Private landlords seek tax cuts to stop exodus
Property owners say rent investment businesses have it easier
LANDLORDS are calling for the Government to ease taxation rates to help stem their mass exodus from the market and the loss of rental properties.
Over 90% of private landlords believe it is unfair that private equity funds pay no tax on rental income, while, in contrast, up to 52% of landlords’ rental income is paid back to the Exchequer, according to a new survey by economist Jim Power, released yesterday.
Mr Power said that the ‘very onerous’ taxation of private landlords is a ‘significant disincentive’ on their participation in an already depleted market.
As of early this month, there were just some 800 properties to rent across the entire country, while rents continue to rise.
Mr Power suggested a flat rate tax of 40%, while others have called for this to be even lower.
Margaret McCormick of the Irish Property Owners’ Association (IPOA) advocated a flat rate of 12 to 15% ‘that applies to both institutional and private landlords’.
Housing Minister Darragh O’Brien indicated earlier this month that taxation measures may need to be looked at to stop landlords from exiting the rental market. A spokesman for the
‘They’ve created a two-tier market’
Department of Finance told the Mail last night that it is due to review a series of short, medium and long-term options on tax and fiscal treatment of rental accommodation providers over the summer. It will then prepare a set of options for October’s Budget.
The study, commissioned by the Institute of Professional Auctioneers & Valuers (IPAV) and the IPOA, also revealed that 91% of landlords do not plan to invest further in residential investment property due to Rent Pressure Zones (RPZs), high levels of taxation and changing regulations.
It said there has been a collapse in private investor participation in the market, dropping from 19.9% of total mortgage lending in 2006, or €7.9billion, to 1.4% in 2021, or €143million.
Mr Power argued that the single biggest thing the Government can do to help the exodus of landlords is to address the legislation on RPZs. An RPZ is a designated area where rents cannot exceed general inflation, or 2% per year, whichever is lower. New landlords can set their rent at the market value but existing landlords are often tied to lower rents which they are unable to increase.
Mr Power told the Mail that he would abolish them altogether or at the very least ‘significantly amend the way they operate’.
He added: ‘They’ve created a two-tier market. The notion that new landlords coming in are getting much higher rent than existing ones – that’s bull.
‘Everybody in an RPZ has to be treated the same. So you either get rid of them because they’re not working or you significantly amend them to make them work.’
Mr Power further argued that this policy also prevents rents going down because ‘where RPZs are in place there’s no incentive to cut rents’.
IPAV chief executive Pat Davitt said that RPZs are not only depleting rental stock by driving landlords out of the market but also by encouraging landlords to leave their properties vacant for two years so they can then increase the rent to market rent. He said: ‘There are people doing it because it’s the only available way that they can get up to market rent.’
He added that other properties are sitting vacant because landlords, particularly older people, are being put off renting them by the ‘onerous’ legislation.
Mr Davitt, who himself owns several properties around the country, told the Irish Daily Mail that he is selling his properties as soon as his tenants leave. He said: ‘I’d like to pass on the rental properties to my children... but at the moment that thought has gone out of my mind because you’re passing on a huge problem.
‘Young people don’t want to take on the onerous regulations.’
The study’s argument that RPZs have been ‘counter-productive and ineffective’ contradicts a report by the Economic and Social Research Institute last month which said that the legislation has resulted in a degree of rent stabilisation.
But an internal briefing document on the Housing for All strategy showed that officials in the Department of Finance have expressed concern that ‘rent controls can disincentivise supply’.
It added that the expansion of RPZs ‘seems to be in conflict with the Strategy’s other intention of keeping smaller landlords in the market’.