Landlord renting out a self contained flat or apartment in his own home

[Greenbook]

Or, as in 2026 property prices being at record highs, you could always reduce the selling price to achieve the yield?

Precisely, that is what you may well end up having to do with a tenant in situ sale - reduce the selling price is order to sell the property. That makes the PRS an unattractive investment. If I buy an apartment now for €600k, I would want the sale price in 10 years time to at least keep up with inflation. I would not want to have to sell for €400k in 10 years time because I can't get a purchaser at any other price. As I previously said, a high rent may avoid that outcome.

Granted. But one the reasons cited is being caught with a tenant that you cannot evict - its this reason that I was honing in on as it depicts an attitude, to me anyway, that is not suited to being a landlord.

I've been a landlord for nearly 30 years, but I am getting out now. Obviously, it is something I was never suited to. That's the only possible explanation for why I am getting out.

I reiterate again, if it wasn't for the fact that the new rules makes the PRS so risky and unattractive, I would not be getting out. I'd be staying in for another 10 years, until I was too old for the job and everybody, even landlords, are entitled to retire due to old age surely!

Absolutely, you are right - so can we please stop hearing from private landlords pretending to be concerned about the lack of supply for tenants as a consequence of government legislation? Private landlords are only more than capable of exiting the market, reducing supply by themselves.

We're being driven out by government policy.

 

[bipped]

those selling up and leaving are just doing now what they were intending to do anyway at a later point - reduce supply.

That begs the question as to why they are leaving now instead of staying in for another 5-20 years. What changed to make it more risky?
I can see the emotive language there, private landlords intending to ‘reduce supply’ as if that was the reason they are leaving.
Private landlords are not charities or non-profit entities like AHBs or cost-rental providers (both heavily subsidised by the state). In fact, those organisations provide multi-generational tenancies on a par with council tenancies, they enter the sector with a plan to stay in operation for an unlimited time period.

Private landlords are only more than capable of exiting the market, reducing supply by themselves.

I think the point about housing supply being the states responsibility is not clicking for some reason.

 

[Sister Sara]

We're being driven out by government policy.

Well let me propose a solution to keep you, or to bring other LL's into the market.

The State sets up a Rental Authority to manage the amount of rental properties in the country.

A new 2-bed apt for €600k comes on the market. For owner-occupiers they need 10%-25% deposit?
Say for investors intending to rent they require a minimum of 30%

You put up €200k and the property is registered as a rentable unit with the Rental Authority in your name.
The States carries the other €400k mortgage and you take a 1/3 share.

You are allowed an attractive 10% yield on your €200K investment. A rent of €1,666pm for a €600k (or €200K for you) 2 bed apt in Dublin.

In 25yrs in 2051, you decide to exit the market. You 'sell'/transfer, the apt back to the State Rental Authority at its market value (tenant in situ or not), say €1.2m in 2051.

You take your 1/3 cut of €400k. The State Authority then sells it to another investor who pays 30% (€400K) to State and lets it as a rental property until 2076.

The property is continually re-cycled into the rental market for multi-generations.

- You get your monthly rent with a generous yield
- You get your capital gains from the doubling of the price
- The tenant gets security of tenure
- The tenant gets to pay a rent that otherwise may have been three times the amount
- The tenant is given a viable option to rent rather than be tied down with an expensive mortgage if that is what they decide
- The State gets all its money back, and some.
- Social cohesion prevails. Family planning grows. Everyone is happy.


Maybe I'm mad, but I'm trying to find the flaw in this idea.

 

[Greenbook]

An easier solution - the State ensures that there are plenty of properties for owner occupiers to buy at reasonable prices.

That means that landlords are, as in the past, only renting to those who it suits to rent; people who are young and mobile and don't want to buy yet.

The State polices the rental market to ensure that bad behaviour on both sides is sanctioned (not paying the rent or damages the property by tenants, landlords not providing a good service, unreasonably withholding deposits).

As there are plenty of properties to buy at reasonable prices, rents are affordable too. A landlord could ask for a very high rent, he won't get any takers unless what he is offering is exceptional. A landlord who tries to pull a fast one on a sitting tenant and push through an unreasonable rent increase hears from the RTB.

The State hasn't done that. It has made it very difficult to build, easy to object and brought in ultra high standards making everything expensive. A symptom of the lack of building is pressure and lack of supply in the rent market. Instead of sorting out supply, it has spent its time tying the rental market up in knots.

 

[stormy]

Maybe I'm mad, but I'm trying to find the flaw in this idea.

How much capital would the state need to provide to fund such a proposal? Does the state have access to such a quantum of funds?

Would appreciate if you could also come back on my prior question to you also. I think it makes sense to put numbers on statements / proposals to sense check their validity / feasibility.

 

[bipped]

A rent of €1,666pm for a €600k (or €200K for you) 2 bed apt in Dublin.

So many questions in that idea. Eg does the investor get 1/3 of the rent and the state gets the balance. Who is responsible for the day to day management, M&R, what happens in an RTB dispute - does the state appear as the larger owner. Or do you mean a silent partner, landlord ponies up 200k, gets regular rent, pockets the gain on exit and has no input for 25 years.

