# Landlords body: Rent controls have made matters worse



## Brendan Burgess (18 May 2022)

Report claims rent controls have backfired and worsened crisis
					

Study claims rent pressure zones have added to rent pressures




					www.irishtimes.com
				




Government measures to control rents have backfired and in many cases have led to an increase in rents, a new report has claimed.

The study by economist Jim Power suggests that Rent Pressure Zones (RPZs), introduced in 2016 to limit rent price increases, have resulted in significant “rent rigidities” and an inefficient two-tier system where the proper maintenance of rental properties is no longer economically viable.

This has prompted many smaller landlords to exit the market and to be replaced by institutional landlords with new stock at higher rents.

A longstanding complaint against the RPZ system is that new rental properties or tenancies are excluded from the restrictions and can be put on the market at any rent.

“The real losers are tenants at the lower end of the market,” Mr Power said

Market​The report, commissioned by the Institute of Professional Auctioneers and Valuers (IPAV) and the Irish Property Owners Association (IPOA), concludes that the Irish rental market is not functioning in an effective manner and that RPZs are undermining the market and not achieving what they are intended to achieve.


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## Rasputin (18 May 2022)

On an aside, I never increased rents prior to the introduction of the RPZ system, but the way this policy works, you are almost forced into it.  I wouldn't say I am unique in increasing rents after the introduction of RPZ where I never did before.  I am in the process of getting out of the game and selling up as I have no clue what's next, but am pretty sure it will make things a lot more difficult for me. Every time they tinker in the housing market, it seems to make things worse as they just come up with short term soundbite policies to react to the loudest narrative at the time, and don't have a vision of what a functioning housing system should look like or even what they really need to achieve.


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## Firefly (18 May 2022)

I think RPZ are a terrible idea and think repeated government intervention in the housing market has made things worse. However I'm not sure I agree with this:

_"In his report, Mr Power suggests that the majority of landlords exiting the market are those that in the past charged rents that were less than market rates and are now only able to minimally increase rent on their properties because they are subject to RPZ rules."_

I would have thought landlords who were renting their properties at rents that were less than market rates would have been happy with the 4% RPZ limit. Also, we know that a lot of landlords were leaving the market before the recent increase in inflation, so their costs hadn't gone up that much either.


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## Leo (18 May 2022)

Firefly said:


> I would have thought landlords who were renting their properties at rents that were less than market rates would have been happy with the 4% RPZ limit.


But if they weren't raising rents prior to the introduction of the controls, I doubt the imposition of restrictions and potential penalties would encourage them to start doing so.


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## Dermot (18 May 2022)

The maximum increase in an RPZ zone is 2%, not 4 %


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## Firefly (18 May 2022)

Leo said:


> But if they weren't raising rents prior to the introduction of the controls, I doubt the imposition of restrictions and potential penalties would encourage them to start doing so.


I think I get what you mean, but if they weren't increasing the rents anyway and keeping them below market rates, then I'm not sure limiting the increase to 4% initially and then 2% makes any difference to them?


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## Sarenco (18 May 2022)

Firefly said:


> I would have thought landlords who were renting their properties at rents that were less than market rates would have been happy with the 4% RPZ limit


There was a two-year freeze on increasing rents immediately prior to the introduction of the RPZ regime.  Market rents rose very substantially during that two-year period so a lot of landlords got stuck renting at 20-30% discounts to market levels.

With rapidly rising maintenance and other costs and no ability to raise rents (beyond 2% pa), a lot of these rentals are no longer economically viable as a long-term investment.

It is axiomatic that, over time, rent controls reduce the quantity and quality of available rental properties.  It was entirely predicable that the RPZ regime would exacerbate our housing crisis.


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## 7 of 9 (18 May 2022)

Firefly said:


> I would have thought landlords who were renting their properties at rents that were less than market rates would have been happy with the 4% RPZ limit. Also, we know that a lot of landlords were leaving the market before the recent increase in inflation, so their costs hadn't gone up that much either


I have an excellent tenant, who repairs everything themselves and keeps the house in perfect condition. It's now 50%  of the market rate. It's making very little profit but takes no effort on my part. If they leave I plan to sell. I would not pass this discount onto another tenant.


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## NoRegretsCoyote (18 May 2022)

Sarenco said:


> There was a two-year freeze on increasing rents immediately prior to the introduction of the RPZ regime.


Market-wide RPZs should always have been a temporary measure, maximum three years.

After that some kind of pragmatic approach at property level should have been brought in. Rents in payment should not be allowed to remain untethered from market rents forever, but landlords should be capped at closing more than a third of the gap a year, or 5%, whichever is higher. That would strike the right balance between consumer protection and respect of landlords' legitimate property rights.

The current situation where landlords are basically stuck below market rents in perpetuity is not just, and not very different from laws that were struck down by the Supreme Court in the early 1980s.


