Reform of the private rental sector

Discussion in 'Housing and mortgage arrears - policy issues' started by TheBigShort, 22 Oct 2018.

  1. TheBigShort

    TheBigShort Frequent Poster

    The management of these houses should be sub-let to letting/ property management agents who are prepared to rent and manage the properties. The letting/property agent who is prepared to offer the lowest rent gets to let it out making a profit while paying LA a sum equivalent to LA authority rents.

    - LA gets its rental
    - House is occupied and looked after
    - Tenants pay affordable rents
    - Letting agent makes profit based on most competitive rental prices.
  2. Brendan Burgess

    Brendan Burgess Founder

    But houses are allocated based on need and not based on a letting agent's choice?

  3. Delboy

    Delboy Frequent Poster

    But but but....that's the private sector :eek:
  4. TheBigShort

    TheBigShort Frequent Poster

    Yes of course. I would need to elaborate somewhat. Houses are allocated on need - LA's are primarily focused on the need of homeless and those on waiting lists. Whether on the streets, in hostels, hotels, or simply in overcrowded housing.

    The needs of people extend far beyond the remit of LA's. The housing crisis is most pronounced in the extreme cases of poverty, and, as the Indo reports this morning, in tragic circumstances of a mother of two taking her own life.

    However the needs of ordinary working people who cannot afford a place of their own, or who are drowning in high rents (affecting family planning, quality of life etc) are also a need.
    This group of people have basically been thrown to the free-market, for maximum profit market. This is unsustainable long-term, affecting inward investment and employment opportunities.
    So, firstly, the State needs to build more houses. These houses can be affordable/social housing and apartments. But a considerable portion can also be set for private rental for those who do not want to buy, or it is not suitable to buy.
    But rather than the LA's managing housing estates and setting and collecting rents the houses/apts are let out by letting agents who can profit from rents. The caveat being, only the letting agent who offers the most competitive rent prices will win contract to let the property.
    There are plenty of letting agents who do this for their clients but to obtain maximum rents and charge a fee.
    In this instance the landlord is the LA, it charges a fee from the letting agent equal to what it would charge a LA tenant. The letting agent rents out the property (but at a rental price that is the most competitive) and profits.

    - LA gets its rental to re-invest in more housing for homeless, unemployed etc
    - House is occupied by working people and looked after by letting agent
    - Tenants pay a competitive rental price based on who is willing to manage the property for lowest price
    - Tenants have a real alternative to home ownership / private rental extortion market

    Im sure there are plenty of if's and buts and whatabouts to this concept. But I dont think it would be impossible to engineer a legal and administrative structure around this.

    The concept is simple - drive down private rental charges through a competitive tendering process affording working people a real alternative to the owner occupier model and the current private rental model.
  5. Bronte

    Bronte Frequent Poster

    You want to create a new civil service quango?

    How would the rental agency make money if they charge the tenant LA rents and pass on this rent to the LA?
  6. TheBigShort

    TheBigShort Frequent Poster

    No. LA's already exist. They can be funded as appropriate to build housing. There are basically four types of housing in my view

    1) LA housing for people and families who have no reasonable means to source accommodation for themselves

    2) Social and Affordable housing for people and families who do have incomes but whose incomes are deemed insufficient to ever afford a home in private market.

    3) Private rental market. For people and families who earn incomes over and above thresholds for social supports and/or who cannot afford to buy a house or who choose not to own a house.

    4) Private home ownership. For people and families whose incomes qualify for mortgages to buy homes.

    Its 3) Im focused on.

    Ok I have explained all of this before, so I will try keep it simple.

    - LA (say Dublin City Council) assesses housing needs for the population in its area. It deems there is a severe shortage manifesting itself in increasing numbers of homelessness, waiting lists and notably that private rental rates are at record highs.
    - It builds 2/3 bed townhouses and apartments as required.
    - It begins to allocate these houses on basis of need.
    - It recognises that alot of working people who by virtue of their incomes are disqualified from social supports but are also paying chronically high proportions of their incomes on rents. It recognises that these people are also in need.


    The LA designates a portion of the new housing it builds to be occupied by income earning tenants who by virtue of their incomes are disqualified, until now, from any social supports with regard housing.
    The scheme will operate in designated RPZ's initially.

