Five ways we could finally put the brakes on extortionate problem of runaway rents
NOTHING speaks of policy failure like the fact that rents are at record levels, and still rising.
The lack of new homes coming on stream is exacerbating the problem, but even if house-building ramps up, there’s no guarantee that rental costs will fall.
But there are actions the Government can take to ease the enormous pressure being felt by individuals and families living in fear of being evicted, and the prospect of rising costs.
Without such action, rising rents will threaten our competitiveness and job creation. Developing a rental sector that offers an alternative to home purchase in terms of security and long-term affordability is urgently needed. Here are five possible solutions:
■ Expand the rent pressure zones. While these limit rental increases to no more than 4pc a year, they only apply to existing tenants living in 21 areas. While this represents just under 60pc of all tenancies, rent pressure zones should be extended to all counties, at least in the short-term. The system could be tweaked based on local conditions. The National Economic and Social Council, which advises the Taoiseach and Government, says that in Belgium, initial rents are not set, but the rent is adjusted annually in line with inflation. In Germany, and parts of France, they cannot rise beyond local reference rents. A similar system is needed here.
■ Provide security of tenure. Tenancy agreements are renewed on a rolling basis every six years. Why not allow landlords and tenants to enter into longer arrangements? While landlords are entitled to evict tenants if they want to sell the property, unless the new owner plans to live in the home, the tenants should be allowed stay. This currently only applies in the case of those selling 10 units or more, and should be changed. Tenants can also be evicted if the landlord intends to “substantially refurbish” the property, but there is no definition as to what this means. Is it painting the house, or extensive construction works? This needs to be clarified.
■ Develop an affordable rental sector. The State has identified some 700 publicly owned landbanks in our major cities. These should be developed for affordable rent, with builders provided with low-cost loans or loan guarantees through the Ireland Strategic Investment Fund to help fund construction and increase supply. If Irish firms aren’t interested, look elsewhere. Obliging developers to
construct more family sized apartments would also help make renting a longterm option. Measures are expected on affordable rent in the coming weeks.
■ Taxation. The tax treatment of residential landlords is being reviewed, but it needs to be brought into line with that enjoyed by commercial landlords, sooner rather than later. Investors seeking a steady income stream over the longer-term, rather than being solely concerned with the value of the property rising, allowing it to be sold for profit, should be encouraged, perhaps by way of tax breaks.
■ Supply, supply, supply. In May last year, one of the country’s biggest landlords, Ires Reit, warned that Dublin rents were “touching the limits of sustainability”. The solution was more new homes, but we still don’t know how many, with no reliable source of data. Credit unions, such as the Garda Credit Union, should be encouraged and facilitated to develop affordable rental homes for their members using their substantial deposits. This would provide a decent return on investment, and crucially, low-cost housing for key workers struggling to afford a home being advertised on the market.
A rental sector that offers an alternative to home purchase in terms of security and affordability is urgently needed