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## PebbleBeach2020 (18 May 2022)

Firefly said:


> I think I get what you mean, but if they weren't increasing the rents anyway and keeping them below market rates, then I'm not sure limiting the increase to 4% initially and then 2% makes any difference to them?


It does if they were and are charging anything from 25-50% under the market rent. I know landlords who wouldn't charge market rent but would be happy to bring up rents at a more meaningful rate. 

The alternative is they sell up and rental pool is reduced further. Thus is what's happening. And SF are becoming more and more popular by spooking landlords with their threats about what they'd do if they were in government etc.


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## PebbleBeach2020 (18 May 2022)

NoRegretsCoyote said:


> Market-wide RPZs should always have been a temporary measure, maximum three years.
> 
> After that some kind of pragmatic approach at property level should have been brought in. Rents in payment should not be allowed to remain untethered from market rents forever, but landlords should capped at closing more than a third of the gap a year, or 5%, whichever is higher. That would strike the right balance between consumer protection and respect of landlords' legitimate property rights.
> 
> The current situation where landlords are basically stuck below market rents in perpetuity is not just, and not very different from laws that were struck down by the Supreme Court in the early 1980s.


I must say that this is the one of the most intelligent, logical and sensible summaries that would go a long way to halting the slide of landlords exiting the marketplace and perhaps also attracting new landlords and investors into the sector.


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## Firefly (19 May 2022)

Sarenco said:


> There was a two-year freeze on increasing rents immediately prior to the introduction of the RPZ regime.  Market rents rose very substantially during that two-year period so a lot of landlords got stuck renting at 20-30% discounts to market levels.


I agree with that, and I wouldn't blame a landlord being bitter about this. But would that cause the majority of them to leave the market? After all they were renting below the market rate at a rent they were happy with. Also, as rents have soared, the tenants they were happy with would be much less likely to leave.


Sarenco said:


> With rapidly rising maintenance and other costs and no ability to raise rents (beyond 2% pa), a lot of these rentals are no longer economically viable as a long-term investment.


If by referring to "the rapidly rising maintenance and other costs" you mean inflation, then this is only very recent and landlords were leaving before this. 


Sarenco said:


> It is axiomatic that, over time, rent controls reduce the quantity and quality of available rental properties.  It was entirely predicable that the RPZ regime would exacerbate our housing crisis.


I agree completely. I think rent controls have made the situation a lot worse and have been a factor in landlords leaving and as importantly preventing landlords entering the market. I am just questioning Mr Power suggesting "that the _majority _of landlords exiting the market are those who in the past charged rents  that were less than market rates and are now only able to minimally increase rent on their properties because they are subject to RPZ rules".

I certainly think RPZ is a factor, but there are others such as the pro-tenant RTB and the associated long delays / cost when it comes to dealing with tenants who don't pay. Property prices have risen substantially also, giving landlords the ability to exit this unattractive market.


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## Firefly (19 May 2022)

NoRegretsCoyote said:


> The current situation where landlords are basically stuck below market rents in perpetuity is not just, and not very different from laws that were struck down by the Supreme Court in the early 1980s.


Such landlords have zero incentive to upkeep their properties too, unless they do a massive job thereby allowing them to increase the rent.


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## Firefly (19 May 2022)

PebbleBeach2020 said:


> It does if they were and are charging anything from 25-50% under the market rent. I know landlords who wouldn't charge market rent but would be happy to bring up rents at a more meaningful rate.


I think landlords should be able to charge whatever the market can afford. I am just questioning that "the _majority _of landlords exiting the market are those who in the past charged rents that were less than market rates and are now only able to minimally increase rent on their properties because they are subject to RPZ rules".


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## NoRegretsCoyote (19 May 2022)

PebbleBeach2020 said:


> I must say that this is the one of the most intelligent, logical and sensible summaries that would go a long way to halting the slide of landlords exiting the marketplace and perhaps also attracting new landlords and investors into the sector.


The situation that pertained circa 2015 was bad for everyone *because tenants and landlords alike had poor rights.* Tenants could be turfed out too easily, too quickly, and were vulnerable to high rent increases. Landlords had poor rights as it was long and arduous to remove a difficult tenant.

Tenants' rights have been strengthened a lot since then, too far in some regards, but very much in the right direction.

Landlord's right have not been strengthened at all, and weakened in a lot of others.


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## Leo (19 May 2022)

Firefly said:


> I think I get what you mean, but if they weren't increasing the rents anyway and keeping them below market rates, then I'm not sure limiting the increase to 4% initially and then 2% makes any difference to them?


Prior to the imposition of the limits they were free to reset rent when the tenants moved on as most do. It also may affect the value of the property, more so of course if the property is in a high-demand rental area.


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## Firefly (19 May 2022)

Leo said:


> Prior to the imposition of the limits they were free to reset rent when the tenants moved on as most do.


