Irish State could be inadvertently complicit in small landlords losing their investment BTL properties in RPZs.

[CarrotStick]

Hey I fully agree. Why should the people providing the accommodation be penalised? That's ridiculous.

In your case you are in the situation of paying 7%
To me that is another injustice
I'm just not sure you can join the two in a court case. Judge will say why are you paying 7%?

RPZ has gone from bad to worse.
Originally there was 4% limit and that was to apply I think if HICP inflation was below some number for 3 consecutive quarters.

That was replaced by this crazy rule that rent increase cannot be higher that the lower of:

1. HICP inflation
2. 2%

So now HICP inflation is 10%. (bread milk petrol) the landlord is expected to remain at 2%
Even though an interest only mortgage may have increased by 300%
(Tracker going from 1% to 4%)

I think you hit the nail o the head, this Government is heading for disaster.

The Government have alienated Irish farmers

The Government has alienated renters with its disastrous rental policy. RPZ‘s may appear great, but they have had no real effect on rental increase in the rental market or on the institutional investors in the housing market. Small landlords are leaving in their droves. See Feb 5th article in Sunday Business Post, entitled.

Dominant funds could set rent prices in central areas of Dublin​

The Government has alienated small time landlords.

Who have they not alienated?

 

[RonnieShinbal88]

Rent controls have never worked anywhere. Why would it be any different?! They are going to drive more and more landlords out, suck supply to the bone and only investors attracted in are going to initially ask for sky high rents knowing they are limited to 2% per annum going forward.

Even that is unsustainable. It's unsustainable to lose tens of thousands of rental units and have them replaced at new market high rents, the political risk will just grow and grow. New investors looking at coming in will surely extrapolate ahead and think twice, the government has shown they play fast and loose with property rights and are quick to intervene in the market in response to populist ideas if they think it will get them votes.

 

[CarrotStick]

What really takes the biscuit is that the tenants will need to find a new rental home.
In the current market that is going to be much higher rent that the artificially low RPZ controlled rent that drove the BTL owner out of the market/into bankruptcy.

So who benefits from this, the new landlord.
Rents in RPZs are going up 14% year on year - how is that possible when the idea of RPZs is allegedly to cap them at 2%?

Could it be that this whole process is not in fact reducing rents but is increasing them by driving out small landlords and that increased rent is going to institutional landlords?

Doesn't sound like much of a win for the consumer!

This is our current Government’s housing policy, DAFT. (A 17 year old school-goer would do a better job)

 

[Itchy]

Thank you for that response. You say that ”Property rights doesn’t mean you can rent out without regulations” From 1928 until recently, you could. If these new regulations interfere with your ability to repay your mortgage obligations on a variable rate mortgage then they are simply unjust and open to challenge. You cannot have the contractual obligations to repay a mortgage loan agreement interfered with by newly imposed State regulations during the term of that mortgage, it’s simply untenable, unjust and unreasonable, but that is precisely what has happened.

So regulation of tenancies is "unjust and unreasonable" as long as certain market participants, who have engaged in leveraged speculation in the property market, deem their "ability to repay" or meet their obligations has been "interfered" with by the regulation? And furthermore, should be immune from the impacts of regulation for the duration of that obligation? Bonkers.

 

[RonnieShinbal88]

So regulation of tenancies is "unjust and unreasonable" as long as certain market participants, who have engaged in leveraged speculation in the property market, deem their "ability to repay" or meet their obligations has been "interfered" with by the regulation? And furthermore, should be immune from the impacts of regulation for the duration of that obligation? Bonkers.

That's a text book strawman argument, no-one is suggesting immunity from all regulations, but specifically from price controls limiting increases to 8% below inflation in a high inflationary environment when mortgage interest rates are going up.

But yes, I know how discussion works on here - 'well someone is suggesting that <quote post> '

Life is too short. Bonkers. lol. etc.

 

[CarrotStick]

So regulation of tenancies is "unjust and unreasonable" as long as certain market participants, who have engaged in leveraged speculation in the property market, deem their "ability to repay" or meet their obligations has been "interfered" with by the regulation? And furthermore, should be immune from the impacts of regulation for the duration of that obligation? Bonkers.