    The LA will request letting agents or any other property management agents/companies to take charge of properties in the day to day management, furnishing, letting of properties to tenants and any other conditions it deems reasonable and appropriate.

    The LA will award the letting of the property to the letting agent/property manager that, amongst other things, guarantees the lowest rent to the tenants.
    The letting agent will pay the LA a sum equivalent to the average LA authority rent (around €400pm).
    The letting agent will also pay for furnishings, fixtures and fittings, management fees (if applicable) etc.

    For sake of argument, lets say the cost of managing the property for the letting agent is circa €700 a month including LA fee. No mortgage, or interest payments.

    Currently a two-bed townhouse or apt in Dublin city centre can fetch €2,500-€3,000 a month.
    Thats a minimum of €1,800 a month clear profit.

    However, the LA being in the business of serving the public will only award the management of the property to the letting agent/property manager who guarantees the lowest rent to the tenant. Therein lies a competitive tendering process where letting agents and landlords are competing against each other to avail of the profits to be made from providing the exact same service that they would otherwise provide for their clients or in their capacity as private landlords.

    The question emerges, how low would the rent go before a letting agent/property manager deems it not worthwhile to provide the service of managing a property for profit.

    I hope that explains the concept?
    If so, I will try to answer other questions you may have.
    if not, then no need to continue any further.
  7. The Horseman

    The Horseman Frequent Poster


    You seem to expect the property manager to guarantee the lowest rent, this is not how business works. No matter how many times you suggest the above as your answer to the issue it wont happen.

    Business people are in business to make money pure and simple. I am concerned that you refuse to accept this concept and believe they will provide a service at a guaranteed lowest rent. If you want to a business to compete solely on price look at any business that competes on price only and see the service they supply.

    Look at Ryanair as a prime example, if you are required to fly on a very regular basis (say weekly for work) would you want to fly with Ryanair each week with all of the associated administration that you as the customer must undertake.

    What it appears you are proposing under the above is forcing the property manager to provide the service on the lowest possible rent. Where is the incentive for them to do so. If there were more property managers then the market/sector required then your suggestion may work but there is not hence the housing crisis!
  8. TheBigShort

    TheBigShort Frequent Poster


    There is a 2 bed townhouse or apt built by LA in Dublin city centre. The LA, is outsourcing it to private market for purposes of rental to public.
    Ordinarily this property could fetch €2,500-€3,000pm on the market. The LA only wants €400pm in return - there is no mortgage, no mortgage interest and for good measure the State will throw in a property tax exemption for this property.
    Can you see at this point how some people, who know how to service rental properties, might be interested in taking this particular property from LA?
  9. Zenith63

    Zenith63 Frequent Poster

    Are we sure the rental market needs reform? It seemed to function fairly well 10-15 years ago and I'm not sure our model is that different to other countries, where it also functions fine. To me the root of the housing crisis is the lack of housing supply, tinkering with the rental market (RPZs etc.) is a classic case of treating the symptoms not the cause, and with the usual outcome of unintended side effects and little improvement to the underlying issue.

    Rents are a complete joke in many areas and I feel huge sympathy for people having to pay them, but seeing so much focus from the media and the Take Back the City movement on landlords and rental rates is dismaying to watch. The likely outcome of this pressure being applied to the wrong area will be another ill-conceived government move like RPZs. The pressure needs to be directed firmly at those with the ability to get more houses built, to increase supply and let the supply/demand market do what it did until 10 years ago and does most other places in the world.
    Leper likes this.
  10. The Horseman

    The Horseman Frequent Poster

    Why would any rational business person enter into a contract where the LA dictates the rent you can charge and encourages the lowest income to you as the property manager as possible while you take all the risks of managing the property maintaining it, replacing furniture etc and then don't even own the property at the end of the process.

    Based on the above all of the risk rests with the property manager and all of the reward is with the LA/Tenant. This is what the HAP is and we are all well aware of the aversion by landlords to this scheme.
  11. TheBigShort

    TheBigShort Frequent Poster

    The LA doesn't dictate the rent that is charged. The letting agent dictates that.

