Reports: Government will retain rent controls for existing landlords but lift them for new investors

[Greenbook]

In France, 3 years is somewhat the norm. However, during this period, LL can give notice in a limited number of situations (a bit like currently in Ireland). Note: the tenants might also have to give 3 months notice if they break the lease without justification.
Once in place, the LL can only review the rent within an indexation system (if the lease allows it) and between lease (within some limits).

I think a system where the initial rent is set at market value followed by low annual increases (inflation or 2%) would be a pretty decent one. The landlord gets market value initially, the tenant has certainty as to increases for a period thereafter. Likewise, a system where the tenant as absolute security of tenure for a period is, I think, a good idea as well.

I think that the 6 year cycle currently suggested is too long. It won't be attractive to landlords. 3 years, as in France, would be better. It does give the tenant security as to tenure and rent without tying the landlord's hands for too long.

 

[Greenbook]

6 year cycles will also make shorter term tenants much more attractive to the average landlord. They'll leave after a year or two, so you can then reset the rent to market level. Likewise, you have much more flexibility as to selling. Unintended consequences again.

 

[Sister Sara]

Except in two decades of anti landlord and pro bias tenant legislation it hasn't fixed the problem, it's just made it worse. Because landlords were never the problem. They are symptom not a cause.

There are some 100,000 registered landlords in the country?

I wonder if each of those landlords simply put one property up for sale, then the housing need for owner-occupiers would be resolved overnight.

 

[AlbacoreA]

I think there is more to Europe than France...

"....One of the tenant rights in Germany is the right to a written agreement between you and your landlord. You’ll come across two major types of rental agreements in Germany: indefinite and fixed-term .

Indefinite rental agreement Indefinite rental agreements in Germany (Unbefristet) have no termination date. That means that tenants can end their lease by providing a notice. However a landlord can only terminate a rental contract under specific circumstances.

Fixed term rental agreement Fixed term rental agreements in Germany (Befristet) have move-in and move-out dates outlined in the contract. Neither party is obliged to renew the lease agreement after its expiration. You’ll often come across such agreements when looking for student accommodation in Germany.

In either case, keep in mind that minimum rental periods in Germany can be up to 2 years..."

"..Free Market Contract:
These are the most common type of rental contracts in Italy. They typically last four years with the possibility of automatic renewal for a further four years.

The rent and other contractual terms are freely negotiable between the landlord and tenant.

Agreed Rental Contract:
These contracts last three years with a two-year extension. Homeowners and tenant associations set the rents, often resulting in lower rates than free market contracts...."

 

[Premos]

if each of those landlords simply put one property up for sale, then the housing need for owner-occupiers would be resolved overnight.

And where does that leaves the people that can't buy or have no intention of buying short-term

 

[AlbacoreA]

I doubt that any landlord flip flops like that; landlord one minute, owner occupier the next. 6 years is a long time and I wonder how attractive the new system will be for

It's widely reported problem. They usually don't move a family member in, just use the rule to rotate tenants. Airbnb is a means to do the same thing.

 

[AlbacoreA]

There are some 100,000 registered landlords in the country?

I wonder if each of those landlords simply put one property up for sale, then the housing need for owner-occupiers would be resolved overnight.

You want to make tenants homeless.... How does that fix anything.

Other flaws we need 50k+ backlog new properties a year. You'd only be half fixing it (breaking it for renters) for one year.

The vast majority of landlords have one property. So there would be nothing to rent.

 

[AlbacoreA]

You can't fix the housing crisis by solely targeting landlords. Why the govt and posters here keep trying and failing without learning that is baffling.

 

[peemac]

The commercial lease market works well.

Rent set. 5 year reviews, Automatic right for renewal once the lease is over 4 years 9months (unless renunciation doc signed), rent review subject to mediation is not agreed between parties.

Tenant can't walk away during the term unless they pass it on to another party. Similarly LL can't end the tenancy - but can sell without affecting the tenant's rights/term

Under 4 years and 9 months the rent is set for the term of the lease which can be agreed between both parties.

Its simple. It works. Suits both small landlords and large institutions


Surely a potential template for the housing market?

 

[TomEdison]

Commercial property is a very different market. In an economic downturn demand for commercial property falls — businesses either close, or they reduce their level of activity and require smaller premises, and this brings rents down (and makes for lots of vacant properties). But there's no similar correction mechanism for residential accommation, demand for which is a function of population size but not economic activity.

