TheBigShort
Registered User
- Messages
- 2,789
The letting/property agent who is prepared to offer the lowest rent gets to let it out
But but but....that's the private sectorThe management of these houses should be sub-let to letting/ property management agents who are prepared to rent and manage the properties.
But houses are allocated based on need and not based on a letting agent's choice?
Brendan
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.
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?
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.
Proposal
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.
Where is the incentive for them to do so.
Profit.
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?
Why would any rational business person enter into a contract where the LA dictates the rent you can charge
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?
Would it not be more cost efficient for the LA to provide this function and save on the Property Manager costs?
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?Can you still not see how some people who are experienced in letting properties could make some money here?
Perhaps not. Arrears of local authority rent are over 30% in many council areas.
Perhaps not. Arrears of local authority rent are over 30% in many council areas.
Once they win the tender what is to stop them from renting to the highest bidder?
How is this then different to the rental market that already exists whereby the market dictates the rent the tenant pay's?
Proposal
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.
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.
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?