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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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I’m lucky enough to have gotten a mortgage recently. I’m now saving money compared to renting. There is something seriously wrong with that. It should be cheaper or at least equally priced to rent.
The free market will not and cannot solve this problem as it is the cause of the problem. The market cares only for profit. It’s blind to all other concerns. The catastrophic failure of the policy of ceding the provision of accommodation to the commercial sector is irrefutable. The state needs to urgently intervene with a massive program of social and affordable housing construction. While waiting for the housing to be built, the government should impose an immediate rent freeze and progressive rent reductions to affordable levels, banning economic evictions and ensuring security of tenure.
Allowing a tenant to stay in their rented apartment into perpetuity,provided the are up to date with rent and confirming with terms of lease, is vital. This wasnt done. Bad mistake. The landlord gets possession only when the original tenant leaves.
This article is so confused. On one hand he says it’s anti renter and a giveaway to landlords and then later he admits that 71% of landlords still have to top up rent received to make mortgage repayments. Which is it?
Benjy
So there should be forced rent freezes and reductions. Should that also be reflected in pay freezes and pay reductions?
@Brinster: If they didnt have to top it up then sure we would all be landlords. The Landlord ends up with an Asset for their Pension that was mostly paid for by the service it provided to a tenant. So surely if they didnt have to put in something to the mortgage everyone and their aunty would be getting buy to lets. I think some Landlord expect it all to be 100% profit rather than possibly a safer option for a pension.
benjy how come the free market works in every other advanced country?
boo. If the tenant never leaves has the landlord lost his house?
brainster it’s both. Some landlords have large mortgages some no mortgage.
This ‘housing Crisis’ is the deliberate result of government policy. It’s not accidental. They have every single property lobby group, vulture fund, financial organisation telling them exactly what to do in order to force up property values.
The consequences of this policy has been spelled out repeatedly since 2012, but every action the FG government has taken has been focused on driving up yields in order to drive up values.
Why are they introducing this measure now? Because the Dublin/Cork market have topped out and can’t support rises in excess of 4% per annum. They have all the advice to show them that. this measure is simple sending a signal to landlords outside Dublin and Cork to force up rents now before they extend this measure to other areas.
This is the most cynical and deliberate attempt to force up rents. It will cost lives, but as long as the investment funds are making a killing FG couldn’t give a damn.
Extremely well said.
Bit of a blinkered view
@Coles:
Or, perhaps the less sinister viewpoint would be that the government wanted to indeed push house prices up to make it viable to start building again and to bring people out of negative equity….
Is that not sinister enough? They are using the poorest and most vulnerable in society to inflate the wealth of the richest.
Want cheaper housing? Allow higher densities. Encourage high rise.
Want cheaper housing? Introduce a Site Value Tax to force landowners to develop derelict sites and empty houses.
Want cheaper housing? Increase the availability of zoned land. Apply ‘Use it or Lose it’ clauses.
Want cheaper housing? Create employment in areas with large numbers of vacant units. Roll-out proper broadband. Facilitate remote working, work from home.
Want cheaper housing? Reduce the tax take on self-builders. Encourage clustered developments that share infrastructural costs such as wells/sewage systems.
Want cheaper housing? Encourage the development of multi-generational housing where elderly relatives live with their offspring. Health can child care benefits etc.
Want cheaper housing? Get rid of FF/FG.
@Coles:
Your first point about higher density is the real solution to all this as that’s the only way to quickly increase supply. Unfortunately densities are controlled by the SF/Labour/AAA dominated Dublin City Council and not the government.
@Fred Johnson: Is that actually true?
It appears from their housing strategy that SF support higher densities?
https://www.sinnfein.ie/files/2015/HousingDoc_Dec2015_web.pdf
“Require Councils in urban areas to examine the option of higher-density
developments in their Local Area Plans where there is high housing demand in any
housing sector. High-density housing should not be reserved only for public and
social rental housing tenants. Apart from the potential negative association of high
density with low income and vulnerable people, there is also a real need for higher
density privately owned and rented apartments. “
@Coles:
What is certainly true is that DCC control densities and DCC are most certainly dominated by lefty parties that i mentioned.
@Fred Johnson:
FF/FG/ Lab have 25 of the 63 seats on DCC. Says it all about what the others really think about provision of housing.
coles nonsense. They want to be re elected. They are losing votes from tenants and landlords and every caring person in the country.
If any union came out and threatenef strike action seeking a16% rise over 4 yrs..coveney and the rest of govt would be first out of the blocks calling it unrealistic ..
At the moment landslords can increase rent by any figure they pull out of their hat. Is a cap on increases not an improvement on the current situation?
@Reg: Seeing as rent caps have worked no-where, how can a non-improvement be an improvement?
When last did a union look for a pay rise as low as 16%. The apple pushers wanted 60%+
Don’t forget the part where it said how many landlords were accidental landlords supplementing their mortgage. It’s not just a cut and dry case of greedy landlords
Don’t be feeling sorry for yourself or them- they only became a landlord because they thought they’d make a packet! They weren’t doing it for the benefit of the renters!
Wrong Christine. Many people bought properties that are now no longer suitable to their needs due to a growing family, having to relocate for work, etc. Many were bought during the boom at inflated prices meaning they cannot be sold. And many of these are being let for less or at best, equal to mortgage repayments. Not every landlord is making a packet you know
Exactly. For example, my wife and I are accidental landlords. We had a house each while single, before we met. By the time we moved in together and got married, property prices had fallen so much from the time of purchase, that selling one of them asn’t an option as we couldn’t afford to take a roughly €100,000 hit. So one of them is rented out instead, for roughly what it takes to cover the mortgage each month. To be honest, it’s a pain in the hole and I’d love to be rid of it, but it’s still not an option. These are the kind of cases that Benjy and the others ignore when they accuse all landlords of being greedy money-grabbing sorts.
@Oonaghpoonagh: He did say that. He mentioned that some are losing money. He also claimed that rental yields are at a record high. These statements are not compatible. Any prizes for guessing which one is untrue?
Just speculating, but it could be the case that while rental incomes are at an all time high, the repayments the landlord must make on a property are at an all time high too, particularly if that property was bought at the height of housing prices. So while you could be getting €1000 rent in a place where rents were around €800 beforehand, you’re still losing money if your own monthly payment is €1200. As I say, just speculating, but it could be the case that neither is untrue
@Oonaghpoonagh: Many individual landlords are sitting on the properties, accidental or otherwise, as pension funds. Couple that with our insatiable appetite for home ownership in Ireland, a phenomenon that took hold only as recently as the 1959′s) and out total inability to have rental market aimed at the long term tenant and you end up in big trouble. I’d buy a commercial unit quicker than a house for investment purposes as it’s easier to get the occupier out if they don’t pay, less upkeep, often better returns if you know what you are doing, and it’s easier to get hold of previous accounts and credit history of your tenant. Makes more sense.
@Mr Snuffleupagus:
Greater returns on commercial property but a far greater risk of it been empty.
Jumperoo
But Bengy and the others don’t like to deal with the facts and don’t care about all of society. It’s all about more free money for the ‘working class’
Christian do renters rent for the benefit of landlords?
jumperoo you are also taxed on the rental income which makes the house a loss maker.
All because a good percentage of acting government are landlords,lining their own pockets once again
Exactly! Simon Coveney is obviously a landlord in a pressure zone
Such wonderful thoughtful logic considering all the facts. Well done!
Christian is Coveney a landlord? what houses does he own?
Coveney is a landlord renting property in Cork. What an utter scandal that he should determine policy when he directly benefits from rent increases.
There are a few problems here. The tenant does get a bad deal from government but so also does the landlord. The landlord’s income comes from the tenant’s pocket. If the landlord does not have a mortgage on his rented property then the income that came from the tenant’s pocket is taxed at over 50% which is also indirectly a tax on the tenant who is the originator of the money in the first place. If the landlord increases the rent he pays more tax so the increase is double what it needs to be. The government could help both the landlord and the tenant by giving a tax break to the landlord provided that the rent is not increased by the landlord for the duration of the tax break. The disposable income thus created would naturally generate tax returns for the government through the natural spending in the economy. For those landlords wanting to exit the rental market the government should subsidise a rent-to-buy scheme to enable tenants to purchase at a reasonable price. At the moment both the tenant and landlord are emasculated by government.
@Micheal S. O’ Ceilleachair:
Almost make you wonder is tax generated from rent being looked at as a fixed revenue stream?..
And what about the capital appreciation of the property? Landlords in Dublin have seen the value of their properties increase by 50% over the last four years while their rents are up a similar amounts.
That is taxable on sale of the property Coles. It may allow more accidental landlords to get out of the renting game but that reduces rental stock. Swings and roundabouts.
@lavbeer: Capital appreciation results in greater wealth for the asset owner regardless of taxation.
So if a landlord bought a property 10 years ago how much is it worth now?
I’d love not to pay tax of 50 off percent on my income but thems the rules why should landlords get a sweetheart deal on their income?
Wealth isn’t very useful unless you can spend it.
It’s just maths. No point denying it.
@lavbeer: So what if it’s taxable? Every business has that same issue.
Coles of course it does. But factor in the repayments a landlord makes to service loans etc. And you are assuming the price will rise (didn’t everyone) but it doesn’t
@lavbeer: Property values are up 50% over the last 4 years. Are you arguing that landlords haven’t benefited from that?
And over the last 8. Not disagreeing with you on it at all but clarifying a little. Depends in when you buy and sell.and then CGT kicks in. The landlord needs something for taking a risk and providing the service no?
And prices are not up 50% in last 4 years ..
@lavbeer: wrong.
http://www.cso.ie/en/releasesandpublications/er/rppi/residentialpropertypriceindexjune2016/
and capital depreciation. many landlords are in negative equity coles?
Other businesses are allowed 100% tax relief on.interest. why are landlords treated differently
As a landlord who has never chased higher rents from my tenants, I would have preferred a 2.5% increase per year for the next 3 years with more sustainable tax treatment for Landlords – surely this is the way to go? But no, our dear politicians once more pander to the masses and chase the headlines.
If you are a tenant facing higher rents the only people you should blame are the politicians (Fine Gael mostly) who came into power and massively increased the taxes on landlords. Like it or not, this drove landlords out of the market, allowed foreign REITs to come in an pay no tax and this directly caused your rents to increase as private Landlords left the market in their droves and the foreign REITs massively hiked up rents.
It’s laughable seeing landlords getting it in the neck when the politicians are the DIRECT cause of the current situation. Only in Ireland.
I agree Fidelio you have hit the nail on the head.
Agreed. Add nama into the mix. Absolutely no joined up thinking. Noonan is far from what he is made out to be and his decisions will impact generations to come
@Fidelio Cruz:
how exactly did the politicians massively increase the taxes on landlords? I know Lenihan limited the amount of interest tax reiief that a landlord could avail of to I think 50% but this is an historically low interest period for borrowers. Anyway many landlords are not paying off loans.
Lenihan also made landlords pay USC but so does everybody else. So what’s the problem for landlords?
USC is now payable. The PRTB also. Many landlords aren’t paying loans and I think the LPT should compile this info. Property as a wealth tax could then be applied is a better manner.
@Ciaran O’Mara:
See Sam’s response below, summarises the ridiculous situation very well. Bear in mind that this only applies to private landlords. Not the large REITs who pay 0% tax (actually in fairness, I think it works out at 0.05% tax based on the latest figures). It’s a joke.
@Ciaran O’Mara: I don’t accept Sam’s list as being the true picture.
Tax is only payable on the net profit and you can off set insurance, interest, repairs, service charges etc against the gross income. Taxes are only due on the net amount.
Where some landlords have a valid point is when they have to make big capital repayments now that their trackers have them on full repayments. That is a killer because property is still worth less than it was 10 years ago and they probably have big mortgages.
@Ciaran O’Mara:
You are factually incorrect Ciaran. PRSI and USC is now paid on the GROSS RENT, before taxes.
@Fidelio Cruz:
“If you are a tenant facing higher rents the only people you should blame are the politicians (Fine Gael mostly) who came into power and massively increased the taxes on landlords”
Tax has fallen under this and the previous Gov.
The major tax increase happened under FF/Greens with introduction of Income Levy and then USC.
I’m a landlord. last year rental income 10,400 euro. repayments 12,000euro. tax (believe it or not) 4,000euro. income from property minus 5,600 euro.
@Patrick Gough: I bet a huge amount of your repayment was capital? That’s what is killing you in this situation.
Why are we even talking about a rental crisis? AAA will print us free homes
So Eoin why don’t you grow a pair and actually become a Minister. . Or is that against Shiner policy..
Shooting the messenger there Donal. Any solutions you would like to propose?
Roibeard
But the banks have to press a few buttons first and they won’t do that as the capitalist elite don’t want it to happen.
Unfortunately the two largest parties would not engage with us to form a government – so we are unfortunately in opposition
You wimped out of government malachy. you are born hurled on the ditch.
