NoRegretsCoyote
Registered User
- Messages
- 5,766
Ten years ago in 2012 I moved into an apartment renting at €1,500 which was market price at the time. I didn't stay too long before buying a house but if I had the landlord would probably have let the rent alone even as market rents took off in 2014 and 2015. Then rent freezes and RPZs came into effect from 2016 (and subsequently Covid freeze and then the 2% absolute limit). The precise calculations are beyond me but I think the most the landlord could have legally increased the rent under the various regimes since 2016 was about 20%, so from €1,500 to €1,800.
I still get daft alerts for the area and the odd time an apartment in the complex comes up it lets for €2,800 now, a full €1,000 above what I would be paying if I'd stayed there for the last ten years. Rent controls have their place in the short term, but there is just no good reason why existing tenants should be privileged so much over new tenants simply by virtue of having the been there for many years. The bigger question is what is the landlord supposed to do? Legally, the landlord is down a gross €12k a year, a full 35% below market rate. This is a lot of money! Prices are rising all over the economy at the moment because producers need to do so to stay in business and customers can sustain it. If coffee was fixed at 2012 prices you would find most coffee shops would just close as it wouldn't be worth it. You either have a market economy or you don't.
So for a landlord stuck 35% below market rent what are you supposed to do? If a tenant leaves the most obvious thing to do is sell up. If you want to stay a landlord ironically enough the best thing is to leave it idle for 24 months and then let it again at market rates. If there is repainting/refurbishing after a long tenancy there is going to be void time anyway (say 2 months). So you lose 22 months rent at the old rate but can let again at market rate of €1000 higher. After five years you've broken even and are re-established at the higher rate. This is a big upfront cost though with a relatively long payback time. Another option (again if you are a really committed landlord) is to sell one property and buy an identical one that hasn't been subject to rent controls and take in market rent. These are the kind of financial gymnastics a committed landlord is expected to exercise just to stay in the market. It's no wonder so many just throw up their hands and walk away.
I think @Sarenco is broadly correct that rent controls have made a bad situation worse. I think the tax question is still a bigger factor, there is just a lot more tax on income and capital gains than there was 15 years ago. Added to that there is a huge cohort of landlords leaving at the moment. This is the 2002-2008 accidental landlord cohort which is not out of negative equity and can get rid of the albatross around its neck. The other is is professional landlords who bought 2011-2014, held for seven years and can avail of a full CGT exemption. Why would these latter landlords stay in the game stuck well below market rents with a capital gains tax shelter being eroded year on year?
In any case landlords will always be selling and a bigger issue is why so few are buying. For me the tax treatment compared to pension assets is a huge difference, particularly the CGT exemption. Something like the German system where there is no CGT payable if a landlord buys and lets for at least ten years would be a very good idea in the Irish context and I think would tempt some landlords back in.
I still get daft alerts for the area and the odd time an apartment in the complex comes up it lets for €2,800 now, a full €1,000 above what I would be paying if I'd stayed there for the last ten years. Rent controls have their place in the short term, but there is just no good reason why existing tenants should be privileged so much over new tenants simply by virtue of having the been there for many years. The bigger question is what is the landlord supposed to do? Legally, the landlord is down a gross €12k a year, a full 35% below market rate. This is a lot of money! Prices are rising all over the economy at the moment because producers need to do so to stay in business and customers can sustain it. If coffee was fixed at 2012 prices you would find most coffee shops would just close as it wouldn't be worth it. You either have a market economy or you don't.
So for a landlord stuck 35% below market rent what are you supposed to do? If a tenant leaves the most obvious thing to do is sell up. If you want to stay a landlord ironically enough the best thing is to leave it idle for 24 months and then let it again at market rates. If there is repainting/refurbishing after a long tenancy there is going to be void time anyway (say 2 months). So you lose 22 months rent at the old rate but can let again at market rate of €1000 higher. After five years you've broken even and are re-established at the higher rate. This is a big upfront cost though with a relatively long payback time. Another option (again if you are a really committed landlord) is to sell one property and buy an identical one that hasn't been subject to rent controls and take in market rent. These are the kind of financial gymnastics a committed landlord is expected to exercise just to stay in the market. It's no wonder so many just throw up their hands and walk away.
I think @Sarenco is broadly correct that rent controls have made a bad situation worse. I think the tax question is still a bigger factor, there is just a lot more tax on income and capital gains than there was 15 years ago. Added to that there is a huge cohort of landlords leaving at the moment. This is the 2002-2008 accidental landlord cohort which is not out of negative equity and can get rid of the albatross around its neck. The other is is professional landlords who bought 2011-2014, held for seven years and can avail of a full CGT exemption. Why would these latter landlords stay in the game stuck well below market rents with a capital gains tax shelter being eroded year on year?
In any case landlords will always be selling and a bigger issue is why so few are buying. For me the tax treatment compared to pension assets is a huge difference, particularly the CGT exemption. Something like the German system where there is no CGT payable if a landlord buys and lets for at least ten years would be a very good idea in the Irish context and I think would tempt some landlords back in.
There is no evidence that this is behind a material number of notifications to quit. Many landlords don't even know of the existence of this provision.
