rented or social housing. However, the way these benefits are administered, particularly the fact that UC is paid in arrears and directly to tenants, has potentially important implications for landlords.

Financial Considerations

1. Payment Structures and Timing: Tenants on Universal Credit receive a single monthly payment that includes housing costs and it is their responsibility to forward the rent portion to their landlord. This structure reflects the government's intention to promote financial independence and budgeting skills among claimants. However, this system can pose risks for landlords if tenants mismanage funds, experience financial hardship or prioritise other expenses over rent. In such cases, payments may be delayed or missed, leading to arrears.  

Housing benefit landlords can request an Alternative Payment Arrangement (APA), which allows the housing element of UC to be paid directly to them, under specific circumstances, including when tenants are in significant arrears, have mental health challenges or have a history of substance abuse. The application process requires provision of evidence to and approval from the Department for Work and Pensions (DWP). Once in place, it can offer landlords greater peace of mind regarding rent payments.

2. Rent Arrears and Deductions: In the past, the Department for Work and Pensions allowed landlords to recover unpaid rent directly from a tenant’s UC through third-party deductions without the tenant's consent. This mechanism provided landlords with a degree of financial security by ensuring at least partial repayment of arrears over time. However, in early 2025, this system was ruled unlawful following a legal challenge that concluded it breached tenants' rights to due process and financial autonomy. Since then, DWP has been reviewing new frameworks that would require tenant approval for any future deductions.

3. Benefit Caps and Shortfalls: The housing component of Universal Credit is capped according to Local Housing Allowance (LHA) rates, which are based on regional rent averages and household size. In many areas, particularly high-cost cities like London, these caps do not align with actual market rents, leaving a funding shortfall. Tenants are expected to make up the difference themselves, which can place them under financial strain. If tenants are unable to cover the gap, they risk falling into arrears or facing eviction.  

To help address this, local councils may offer Discretionary Housing Payments (DHP), a temporary top-up that can assist with shortfalls or rent arrears. However, DHPs are not guaranteed, are time-limited and are subject to the availability of local authority budgets. This situation creates uncertainty for both tenants and landlords, who may need to take extra steps to assess affordability and sustainability before agreeing to a tenancy based on benefits.

Legal and Regulatory Considerations

1. Non-Discrimination Policies: Refusing to rent to tenants solely because they receive benefits, previously referred to as “No DSS”, is now widely recognised as a form of indirect discrimination under the Equality Act 2010. This includes blanket bans in property listings or application processes. Court rulings in recent years have affirmed that such practices are unlawful, setting legal precedents that have reshaped how landlords must approach tenant selection. As a result, landlords are required to assess all applicants on a case-by-case basis, considering their full financial and personal circumstances rather than their source of income alone. Failure to comply with such requirements can result in legal action, financial penalties and reputational damage.  

2. Renters' Rights Reforms: The government has introduced a comprehensive Renters' Rights Bill with the aim of reforming the private rental sector. One of the key provisions of this bill is the abolition of Section 21 “no-fault” evictions, which previously allowed landlords to give tenants two months’ notice to leave after the elapse of the first four months of an assured shorthold tenancy agreement.  

The reform package also includes a new standard tenancy agreement, minimum property condition standards and improved access to redress mechanisms for tenants. For housing benefit landlords, these reforms mean increased accountability and the need for more precise documentation and justifications in any dispute or eviction process. Importantly, the bill seeks to ensure that benefit recipients and families with children are given equal access to housing, preventing discriminatory practices hidden behind vague selection criteria.  

By introducing more robust protections and transparency, the government aims to create a more balanced and fair rental market where tenants can live with a sense of security and landlords can operate within a clearer legal framework.

Practical Tips for Housing Benefit Landlords

• Communication: Maintain open lines of communication with tenants to address any issues promptly.

• Documentation: Keep thorough records of all communications and payment arrangements.

• Support: Guide tenants to appropriate resources if they face financial difficulties, such as applying for DHPs or seeking budgeting advice.

• Stay Informed: Regularly review updates from official sources to stay abreast of changes in housing benefit-related regulations.

Conclusion

Renting to tenants on benefits can be a viable option for landlords who understand the system and are prepared to navigate its challenges. While concerns around payment delays, benefit shortfalls and regulatory obligations may be valid, these can be mitigated to some extent through clear communication, proper documentation and the use of tools such as Alternative Payment Arrangements.

Legal reforms are continuing to shape the rental landscape, encouraging landlords to assess tenants fairly, and provide access to safe and secure housing regardless of their benefits status. With informed decision-making and proactive management, landlords can contribute to address housing needs and establish stable, long-term rental arrangements with tenants who rely on benefits.

FAQs

Q. Can I refuse to let a property to someone who is renting on benefits?

A. Refusing to rent to tenants solely because they receive benefits is considered discriminatory under the Equality Act 2010. Landlords must assess applicants based on their full individual financial circumstances.

Q. How can I ensure that rent is paid on time by tenants on UC?

A. You can request an Alternative Payment Arrangement to have the housing element of UC paid directly to you. This is particularly useful and potentially applicable if tenants have a history of rent arrears and vulnerability.

Q. What happens if the UC housing element does not cover the full rent?

A. Tenants are responsible for covering any shortfall. They can apply for Discretionary Housing Payments (DHP) from their local council to help bridge the gap.

Q. Are there any legal reforms affecting landlords renting to benefit recipients?

A. The government has introduced the Renters' Rights Bill aimed at transforming the private rental sector. Highlights include abolishing no-fault evictions and ensuring landlords cannot refuse tenants with children or those receiving benefits.

Q. What are the benefits of renting to tenants on UC?

A. Tenants on benefits can potentially offer stable long-term occupancy. With potential arrangements such as Alternative Payment Arrangements, where applicable, and open communication, landlords can mitigate the financial risks to some extent and maintain consistent rental income.