Because commercial property rents are more volatile, you won't get a 90% mortgage to purchase commercial property, so the financing model for commercial property is also very different from the financing model for rental property, relying a lot more on equity participation and a lot less on lending. Which means that the owners of commercial property aren't subject to the same cashflow problems if interest rates go up that the owners of residential property are.

Tl;dr: they both involve bricks and mortar but, beyond that, these markets have little in common, so mechanisms that work well in one of them will not necessarily be suitable for the other.

 

[Premos]

It's widely reported problem.

To be honest, in terms of rentals, I would take widely reported with a pinch of salt.
The regulations are there. If they are not respected or controlled, how can one expect new regulations to be enforced? LLs who use this excuse break 2 rules as they should not be able to increase the rent either in theory.
Surely they would have no issue breaking most of the other rules.

 

[Bronte]

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It astonishes me that no landlord has taken a legal challenge against RPZs which were introduced as an emergency measure and have been extended numerous times since then. They are not going to be lifted for one category of landlords and retained for others. How could this survive a legal challenge? But will anyone be brave enough to take one?

The reason is very simple. We are not stupid. There is no guarantee going legal gives us a 'win' . What small individual is going to take on the government and go to court. The state has a limitless purse, who can take that on. Then there is the general society view that landlords are bad and what judge will go against government policy.

The institutional landlord who have the money won't do it either. Because they have a significant tax status and won't want to rock that boat.

 

[Bronte]

But the idea is interesting.

People are not building apartments because of rent controls.

But if they are told that there won't be rent controls, then it's much more attractive to build.

But Sinn Féin could well be in the next government and what is to stop them from reintroducing them for those previously exempt?

I certainly would not build to let with Irish politicians' record of messing up the market.

It's not interesting. It's more of the same. With the creation of even more different categories of landlord and categories of tenancy. With no certainty it will be all pulled the minute there is a change of government.

Every single time the government has interfered in the rental market it only creates problems and doesn't increase supply.

This is more can kicking, discussions, kit flying.

You're right on the money here though:

I certainly would not build to let with Irish politicians' record of messing up the market.

Except some people will do it anyway. (more anon)

 

[Bronte]

Me too.

There are some extremely low rents out there where someone rented at the bottom of the market / got a deal just to have someone in the property. The landlord never upped the rent so by the time RPZ were introduced rent was already well below market.

The government basically sets rent based on that arbitrary value for the foreseeable future not just to protect the tenant (which has some merit tbf). but for any future tenant who may want to rent. For apartments that may be more suited as rentals they pretty much set the value of the apartment as an investment.

I am relatively left leaning but that’s a lot of state involvement.

I think a fair balance would be rent increases linked to inflation for say 5 years. It gives a renter a level of certainty. After 5 years rents can be set again and the renter gets 5 more years of certainty. New tenants don’t carry over restrictions.

There is another solution for us landlords. We wait out the two years (my case) we sell (my case) we get the tenants out (my case). And I know of others doing the same.

 

[Bronte]

Even if you could it sounds like the yield might be marginal and so you should be selling anyway as it's probably not a good investment?

It's not as simple as that. It's exceedingly difficult to get tenants out. And that's even if you go to the RTB and get an order. Even going to the RTB does not mean you will mean. On the advice of the IPOA I took RTB cases against myself - on the validity of the notice of termination - won one, lost one as I was on holiday and the other I lost as it was the first one and I was naive. All three were exactly the same and all three decisions were different. This of course takes a lot of perseverance, time, frustration, bureaucracy. It's mind boggling complicated. And if you go further, my sibling’s case, and you get a confirmation from the RTB that the tenant must quit, you've a worthless Determination Order that you now have to financially yourself go to court to get the tenant out.

One tenant I got out was when I sent him a solicitors letter. He was on HAP had purchased land, build a business illegally, plus a house on the side and didn't want that exposed by going to court.

(In case anyone has an issue with anything I'm saying I can back up everything in writing, including that same tenant trying to buy the house of me, I have his three folio numbers, I visited his illegal business (still operating) and he brought me in for a cup of tea in the house on the side. Plus he was selling two properties abroad to fund the purchase.)

 

[Bronte]

Serve notice that you want property for your own use.

I advise caution and doing everything by the book. The RTB has extensive powers and financial punishments. I got tenants out by putting a property up for sale, then changed my mind and didn't sell. All legit. That property is now being renovated, two years up, and am approved for the grant.