I agree, but I suppose with the big jump in rent a lot of tenants would have stayed put (unless buying a house themselves etc)



Leo said:


> It also may affect the value of the property, more so of course if the property is in a high-demand rental area.


I agree


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## Leo (19 May 2022)

Firefly said:


> I agree, but I suppose with the big jump in rent a lot of tenants would have stayed put (unless buying a house themselves etc)


Yeah, I was thinking more of the typical pattern here where people starting out working rent for a few years prior to purchasing, but the numbers of those renting longer term does seem to be increasing.


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## NoRegretsCoyote (19 May 2022)

Leo said:


> Prior to the imposition of the limits they were free to reset rent when the tenants moved on as most do.


I think there was a kind of anti-abuse logic here to the prohibition on returning to market rents even when tenants had voluntarily left. The fear was that landlords would "trick" tenants on low rents into moving out, and then reset to a higher rent with a new tenant.

To me it's a complete duplication now that grounds for termination by landlord have been so restricted anyway, and are reasonably well enforced by the RTB.

As we all know the main impact is to make landlords leave the market.


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## Firefly (19 May 2022)

NoRegretsCoyote said:


> To me it's a complete duplication now that grounds for termination by landlord have been so restricted anyway, and are reasonably well enforced by the RTB.
> 
> As we all know the main impact is to make landlords leave the market.


Yip, and prevent new landlords entering the market.


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## dereko1969 (19 May 2022)

Brendan Burgess said:


> Report claims rent controls have backfired and worsened crisis
> 
> 
> Study claims rent pressure zones have added to rent pressures
> ...


In other news the Turkey Rights Association has commissioned a report that concludes that Christmas is a bad idea!


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## T McGibney (19 May 2022)

Comparing a rental crisis (or an unfolding disaster if you're at the receiving end of it) to Christmas is a new one.


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## Purple (19 May 2022)

7 of 9 said:


> I have an excellent tenant, who repairs everything themselves and keeps the house in perfect condition. It's now 50%  of the market rate. It's making very little profit but takes no effort on my part. If they leave I plan to sell. I would not pass this discount onto another tenant.


Are you my Landlord? He reduced the rent by €100 a month about 5 years ago, without being asked, and hasn't increased it since. I look after everything in the house.


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## Purple (19 May 2022)

Small Landlords are leaving the market because;

They never wanted to be landlords but were stuck in negative equity and are now quid's-in and are now taking their capital gain.
They hate being landlords as it's a hassle and are now taking their capital gain.
They aren't making any money due to rent controls, their tax treatment and high costs.
They have been burned by bad tenants which are next to impossible to evict.
They fear the Shinners and the utterly crazy policies they say they will implement in government.
They have retired with a big bloated pension and big bloated real estate portfolio due to the insane money printing that's been going on over the last decade or so and now like pigs in muck.


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## Paul O Mahoney (19 May 2022)

Purple said:


> Small Landlords are leaving the market because;
> 
> 
> They have retired with a big bloated pension and big bloated real estate portfolio due to the insane money printing that's been going on over the last decade or so and now like pigs in muck.


I've taken out the previous points to focus on this, it literally contradicts your previous points.

Small landlords don't have a " big bloated real estate portfolio " the clue is in the word " small ".

We have 2 properties........and they were our PPrs the first one we kept by choice in 2005 and we viewed this as a prudent investment and something for the children....the other we tried selling for over 2 years but would have lost €250k at least on the banks " valuations"that they extended finance......we rented it out and thankfully we will probably wipe its face now....and will still attract tax

I doubt if any " small landlords " a term I find unintelligent , as it isn't correct, as for " pigs in muck"?.

As one of those pigs, the muck us dry.


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## bipped (20 May 2022)

Purple said:


> Small Landlords are leaving the market because;
> 
> They never wanted to be landlords but were stuck in negative equity and are now quid's-in and are now taking their capital gain.
> They hate being landlords as it's a hassle and are now taking their capital gain.
> ...



Small landlords are also leaving because of constant changes to legislation affecting the rental market, it is impossible to keep up with. There is no other sector that has had as many changes to the rules and regulations in the space of five years as the rental market. Small landlords are scared of doing something wrong and ending up with huge fines or being unlucky enough to have a tenant who doesn't pay rent or overholds. Then waiting for years until the rtb handles the dispute. It's just easier to sell up and avoid the grief and hassle.


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## Purple (20 May 2022)

Paul O Mahoney said:


> I've taken out the previous points to focus on this, it literally contradicts your previous points.
> 
> Small landlords don't have a " big bloated real estate portfolio " the clue is in the word " small ".
> 
> ...


There are many landlords in your position but there are also plenty with 2-3 properties who now find themselves facing retirement with a decent pension (thanks for QE) and €1.5-€2 million worth of property (also thanks to QE). The muck is wet and warm for those people and fair play to them. We don't celebrate success enough in this country.


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