Effect of rent controls? Higher rents and reduced supply

Sarenco

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They should just remove all rent control.
But what will happen of course is tighter controls with worse unintended consequences.
I agree that rent controls, in any form, are counter-productive to the point of being textbook "bad policy".

Perversely rent-controls also tend to benefit higher-income tenants to the disadvantage of lower-income groups and we can already that effect playing out here.

However, once introduced rent controls are extremely difficult to repeal as they generate a constituency of vocal tenant "insiders". There is also the distinct possibility that further regulations will be introduced to close-off increasingly creative avoidance strategies – a case of bad regulations chasing bad policy.
 

odyssey06

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Close off the creative avoidance loopholes, with a once off catchup to up to 90% market rate for those landlords whose rent increases registered with the RTB over the last 4 years have been less than the general rate of rent increase for that RPZ.
Or abolish RPZs entirely.
At the moment we have the worst of a bad situation.
 

AlbacoreA

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That's not solely about rent controls. Using refurbishment to break tenancies was common before rent controls.

The only reason LL want/need this is because there is no other way to increase to market rate if you are below it, or to move your property up market which is what the large fund LLs are doing to increase profitability and their ROT.

On the flip side there is tenants security of tenure to consider and this becomes the critical issue in the current situation of a housing crisis, and associated rent inflation.

The only solution is to increase supply. That not only helps tenants, but also LL's as tenants are more willing t move and will move more often as convenient for them.

All rent controls really do is discourage LL's, and discourage tenants from moving. Thus decrease supply further. They do help tenants with security of tenure and affordability, in the short term if they don't move. In the long term the rent will still increase and housing supply will decrease. In Germany its been reported a rise in behind the scenes payments to get around the cap.
 

Sarenco

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Further evidence from this morning's Daft Report that the Government's policies are having a negative impact on the rental market -

"There were just 2,930 properties available to rent across Ireland on 1 August, the lowest number ever recorded. It is the first time, in fact, since such records began in 2006, that fewer than 3,000 homes were available to rent across the country.

In Dublin there were just 1,100 homes available to rent, compared with 2,000 on the same date in 2014.

Meanwhile, rents in Dublin jumped by 12.3% in the first six months of the year. They now stand 18% higher than the previous peak seen in 2008 – equivalent to an additional €260 being paid on average per month per property."

http://www.daft.ie/report
 

newirishman

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Further evidence from this morning's Daft Report that the Government's policies are having a negative impact on the rental market -

"There were just 2,930 properties available to rent across Ireland on 1 August, the lowest number ever recorded. It is the first time, in fact, since such records began in 2006, that fewer than 3,000 homes were available to rent across the country.

In Dublin there were just 1,100 homes available to rent, compared with 2,000 on the same date in 2014.

Meanwhile, rents in Dublin jumped by 12.3% in the first six months of the year. They now stand 18% higher than the previous peak seen in 2008 – equivalent to an additional €260 being paid on average per month per property."

http://www.daft.ie/report
So I thought that rents can only be increased by 4%? Given rents increased by 12%, this particular rule doesn't seem to be a hindrance to anyone.

Quoting from: http://www.citizensinformation.ie/en/housing/renting_a_home/rent_increases.html

For a new tenancy (starting on or after 24 December 2016) in a Rent Pressure Zone, the landlord may review the rent once every 12 months. The maximum rent increase will be 4% per year. The landlord must give the tenant the following information, in writing, at the start of the tenancy {...}
 

Sarenco

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Yep, properties in a RPZ that have not been let at any time in the previous 2 years, or that have been substantially refurbished, are exempt from the rent cap and can be let at whatever rate the market will bear.

Sitting tenants that are enjoying below market rents because of the rent control legislation are strongly incentivised not to move. That increases competition for the very limited number of new rentals that coming to the market and therefore we are seeing rent increases.
 

Sarenco

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Well, I see Minister Coveney thinks that his rent control legislation is working out just fine –

Asked if his rent cap plan had worked, Mr Coveney, now foreign affairs minister, said: “Yes... If you look at the areas where the rent cap applies, it certainly has helped put downward pressure on rent inflation. That was the whole point of that strategy and that has worked to a certain extent. But that isn’t going to solve the problem for people. The main issue here is supply. We need to put temporary measures in place to limit rental inflation which is what we have done and we will continue to do that while it is needed.”
http://www.irishexaminer.com/ireland/coveney-claims-rent-caps-are-working-457549.html

"Delusional" is the word that springs to mind…
 

landlord

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It infuriates me when government ministers constantly talk about this rental crisis ONLY in terms of a lack of supply.
Surely for each additional property that becomes available for purchase, there must be a willing perspective landlord who wants to buy it to positively influence the rental market. Surely for reasons discussed again and again on this website an increase in supply of properties will have an extremely limited impact on RENTAL supply.
I personally feel that the disincentives to becoming a landlord (including rent controls) have never been so strong. If these issues are not reflected in the next budget then the crisis will deepen.
 

Gordon Gekko

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The data's also a joke because rent increases don't tend to be reported.

e.g. a property is let in 2013 at €1,100 a month. The PRTB have visibility of that. The tenant stays for four years. The property is now let to a new tenant at €1,560 a month. The stats look ridiculous and it appears as if the RPZ rules have been flouted.

The reality is that the rent was being increased along the way and stood at €1,500 when the tenant departed. €1,560 is that plus 4%. But the PRTB had no visibility of the periodic increases.
 

Sarenco

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I included a quote from Paul Krugman on the predictable effects of rent controls earlier in this thread:-
"Almost every freshman-level textbook contains a case study on rent control, using its known adverse side effects to illustrate the principles of supply and demand. Sky-high rents on uncontrolled apartments, because desperate renters have nowhere to go -- and the absence of new apartment construction, despite those high rents, because landlords fear that controls will be extended? Predictable. Bitter relations between tenants and landlords, with an arms race between ever-more ingenious strategies to force tenants out -- what yesterday's article oddly described as ''free-market horror stories'' -- and constantly proliferating regulations designed to block those strategies? Predictable."
Well, it looks like we are about to see our first predictable move to block one strategy that is currently being employed by some landlords to circumvent our crazy rent control legislation.

Apparently, our new Housing Minister is instructing his civil servants and the RTB to formulate a definition as to what constitutes "substantial refurbishment" for the purposes of the Residential Tenancy legislation.

It is not clear to me what authority these civil servants or the RTB have to interpret any legislation - in my innocence, I understood that was a matter for the Courts under our constitution.

Another case of bad law chasing a bad policy...

http://www.thejournal.ie/rent-national-prices-3605062-Sep2017/
 
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