Hi Itchy,

Maybe if the small landlords were on an equal playing field as the large institutions IREITS, QIFS, QIAFS, ICAV’s (i.e. pay little or no tax) they would be able to provide social housing for the government, but because they are not and are becoming hamstrung by regulations, they are selling up and getting out.

Result: they are not being replaced by renters pro rata on a one for one basis like Clubman would have you believe, which results in the amount of rental units reducing (Read the latest Daft report) and Feb 5th Sunday Business Post entitled

Dominant funds could set rent prices in central areas of Dublin​

Our borrower in the scenario at the start of the thread would have had no problem accessing the risk in the housing market that he was entering. However, for a fund, that purchased his loan (might I add, at a substantial discount) to up his interest rate to double that, that the originator of the loan charges for the exact same mortgage product, together with the Governments ridiculously thought out RPZ regulations. Dublin rent prices went up 14% last year. The same RPZ regulations limits our borrower’s ability to raise rent to even a 5th of the HICP (Cost of living index) so that he can pay his ballooning monthly mortgage payments, come on now, even Mystic Meg could not foresee those turn of events.

Property will ultimately be sold, probably to an owner occupier, with the result that the current renters are forced to look for accommodation elsewhere, most likely at higher monthly rent and maybe from a fund seeking top rental prices. This will put more pressure on Government to start thinking about the rental situation they brought about all by themselves. Add in the further pressure that the Government will come under in finding accommodation for the influx of refugees, asylum seekers in the coming year(s) etc and we have the perfect accommodation storm.

Final Result


BTL Borrower loses,

Renter loses,,

Government loses,

Fund wins, they always win.


“Ireland the gift that keeps on giving.”

CEO Robbie Hughes Link Assets.

 

[ClubMan]

But yes, I know how discussion works on here - 'well someone is suggesting that <quote post> '

And also don't forget "I suspect that some posters here have a political agenda" based on absolutely no evidence at all.

But I agree with you. Life is too short for threads like this and the conspiracy theorising that they involve.

 

[RonnieShinbal88]

And also don't forget "I suspect that some posters here have a political agenda" based on absolutely no evidence at all.

But I agree with you. Life is too short for threads like this and the conspiracy theorising that they involve.

Moving the discussion again, trying to discredit the poster, we've moved from strawman to ad hominem.

There are people on this thread trying to point out the obvious issues with the strategy in the rental market and a number of people trying to discredit them, engaging in strawman arguments etc.

The bottom line for the consumer is that small landlords are leaving, they are replaced by institutional landlords at higher rents (see the annual rent increase figures, figures on small landlords leaving the market).

We can get into tens of posts of pathological pedantry on minutiae on this or take a look at the big picture and those figures.

 

[Firefly]

Scenario.

Property transferred to Pepper. Pepper ups the variable interest rate incrementally to 7%. Now interest only mortgage payments are 2000 euro monthly. Landlord has to subsidise 500 euro monthly (6000 net annually, 12000 euro before tax approximately)) to keep up with the mortgage payments on the RIP.

The landlord doesn't subsidise anything. S/he took out a loan and must repay it. The tenent, if anyone, is subsidising the landlord.

 

[RonnieShinbal88]

The landlord doesn't subsidise anything. S/he took out a loan and must repay it. The tenent, if anyone, is subsidising the landlord.

How is the tenant subsidising the landlord if they are paying rent that is 25% below market rent and the landlord can't cover their costs and is going bankrupt?

Even if this were true (it clearly isn't) same tenant will now be forced to move out, try to find an alternative rental which is going to be very difficult and stressful, and then 'subsidise' institutional investors at a much higher rent than they currently have.

This may well be the price renters in this country are willing to pay, subsidising the cost of building up supply for the government in the common good and fair play to them if that is the case, but the issue is whether they have a choice. Small landlords are getting out because they don't want to pay those subsidies but the tenants have nowhere to go.

 

[The Horseman]

The landlord doesn't subsidise anything. S/he took out a loan and must repay it. The tenent, if anyone, is subsidising the landlord.

Technically the landlord is subsidising the tenant as the landlord is restricted from achieving market rent due to govt interference specifically the RPZ legislation.

If the landlord was achieving true market rent and it was not enough to cover the costs then it is a business decision that the landlord must live with.