Is Renting Your House to the Council Worth Guaranteed Rent?
- November 10, 2022
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Should you be renting your house to the council? Council Guaranteed Rent Schemes are a great way to let your property for fixed income while shedding some layers of landlording responsibility. But is it worth the disadvantages and what are the solutions?
In this article, we are going to discuss :
Council Tenant vs Private Tenant
A private tenant rents a privately-owned residential property directly from the landlord or their agent. They pay rent to the landlord or their agency.
A council tenant is someone who needs affordable housing options and may be on low income or homeless in some cases. In the case of council tenancy, local councils arrange accommodation on these tenants’ behalf, and the tenant pays rent to the council directly. The council then pays fixed rent to the landlords, regardless of whether or not the tenant is up-to-date on their rental payments.
What Are DSS Tenants?
DSS tenants are council tenants who may be struggling with unemployment, disability or other financial difficulties. As a result, they can receive housing benefits from the council. These benefits often include monthly contributions towards rent (in the form of universal credit).
DSS tenants typically have financial difficulties. For many landlords who have taken risks to invest in their properties, having a tenant who may not be able to pay rent in full or on time seems like a surefire way to increase the risk of their renting business. However, due to the existence of guaranteed council renting schemes, this risk is mitigated. Landlords can rent out their properties through the council and receive guaranteed rental income regardless of whether a tenant pays on time or not.
Do landlords have to accept DSS tenants?
Ordinarily, while it is unlawful to impose blanket bans on advertising ‘no DSS’ listings on property websites, it doesn’t mean you have to accept DSS tenants. It means it is best practice to consider each tenant’s case individually and not discriminate against a potential tenant purely because they receive housing benefits. When it comes down to it, if you are renting your property yourself or through an agent, it is your choice if you want to refuse DSS (universal credit) tenants.
If, however, you are renting your house to the council, you will likely have little say over which council tenants are selected to stay in your home. Council tenants have strong rights within secure and assured tenancies, and can usually only be evicted before the end of their term if you can provide a strong legal reason for an eviction in court.
What Are Council Guaranteed Rent Schemes?
A council guaranteed rent scheme is a way landlords can let out their property to receive guaranteed rental income and mitigate their property management responsibilities. Local councils run housing schemes that can extend for years. During this time, the councils provide landlords with guaranteed rental income and take responsibility for any maintenance and repair work required at the property.
Landlords who use guaranteed rent specialists reap a steady rental income every payment period, regardless of management work or void periods. Compare this with landlords who use traditional letting agents to rent out their properties and often lose money through hefty management fees, high maintenance costs, and potential void periods. For more information on other schemes for guaranteed rent (such as through a property management company or by partnering with a business), check out our guaranteed rent article.
Types of council tenancies
If you are renting your house to the council, tenants may fit into one of these agreement categories:
1. Introductory Tenancies
New council tenants will have a ‘trial period’ for the first 12 months of their tenancy. Any conduct such as rent avoidance, hate crimes or antisocial behaviours will break the tenancy conditions. If the tenant was a council tenant in a previous property and has since moved, they do not have to go through this introductory phase again.
2. Secure Tenancies
Tenants enter a secure tenancy once they pass the first introductory year with no problems. Secure tenants can live in the property for the rest of their life if they keep in line with the conditions of the tenancy agreement. If tenants want to sublet their rooms, they must still seek permission from the council.
3. Flexible Tenancies
Flexible tenants have a fixed period tenancy, usually of around 2 to 5 years. Once the fixed period ends, the council can offer the tenant another fixed-term agreement or a secure tenancy. They also have the option not to renew your tenancy at all.
4. Joint Tenancies
If tenants want to share the tenancy with a partner or spouse, they can apply for a joint tenancy through council housing services. The council generally only accepts these tenancies if there are no rent arrears and no broken conditions of the agreement. The additional person must also have lived at the property for at least one year.
Benefits of Renting to Council Tenants
There are several benefits of renting your house to the council, including:
1. Guaranteed rent – Enjoy fixed rental income every month regardless of void periods. While some council tenants could pose a higher risk of rent arrears, a guaranteed rent scheme ensures a landlord still receives their rental income (the council, rather than the tenant, will pay your rent directly to you).
2. Maintenance and repair work are taken care of – Enjoy more time and less stress as the council organises all maintenance and repair jobs.
3. Council-backed service – A trustworthy, governmental management service takes care of your property.
4. Save time – No time spent dealing with viewings or communicating with tenants.
Disadvantages of Renting to Council Tenants
Along with the benefits, there are also some disadvantages of renting to council tenants, including:
1. High tenant turnover – Since Council Guaranteed Rent Scheme are frequently part of emergency or relief housing programs, there tend to be many tenants moving through the properties every year (as opposed to one tenant who stays more long-term.) The higher flow of tenants in and out of your property will likely lead to wear-and-tear or property damage over time. As a result, you may be left out-of-pocket paying for a refurbishment once the council agreement ends.
2. Increased risk of anti-social behaviour – The increased risk of anti-social behaviour with council tenancies are sometimes associated with higher neighbourhood complaints. There are, however, a range of ways the council and neighbours can deal with anti-social behaviour.
3. No control or say in tenant selection – When renting your property out through the council, you have no say in which tenants stay in your place. The tenants could be part of a homeless shelter scheme or just a regular scheme for families needing housing.
4. Poor maintenance management – In theory, the council operating as your property manager sounds professional and dependable. However, problems still arise. In the past, councils have been shown to neglect their management responsibilities. For instance, in 2022, regulators found that Greenwich Council failed to carry out fire safety inspections in hundreds of homes, putting both tenants and landlords at risk.
5. Often below market rental value – Since tenants in council housing can usually benefit from sub-market rent, your property may be offered slightly below the market rental value.
Should I Rent My House to the Council?
Just like anyone, council tenants can be excellent renters who live comfortably in your home and treat it with respect. However, the lack of say in choosing your tenants (a disadvantage in any type of renting scenario) brings inherent risks.
If you want to learn how to rent your house to the council, get in touch with your local council. However, there’s always a better solution. At Flex Living, our property management team provides the best of both worlds. You can receive guaranteed rent while avoiding the disadvantages listed in this article. Our corporate let model means we rent out your property to professional, trustworthy tenants who are vetted by their employers. Like the councils, we provide on-going maintenance support at no extra cost, so you can sit back and relax while making the most out of your rental property.
Check out the following articles for more useful information on tenants: