Criminalising Landlords will worsen the rental housing shortage

Over the last three years the Legislation imposed on Private landlords has changed significantly on no less than three occasions and the latest raft of measures threatening to criminalise investors and landlords who can so easily fall foul of the rules will do nothing to attract badly needed new investment in the rental housing market.

 

Recent surveys have indicated that landlords in substantial numbers are leaving the rental business and are not being replaced in sufficient numbers by new investors, this despite the high rent levels which could be expected to attract them in droves as has happened during previous boom times.

 

There are a number of reasons why investors are wary and landlords are exiting the business. The Irish rental market is one of the most regulated and highly taxed in Western Europe and over the last three years each set of regulations has had barely time to bed down when a new raft of measures is rolled out.

 

The rent controls are very draconian and penalise landlords who have been imposing little or no rent increases for several years, having chosen instead to wait for a change of tenancy before seeking a justifiable rent increase. This has resulted in tens of thousands of fortunate tenants paying abnormally low rents  but these low yielding  properties when coming to the market are unattractive to new investors. In other jurisdictions where rent regulation exists, new lets are exempt from this type of rigid control.

 

While rents may be high the net yields are at an all time low because of heavy taxation.  When the rent pressure zones were introduced in 2017 the Government set up a working group to review the tax treatment of the sector, this group offered a wide range of options which could make the business more attractive to investors but not one of them has been implemented.

 

The most recent stats from The Residential tenancies board indicate that of almost 5000 disputes lodged almost 40% relate to rent arrears, over holding and damage to property. While landlords may be awarded rent arrears and damages the prospects of receiving money is highly problematic with landlords being out of pocket to the tune of tens of thousands of euro. Yet all the focus is on the 0.1 % of disputes which relate to deposit retention.  Tenants whose deposits are unlawfully retained should of course have them returned and be compensated as they are a RTB adjudications. Landlords who have been defrauded and their property damaged should be effectively compensated.

 

The government have bowed to pressure from the Social Democrats and introduced significant extended termination notices. This measure is unnecessary and smacks of making up rules for fun because where tenants need greater notice; Landlords generally facilitate them with extra time.

 

What has not been addressed and the growing problem where tenants ignore valid notices ,refuse to pay rent or vacate properties choosing instead to  challenge RTB orders in the higher courts thereby securing months or even years in accommodation without any fear of penalties. These vexatious tenants are even being encouraged to abuse the legal process by politicians.  It is extraordinary to behold law makers encouraging tenants to abuse the legal process which the Dail put in place.

The latest stats from the RTB suggest that the vast majority of landlords are complying with the rent controls. This is unsurprising as rents dropped by as much as 40% between 2008 and 2013 where this situation has been reversed there is little scope for further large increases.  Landlords who demand excessive increases risk having properties subject to the headache of frequent transient tenancies or accommodating tenants who quickly fall into rent arrears.

 

Landlords are finding it extremely difficult to understand and cope with the ever changing regulatory framework which they find overly restrictive and complex.  The prospect of yet more restrictions being rolled out over the coming years from a very fragmented  parliament are causing great anxiety and fears that it will be more difficult to manage rented properties in the future  and that such measures will  play into the hands of vexatious tenants.

 

The government and politicians need some mature reflection on their approach to this housing crisis. Scapegoating landlords is certainly not the answer to the problem some of the rules need to be amended immediately One cost free measure would be to  lift the blanket ban on the 2000 units of  budget accommodation which are being closed down by local authorities or lying idle when we have  a massive homeless crisis. Landlords are being forced to evict tenants who have to move to much more expensive accommodation and share not only a bathroom but a bedroom with several strangers.

 

The structure of the rental market in Europe is frequently held up a great model   but this type of budget housing is widely available and promoted in the UK and Europe. The blanket ban in Ireland defies logic.

 

Regulations and good standard accommodation  are of course very important but what is much more important is that regulations are well targeted in a way that will not unnecessarily  reduce the supply of the rented housing stock and cause even more hardship for renters . Sadly this is not the experience in Ireland to date.

Fintan McNamara May 2018