# Negative Equity PPR owners becoming “Reluctant Landlords”



## FTBtracker (25 Jan 2012)

Job Mobility is discouraged, by current property legislation for those in negative equity.

There are thousands of people in negative equity and I do not believe that the issues we face have been adequately addressed by government to date.

The Tax legislation around landlords was designed more for landlords owning multiple properties and written during the boom years for those with “property empires”.
It has not been written to address the current climate of the negative equity mortgage holders that are left in “Limbo-land”, can’t move and are forced to rent their PPR. 

Under current legislation if I take a new job in another county and rent my PPR, I have to give up my MIR, pay NPPR, pay tax on any rent above 75% of my mortgage interest & pay PRTB.
The Tax system on landlords is so unfavourable it is almost more financially beneficial for me to not take the new job, stay in my PPR, keep my MIR and sign on the dole.
This legislation being applicable for 2004 onwards First Time Buyers need urgently addressed, if the younger income earners are going to maintain any mobility in a diverse economy.
Unfortunately, I don’t believe it is on many TD’s radars, as the bulk are not likely in negative equity yet. 
I am interested to hear from other property owners who are is negative equity, can’t sell, need to move and have to rent out their Primarily Principal Residence. 
In effect becoming part of the growing “Reluctant Landlord Sector”.

Rob


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## Brendan Burgess (25 Jan 2012)

I agree with the general thrust of your argument and I have argued elsewhere that reluctant landlords should be treated differently from professional landlords. 

However, I don't agree with this



> I have to give up my MIR, ....pay tax on any rent above 75% of my mortgage interes


Being allowed to deduct 75% of the interest from the rent for tax purposes is  hugely attractive. That is far better than MIR. You can have one but not the other. 

I would suggest that reluctant landlords be treated as follows for the first 5 years. This would be terminated when the market returns to normality.

1) They continue to get MIR 
2) They can deduct rent paid from rent received for tax purposes. In other words if they pay €10,000 in rent and receive €10,000 in rent, they pay the same tax as they would have 
3) They don't have to register with the PRTB but would be subject to their "obmudsman" role in the event of a dispute.
4) Exempt from NPPR

Strict conditions to be agred to avoid abuse by professional landlords e.g. 
The participant must own only one home.


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## T McGibney (25 Jan 2012)

The rental income tax system is far too complicated as it is, without adding another layer of complexity, and then a further layer of 'strict conditions' to combat real or imagined 'abuses'. 

If certain legislation is deemed to be excessively onerous on taxpayers it makes sense to reform it accordingly. The alternative notion of keeping it, but exempting 'deserving cases' (as defined by politicians and civil servants), frankly stinks.


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## ClubMan (25 Jan 2012)

FTBtracker said:


> The Tax legislation around landlords was designed more for landlords owning multiple properties and written during the boom years for those with “property empires”.





> The Tax system on landlords is so unfavourable it is almost more financially beneficial for me to not take the new job, stay in my PPR, keep my MIR and sign on the dole.


Both of these points are highly debatable and I am skeptical about these assertions being necessarily true in the general case. In particular the second one really depends on how the numbers crunch down - e.g. rental property figures, job remuneration and benefits, dole payments - and I doubt that such a blanket statement holds up.


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## T McGibney (25 Jan 2012)

ClubMan said:


> Both of these points are highly debatable and I am skeptical about these assertions being necessarily true in the general case. In particular the second one really depends on how the numbers crunch down - e.g. rental property figures, job remuneration and benefits, dole payments - and I doubt that such a blanket statement holds up.



If this is a case where the owner risks losing a tracker mortgage or paying heavily surcharged interest for the 'privilege' of renting their property, I don't think their assertion would necessarily be that far-fetched.


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## FTBtracker (25 Jan 2012)

T McGibney said:


> If this is a case where the owner risks losing a tracker mortgage or paying heavily surcharged interest for the 'privilege' of renting their property, I don't think their assertion would necessarily be that far-fetched.



 Mr MCGibney, the FTB Tracker point is also a very valid one. Whilst my mortgage agreement does not  state specifically that to retain my tracker I must reside in my house as my PPR, many peoples FTB mortgages do state this.

For the Generation of FTB tracker holders in negative equity that need to eventually move for family or job reasons, this is a massive risk/cost to be considered.

Having to move out of the PPR on a tracker, runs the unquantifiable risk that the banks might eventually try and move you to buy to let with 1.5%+ extra  interest on the mortgage rate.
  Again this massively unclear issue under current legislation has also an adverse impact on work force mobility, employment and growth in the economy that is unquantifiable... And likely largely unnoticed by TD’s...


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## Bronte (26 Jan 2012)

FTBtracker said:


> The Tax system on landlords is so unfavourable it is almost more financially beneficial for me to not take the new job, stay in my PPR, keep my MIR and sign on the dole.


 
You won't be able to get means tested dole as they will make a calculation on the capital value of your rental property. 

"Under current legislation if I take a new job in another county and rent my PPR, I have to give up my MIR, pay NPPR, pay tax on any rent above 75% of my mortgage interest & pay PRTB."

I was one of those that did these many moons ago, but in those days you just got on with it.  So I suggest you post up the figures and see where the problems are rather than complaining about the mess you are in because that's not going to change anything.


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## SPC100 (22 Feb 2012)

I would not limit this to negative equity people.

The economy suffers when are labour force is not mobile.

Given the high percentage of our population who own their PPR (and who are in negative equity), our labour force by definition is not mobile.


We need a dynamic mobile labour force, good government put in place the things to allow our economy to grow.

I would go for the simplest change in law with the biggest bang for the buck in solving this problem.

I would support allowing owners of a single home who rent another home to subtract rent paid from rent received before calculating rental tax. I would require they abide by all other landlord regulation - to avoid adding too many complications to the existing systems.


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## elcato (22 Feb 2012)

Most of this was debated to bits already here. Despite local TD asking about this in ministers questions in the dail all that was done was the fact that they now intend to lump in PRSI next year.


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