 

[Sister Sara]

So many questions in that idea.

The property would effectively be transferred 100% into the investors name. 100% of rent to the investor. Day-to-day management/RTB disputes etc between tenant and landlord (investor). State has a total hands-off. The only condition that when the investor exits the market that the property is transferred back to the State, and is obliged to pay out the investor at 1/3 the market price.

 

[Sister Sara]

How much capital would the state need to provide to fund such a proposal? Does the state have access to such a quantum of funds?

I have no doubt that there would be a lot of questions and conditions that would be more suited to weaning out terms in professional circles rather than a discussion board. But at face value, it could work?

Say 50,000 are built a year, the desired amount. The State considers the rental market requires 7,500 (15%). Average price of units throughout the country, say €300,000.

€300,000 x 7,500 = €2.25bn.

€742m put up by investors, reducing the State outlay to €1.5bn a year.

 

[bipped]

Instead of sorting out supply, it has spent its time tying the rental market up in knots.

Agree, plenty of properties to rent back in the day when developers and builders were producing significant numbers of housing.

 

[Greenbook]

Also, wouldn't it be easier for the State to run the whole thing itself and just borrow the money from the citizen. It could then pay back the citizen the borrowings plus the interest over 20 or 30 years out of the rent as a normal landlord does.

No complicated co-ownership, no questions of who owns this property or who is responsible for what, no need to find a new landlord to purchase when the first landlord exits.

It could be multi-generational as the State would own the property forever. If major work was needed on the property as would happen as time when on, the State could just borrow from another citizen.

This is a simple structure, the State is acting as a normal landlord would but as it wouldn't be trying to funds its pension or make a profit, could charge a cost rent.

 

[Sister Sara]

Can you share the details? What was homelessness numbers pre rent controls and now. What were we average rents pre-rent controls and now.

From CSO

I don't have the homelessness numbers. Not sure why they are necessary.

 

[Greenbook]

Say 50,000 are built a year, the desired amount. The State considers the rental market requires 7,500 (15%). Average price of units throughout the country, say €300,000.

That is the problem. We are currently hard pushed to build 35,000. If we managed to build another 50,000 on top selling for 300,000 a piece our problems would be solved. We'd have plenty of affordable properties for owner-occupiers to purchase. The pressure on the rental market would fall away and the medding would stop.

If we could build 85,000 units a year with an average price of 300k or 400k, we wouldn't be having this discussion.

 

[Sister Sara]

Also, wouldn't it be easier for the State to run the whole thing itself

You could say that but my understanding that in our free-market capitalist country this would neve run politically so would never get off the ground.

How about addressing the proposal as put in the political, social and economic conditions we live with today?

 

[Sister Sara]

If we could build 85,000 units a year with an average price of 300k or 400k, we wouldn't be having this discussion.

Obviously, they were hypothetical figures to assist with the example.

If we are building 30,000/ 20,000 whatever, and around 15% of them are needed for rental purposes, how does the proposal sound to you?

 

[Greenbook]

@Sister Sara we're engaged in bluesky thinking here. It would be easier and simpler for the State to run the whole thing itself and borrow to fund the acquistion.

I think it is a problem with the Irish civil service, the first port of call is always a complicated scheme of some type.

 

[Greenbook]

If we are building 30,000/ 20,000 whatever, and around 15% of them are needed for rental purposes, how does the proposal sound to you?

Problem is that most of these (per an article by Lorcan Sirr in the Irish Times today) are being built or purchased by the State for Council Housing or AHBs with a few investment funds in the mix (they've largely left). So at 30k, there is nothing available for this scheme. Currently, there are few new builds for owner occupiers either.

 

[Sister Sara]

@Sister Sara we're engaged in bluesky thinking here

True. Only in my adult lifetime (40 odd yrs) there has never been a stable functioning housing market in this country. Boom...bust...boom....undersupply, oversupply ...

Some blue-sky thinking is much needed.

 

[stormy]

I don't have the homelessness numbers. Not sure why they are necessary.

There you go. Are we in agreement that pre rent controls, rents were decreasing and post rent controls, rents grew extremely fast?

 

[Greenbook]

@Sister Sara I agree entirely. The State needs to figure out how it can ensure a consistent supply of good quality (not rolls-royce quality) accommodation at affordable prices along with some expensive supply for those who can afford it. If it can do that consistently, all the problems in the PRS will fall away. Landlords will do what I did up until 2016 or so - trying to attract and keep good tenants.

If the answer to that can be found, the problems will largely disappear. Those who can't afford the affordable housing will have council housing available to them.

 

[Sister Sara]

Are we in agreement that pre rent controls, rents were decreasing and post rent controls, rents grew extremely fast?

No, sorry, not in agreement. Rent controls came in December 2016, so the first quarter 2017 has Dublin at €1423pm. Q1 2012 is when rents began to rise at €1015.16.

So by the time rent controls came in, rent had increased by some 40%.
House prices also increased from 2013 to 2016 by about 34%

Between rents and house prices and lack of building, its a crisis.