Rent controls don't work

D

DannyBoyD

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Yet again another report underlining the negative impact of rent controls - when will our politicians listen?

www.rte.ie

Rental prices up 13.7% amid 'chronic' supply shortage

Rents being sought on the open market in the final three months of 2022 were 13.7% higher than the same period in the prior year, the latest rental report from the property website Daft.ie shows.
www.rte.ie www.rte.ie

""Since the introduction of Rent Pressure Zones in 2016, rents of sitting tenants have increased by 19% on average, compared to an average increase in open-market rents of nearly 75% over the same period," the report notes."
 
I bought a place in an RPZ recently, which goes against my number one rule "Don't buy in an RPZ," but everything else was perfect about it so I went for it. Hopefully I'll have the keys by the end of the month. When I'm putting in a tenant I have chance to set the rent as it was owner occupied previously.

Normally I would put a place on the market and I'm happy to take a bit less than what I could potentially get because I want to create a good relationship with the tenant and keep them there long term, so setting rent a bit lower than the market in the knowledge I can always increase it at a later date if needs be is what I do.

In this case, I'll be setting it as high as I think I can get because I'm afraid that I'll get caught out by inflation several years down the line if I don't squeeze every penny out of it now. I don't feel good about it because I think that it's too much money for a couple to pay from a standard wage. However, I'm also here to make a profit so it's what I need to do in order to future proof the investment.

So there's a real life example of why RPZ's are not necessarily a good thing for new renters coming in to the market. I know it's benefitting people hugely who have been in a place for a long time, but there's also a lot of new renters looking to enter the market who will suffer because of situations similar to mine.
 
The effect of rent controls was widely anticipated at the time of their introduction-

Effect of rent controls? Higher rents and reduced supply

As widely predicted on here, Minister Coveney's rent control measures have failed to halt galloping rental inflation and have co-incided with a further reduction in the supply of rental properties to the market. The only tangible result of the Minister's measures is to benefit one cohort of...
www.askaboutmoney.com

The private rental market is now in a dire state and this will adversely impact the broader economy, which impacts everybody.

But have you heard a single politician call for the abolition of rent controls?
 
They are very difficult to get right, but they won't work as implemented here anyway. They way we did them you can avoid them if its a new rental. Which heavily biased towards new Institutional landlords coming into the market. I doubt that was accidental. Ultimately its lack of rental supply that driving rents up. Lack of construction and rental leaving the market. Both due to deliberate Govt Policies.

So none of this is news to anyone.
 
Rpz zones were planned as a short term measure and thought that way or never thought thoroughly. The fact that there's no possibility of reviews between lease mean that the gap keep on increasing between established rentals and new rentals. The price charged for new rentals doesn't necessarily correspond to the market because LL actually anticipate they will not be able to increase in the future so try to charge as much as they can. Renters cannot shop around any more and are stucked in their artificially low rents. Low rents LL consider their position and leave the market (because of rpz and multiple other factors encouraging them to review their investment). And no private LL in their right mind would enter the market right now because of the price of property, the rpz or the eviction ban. It is such a mess now that government is really just stuck. Eliminating rpz zones immediately would create further mess. I, for one, would just try to get as much as I could from my rental as I have no idea what will come down the line... The situation is the same with the eviction ban.
I personally think the only way to ensure LL stay in the sector would be to create some incentive of some sort. But I don't know if it could be enough. I think it would still be difficult to get right and I definitely know that it would be highly unpopular.
 
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In fairness at the time they were told and had examples to follow. They ignored it all.

What they need is stability in the market. Turn rentals into long term rentals, that can't switch "use" from rental to private on a whim. At the same time giving an incentive to long term rentals over short term rentals. Thus far all they don't is penalize LLs. So there's no incentive to stay in the market, unless you're its returning a high margin.
 
In contrast to my post above, I've just returned from viewing an apartment building that is up for sale in the city. It's currently leased to the Co. Council, it's in an RPZ. The rent roll is actually quite good on it and the current tenants are extremely fortunate. I asked one of sitting tenants how much they were paying a week. He said he is contributing €400 a month to the council. The council are paying 1,000 a month for the 2 bed apartment. If the rent was being set fresh on the apartment now, you could easily get 1,200 for it.

So the council must be subsiding this (and the other apartments) to the tune of 600 per month. These tenants are extremely fortunate to be in the situation they are in, but they are stuck there for good. While new tenants coming to the market will be getting charged 1,200 for the same quality apartment (if they don't have government support). This must be costing the government an absolute fortune on the nationwide scale. Can't be sustainable.
 
The flip side of this is arrears.

Look at the rent arrears building owned to local authorities. Then imagine the arrears building with private rentals and those rented to the local authorities.

Then imagine all the hotels they are renting.
 
Always Learning said:
I bought a place in an RPZ recently, which goes against my number one rule "Don't buy in an RPZ
Click to expand...
Always Learning said:
In contrast to my post above, I've just returned from viewing an apartment building that is up for sale in the city. It's currently leased to the Co. Council, it's in an RPZ.
Click to expand...
Sounds like you need to demote your number one rule from top of the charts? ;-)
 
ClubMan said:
Sounds like you need to demote your number one rule from top of the charts? ;-)
Click to expand...

You got me. I suppose I'll have to start calling it a guideline from now on.

This is very tempting because the council do all the work and the net ROI is still just above 8% per annum, but without any of the work of letting it myself for the next 20yrs, so I'm considering breaking the rule again :)
 
Check out what the local authority process is for recovering non paying tenants and damage of same. Some day they cover it, I'm not certain if that's true of them all..
 
AlbacoreA said:
Check out what the local authority process is for recovering non paying tenants and damage of same. Some day they cover it, I'm not certain if that's true of them all..
Click to expand...
Yes I've checked it out, it's a direct lease agreement with the council. The council are responsible for property management and tenant management. Rent is paid by the council to the owner, whether the tenants pay or not is the councils problem.

• No rent loss due to vacant periods
• No rent arrears
• No letting fees
• No advertising costs
• No RTB tenancy registration charge
• No day to day maintenance costs
 
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