All I can think of is the misery Simple Simon has heaped on people now. But since he and a lot of his buddies are landlord of course he was going to look after number 1. Wait till we have all the economic migrants looking for living quarters and then he will raise the rent allowance. So it will fall to the taxpayer again. Bloody brainless numpty
This is not the fault of one minister. The whole government has failed us for many years.
So , out with FG and back in with FF. We never learn.. They continue with policy of self indulgence, rape of the tax payer , and ensuring the status quo for elite…. Vote on Ireland..
The following is a list of charges a landlord has.
40 % tax on earnings.
7 % usc.
5% prsi.
Property tax.
Those four itens alone nake up to 60% tax.
They have insurance costs .
Mortgage costs.
Management costs.
Prtb registrations
Accountancy fees
This five items make up another 20 % .
The labdlord has only 20 % net income.
Take a normal 3 bed house with rent roll of 12 k per year.. with a 20 % net income comes to 2.400 euro. Why would anybody become a labdlord. The real winners here is the state, taking in 60% of revenue, ie, 7200 k from one small three bed house. Consider for a moment they are eight hundred thousand persons renting at an adv of 3 persons per house ,this equates to 27 thousands property rented in the country @ an adverage of 7200 e each going directly to the state this overall take by the goverment goes into billions, The real winner here is the state abd hence the reason why they are not interested in building more houses. Consider also the velture fubds who pay 0.002 % tax on there profits. Consider also if outside investment purchasing residental property here pay only 20% tax. The irish landlord is screwed by fine gael. They are currently proping up the residental market for outsiders with favourable tax schemes. The landlord is protrayed as a villian instead of being a solution to the problem. In germany the land lord pays 20% tax as he is seen in a favourable light as one that is providing accommodation. The adverage rent there is 70 euro per week abd this would include heating,refuse. Successive goverments have destroyed this sector. Why would anyone become a landlord with such penal laws and high taxes. Its time the governent acknowledged they are the ones who have created the problem and not the landlord.
@Sam:
I agree with everything you said and maybe you have taken this into account in your 12k per year. But what about the damage tenants cause, the non payment of rent, the time in between tenants when the property is vacant and not earning rent and the cost of cleaning and repainting when tenants leave. That significantly reduces your annual rent collected and puts huge pressure on cash flow and the landlords ability to pay their mortgage.
@Sam: Most investors are happy with a 5% return. That’s in around what is sought. Landlords are doing a lot better than that.
@Sam: Where are these 3 beds for 1000 Euro pm ? Roscommon? because thats prob the cost of a 3bed up there which is scandalous in itself. Alot of these Landlords fail to recognise they will end up with an Asset thats has been paid for by the tenant in good part. Its an asset that just starts making money for you when the mortgage is paid down. Purely a better option than most pensions these days which have terrible guaranteed returns.
Mostly what ive heard so far is “who would ever want to become a landlord these days” from actual landlords. Try to get everyone else out of the game so you can snap up homes in west dublin and pull in 1600-1800 PM out of them. Sure who would ever become a landlord …..
The government as part of LPT returns should collect how much borrowings against each property.
Referendum to amend the Irish Constitution like the German Constitution , otherwise this housing obscenity will continue into the future for your kids and grand kids and their grandkids …. fiddling and tweaking the existing system of house provision is pathetic.
https://www.change.org/p/referendum-on-right2home-in-ireland
… read what a change in the Constitution like Germany would mean for all Irish citizens.
The answer is simple build loads of social houses.
The Bilderbergers have their claws deep in Coveney.
He’s nothing but a servant of the rich.
His policies will never favour the poor serfs.
the dirty little secret: 80,000 units of social housing deliverable between now and 2020 are HAPS (private housing)
https://www.youtube.com/watch?v=85IPKJKAzDs
And here he is at the Bilderberg meeting 2014 swanning around with none other than sith lord Peter Sutherland
https://www.youtube.com/watch?v=TO5K_bxxNQc
This Govt had failed both renters and owners. One of the reasons rents go up is because banks here charge more interest that their European counterparts. If they were to bring rates in line with Europe,which we are a member, then paying back on a mortgage wouldn’t be so high therefore both rents and mortgage repayments wouldn’t be either. What kind of fools were we to all Kenny and his band of not wits back into power?
Its out reajous that FF & FG play politics jostling for power when people want certainty over rents … The dail will break for a month … Landlords will keep increasing prices & renters will suffer … The politicians on their big salaries will not be wondering if they can afford a room at the inn
have your say