YESTERDAY, SIMON COVENEY launched his strategy for the private rental sector. The big question in the build up to this launch was would it deliver any meaningful improvements in the lives of struggling renters? Unfortunately the answer is no.
The Minister had an opportunity to provide renters with some real relief from rising rental costs. However instead he chose to potentially hit renters in Dublin with a €4,500 price hike over the next three years. Renters in Cork will be hit with a bill for €3,200. The rest of the country, including the Minister’s own hometown of Carrigaline, will remain at the mercy of the market.
Creating ‘rent pressure zones’
The creation of “rent pressure zones” in Dublin and Cork is the only “big idea” in the 40 page document. The rest is stuffed with re-announcements of proposals made public over the last few months.
In areas deemed to be in rent pressure zones, rents can only be increased by a maximum of 4% a year for the next three years. For the privilege of living in a “rent pressure zone” tenants will be guaranteed rent increase of 12% over the next three years.
This will continue to heap pressure on struggling renters, and lock low income families and single people out of the rental market. Plus they will suffer rent reviews on an annual basis, and not every 24 months as is currently the case.
The picture for the three quarters of a million people living in the private rental sector is bleak. Gone are the days when renting was the preserve of the transient low income worker or the away-from-home student. Increasingly, it is where low and middle income families and single people spend long periods of their lives.
In the capital city, where one in four households rent, the cost of renting is now out of control. In Dublin the average rent is €1,500 per month while new-lets are approaching €2,000. Across the rest of the country the picture is not much better.
Poor regulation causes homelessness
Despite its dramatic growth, the private rental sector is badly regulated. High rents, insecure tenure and poor standards are all too common. Renters may have accommodation but rarely have a home.
The result has been a dramatic increase in family homelessness, up 200% in two years as lower income renters are squeezed out of the market by those with better jobs and higher incomes. Working families are now paying between 40% and 60% of their disposable income on rent – pushing them into in-work-poverty and locking them out of the first time buyer market.
Tenants’ rights remain very weak even after the Residential Tenancies Act reform of 2004. The grounds on which a landlord can serve a Notice to Quit are too broad and make legal evictions too easy.
Standards remain patchy. A recent NOAC study found that 55% of rental properties inspected by local authorities in 2014 did not meet minimum standards. Unfortunately the inspection regime itself is poor with some councils inspecting no rental properties at all. We do welcome the commitment made by the Minister to introduce new regulations governing standards in rental accommodation. However he must ensure that local authorities are adequately resourced to do so.
Accidental landlords dominate
With 65% of landlords owning only a single property and a further 17% only two, our rental market is dominated by accidental landlords. These are people who thought renting was a passive investment requiring little effort or cost.
Now 71% of them have to top up their rental income to meet their mortgage payments. Ironically our poorly regulated rental market is bad for many landlords too. Tax treatment of landlords is complex and treats large non-resident investment trusts more favourably that resident landlords.
The bottom line is that our private rental sector is broken and Simon Coveney had a chance to start the job of putting it right. He could have set out a vision for a private rented sector that provides tenants with rent certainty, security of tenure and quality housing in exchange for reasonable returns to landlords for the professional service they provide.
Rent certainty
The Minister missed an opportunity to introduce rent certainty. Sinn Féin has tabled legislation linking rents to the Consumer Price Index three times in recent months. It has been blocked by Fine Gael and Fianna Fáil.
If the Minister had introduced a better proposal for achieving the same aim Sinn Féin would have welcomed it. His argument that limiting rent reviews to affordability will reduce investment in the rental sector is bogus, and he has produced no evidence to support this argument.
The truth is that rental yields are at historic highs and even with the CPI index linked to rent certainty, landlords will make a return. Halting the spiral of rent inflation was the litmus test of Minister Coveney’s strategy, not just for Sinn Féin, but for the tens of thousands of renters struggling to get by.
Minister Coveney failed to tackle the security of tenure issue. Extending leases from four years to six years doesn’t go far enough. The Residential Tenancies Act needs to be amended to limit the grounds for issuing Notices to Quit, and to provide for tenancies of indefinite duration. Long-term stable tenancies are good for tenants and landlords, and help to build sustainable communities.
Taxing landlords
There is also a need to reform the tax treatment of landlords. Mortgage Interest Relief is provided at different levels to different categories of landlords. Real Estate Investment Trusts have even more advantageous tax arrangements, in some cases allowing them to avoid almost all of their tax bill.
This costs the taxpayer millions in lost revenue annually. We welcome the Minister’s inclusion of a Sinn Féin proposal that in advance of Budget 2018, Minister Noonan needs to review the way in which Government taxes landlords. Where tax reliefs remain in place they must be designed to deliver a more professional, secure and sustainable rental market.
Our rental sector will need to expand further
This can be done in a number of ways. Firstly by providing more social and student housing, freeing up properties in the rental sector and easing demand. The same can be achieved by providing greater affordable housing for first time buyers.
Better use of existing vacant stock, particularly in high demand urban areas, is also crucial and will require greater government investment that provided for in Budget 2017. Local Authorities and housing bodies should enter the affordable rental market in mixed tenure estates, such as that proposed in O’Devaney Gardens.
Private developers will go where the investment returns are greatest but Government policy must not be led by these concerns. Developer-led housing policy has failed in the past and it will fail again in the future.
Renters will be deeply disappointed that Simon Coveney and his colleagues chose not to break with decades of such policy failures. He has launched a strategy for the rental sector that will provide landlords with increased level of returns while failing to provide tenants with real rent certainty and robust security of tenure.
Eoin Ó Broin TD is Sinn Féin’s spokesperson on Housing, Planning & Local Government.
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