    All the LA does is choose which interested letting agent to outsource the management of the property too. It does this on set criteria that awards the outsourcing of the property to the letting agent/property manager that offers the most competitive rent price to the tenant.
    It really isn't that hard to understand. There is a property available for outsourcing from Dublin city LA ready to rent out into private rental market. The property ordinarily could fetch €2,500-€3,000 pm. The LA doesn't want to manage it and is willing to outsource the management of the property to the private sector. All it wants in return is the equivalent of an average LA rent - €400 a month.
    The letting agent can decide whatever rent it wants to apply. If only one letting agent applies to manage the property, they are on pigs back charging €3,000pm, making a killing and this proposal falls flat on its face.
    But if two or more letting agents are interested, then they enter a competitive tendering process offering to service the property to the private rental sector at a price they deem worth their while.
    The letting agent that offers to manage the property for the most competitive rent will be awarded the contract to manage the property to the rental market.

    Can you still not see how some people who are experienced in letting properties could make some money here? While simultaneously driving down rents in the private rental sector?
  12. The Horseman

    The Horseman Frequent Poster


    How is this then different to the rental market that already exists whereby the market dictates the rent the tenant pay's? Would it not be more cost efficient for the LA to provide this function and save on the Property Manager costs?

    Effectively what you are proposing is that State owned properties are managed by the property manager to the highest bidder? Is this not one of the main reasons we have a housing problem that the State sold off its stock or no longer has control of its stock and therefore can't house people?
  13. cremeegg

    cremeegg Frequent Poster

    The model of the state defining the service and putting it to the market to provide the service is well established in many areas.

    The idea of auctioning the contract to the bidder that will require the least subsidy (in this case lowest rent) happens widely in transport and other areas.
  14. cremeegg

    cremeegg Frequent Poster

    Perhaps not. Arrears of local authority rent are over 30% in many council areas.
  15. Páid

    Páid Frequent Poster

    I imagine they will try to win the tender by saying they will give charge the most competitive rent. Once they win the tender what is to stop them from renting to the highest bidder? If they are paying LA €400pm and ask for rent of €800pm they will have lots of interest in a market that commands €3000pm. Won't they be tempted to charge more either above or below board?
  16. Leo

    Leo Moderator

    Across the Dublin authorities, >55% of tenancies are in arrears.
  17. The Horseman

    The Horseman Frequent Poster


    Does the above not then show we should be looking at how we manage the existing stock and then introduce it to any new stock rather than expecting the private sector to manage the stock under State set requirements?
  18. TheBigShort

    TheBigShort Frequent Poster

    A simple register of properties lodged at the LA and the agreed rent price as fixed under contract should suffice.
    Any attempt to increase rent outside of the parameters of the contract would bring penalties for letting agent.
    That said, such parameters could include genuine inflation increases where a letting agent would be able to increase rents in a structured manner.
  19. TheBigShort

    TheBigShort Frequent Poster

    Because it forms part of public housing policy that recognises that adequate suitable housing is a critical social need of the population in order to develop and sustain a prosperous and civil society.

    It removes, in part, housing as a commodity to be bought, sold and rented for maximum gain.

    It inverts the competitive process by seeking out those who are prepared to provide a service at the most competitive rental prices for tenants, bidding them down, in order to profit from the highest bidder.
    Rather than a system that seeks to extract maximum income from tenants for maximum gain in order to profit.
    It does this by removing the biggest cost of all, the mortgage and interest repayments, and now the provision of private rental accommodation becomes a going concern for those who are prepared to provide the service for service.

    People who are working, skilled, educated, earning a good income are paying 50%+ tax rates. They have a reasonable expectation that those taxes could be used to supply reasonable and adequate accommodation for a rent that is sustainable and not extortionate.
    They have a reasonable expectation that they should be able to live in areas within reasonable distance to their work
    They have a reasonable expectation that their hard graft, skills and expertise should afford them a quality of life that is not disproportionately dominated by the monthly rent.
  20. Bronte

    Bronte Frequent Poster

    So the Government builds loads of houses for let's say 400K a pop, or maybe 500K if it's Dublin 4. I with my family will be entitled to rent this for 700€ a month via a letting agent, who pays DCC 400 and takes 300 to manage the property? And because I work in Penneys on O'Connell street I should get the 500K house in D4, which of course is worth much more, because of it's location near city center. Me working there gives me the right to live there.

    Have I understood this right?

    Next scenario.

    Why should the agent not offer the property to me at 400, pay the LA 100 and take his 300?

    - who will pay for repairs to the property?
    - who pays if the tenant thrashes the place