One property I sold the next landlord waiting the two years, is now going to do major renovations and I met him recently to help him with the application and how to do it. He was in turn helpful to me by showing me some flats he's rented and giving us ideas.

 

[faketales]

I really do not understand this concept that houses/apartments are not being developed and built because of rent controls.

As if the only option out there for developers and builders was to supply for the needs of landlords?

There is a huge underbelly of owner-occupiers trying to get a foot hold into accommodation also. They seem to have been side-lined in recent times, or at least that is my impression.

This change by the government is due to a major slow down in investment in apartments.

Apartments are expensive to build and need a lot of investment. You can build 10, sell them to fund the next phase and so on.

The cost of building them doesn’t make them very attractive to sell for owner occupants. Irish people value houses, gardens over city centre living a lot if the time. It’s also far easier to sell 100 units to one rental company in one go that sell 100 units separately over time. Often the sales are made before the development starts and are the only reason it goes ahead.

The companies that invest in the companies buying the rentals are just looking for a return. It’s simply an asset with an income to them. Usually to fund pensions etc. restrictions on how much they can increase rents will cut into that return and see margins drop over time. This doesn’t make it a very good investment. And some money goes elsewhere. It might not even go to housing in a different country.

 

[Bronte]

They don't only build apartments to rent. It's the costs to build that's causing the issue. Rents are contributing factor I'll concede.

I think everyone can see the govt just keeping the housing and construction just limping along on life support of new investment without actually fixing anything. Always kicking the can down the road.

I exited it a few years back. But I would go back to rentals if the opportunity arose again. Hard to get the same passive income any other way.

Crazy in a decades long housing crisis it's the govt policies making landlords live the market.

We've had the same issue. What to do with the money when we exited. Searched for the last few years but nothing made sense to buy (top price so you'd have no capital appreciation) or not making sense to buy and renovate (because the renovations costs are unreal). So I'm renovating with the grant but crucially I don't have the acquisition cost and we'll go back to top market rents in an RPZ. Otherwise it makes no sense. And there is plenty of vacant property out there that could be rentals but financially if it doesn't 'make sense nobody will do it.

 

[Bronte]

I really do not understand this concept that houses/apartments are not being developed and built because of rent controls.

As if the only option out there for developers and builders was to supply for the needs of landlords?

There is a huge underbelly of owner-occupiers trying to get a foot hold into accommodation also. They seem to have been side-lined in recent times, or at least that is my impression.

What am I missing?

Landlords do not build homes. They compete with the rest of the civilian population (the non-landlord part) for ownership of limited housing stock suitable for sustainable community development. Ergo, putting pressure on the price of housing.

There are two markets. The rental market and the owner occupier. But within that you have the following issues

- The rent controls prevent the small investor from purchasing, leaving vacant stock
- The tax incentives are for the Reit's/big institutional investors, they want large apartment blocks, they charge the biggest rents
- The costs of building is so high it's hard for developers to justify building housing estates unless prices are sky high
- The government does not want to build social housing (which is badly badly needed)
- The charity sector is doing the governments work on social housing, they buy the land, the government pays for the building, leaving ownership in the charity, and the charity rents to the government so the government is paying for everything and owning nothing. And even with all that government largesse some of them are in financial difficulty (Peter McVerry Trust) In addition charities don't have the same planning rules, they can put more housing on a site than others, just by virtue of their charity status.
- The RPZ's has made small landlords exit the market, some of those are being bought by owner occupiers, but you're reducing your landlords

 

[Bronte]

The continental model.

There are some incorrect assumptions posted on this market. In general you might have a set number of years in a lease, but that doesn't mean it's only for that term, or indeed that you are tied in for the term. Instead you sign a lease and you can get out of it , with a financial penalty, I'm in the second year of such a lease, and I rented when we moved abroad initially. Basically you have security of tenure. It's exceedingly difficult to evict you. But you are not encouraged to move either, with the financial penalties in the beginning. In addition we get a properly indexed annual increase in rent. So people will rent for very long period of time. Unlike the Irish model the idea is a stable strong rental market. Not the rent for a few years to then buy Irish idea. It means the housing stock is good. And also most rentals are unfurnished. You make the place your home, but you have very onerous tenancy obligations. Which will be enforced. It creates respect. On both sides.

Germany messed up it's market with rent controls. I met a lady recently on holiday whose son living in Thailand would not rent out his Berlin apartment due to rent controls.