"Rents are at a record high – so why are private landlords selling up?"

[PebbleBeach2020]

I think this upcoming Budget is critical for the government to act to entice/reward/attract landlords to remain in and invest in the rental sector.

I think the crucial issues are:

1) taxation is too highly and unfairly punished mom-and-pop landlords with taxation rates of 52%. A flate rate at 35-40% would make a difference and stop pushing existing people over the edge.
2) properties below market rent and I mean way below market rent, need to be afforded some facility to bring the rents up. I would imagine that the landlord leaving the market are ones charging much lower than the average/headline rents in Ireland and due to being punished and limited to 2% increases year-on-year. Its for this reason, that new properties coming onto the market are charging/quoting far in excess of market rent because they are conscious of not being able to increase more than 2% a year going forward. I see 3/4 bed semis renting for 2500 euro in Cork when these should be 1500 max. If you have an existing landlord with rent of 1300euro a month who didn't increase rent for years due to a good tenant, that tenant now leaves, the landlord is likely/encouraged/motivated to sell up a property, and if they want, go in and buy a new property. The exit and entry costs would be covered within 12-18 months from the higher rent.
3) ability of landlord getting back vacant possession (stop threatening them that this shouldn't be allowed). And if a tenant stops payment of rent, the RTB should be siding with the landlord and not the tenant. If a tenant stops paying rent, it shouldnt take the guts of 2 years to get them out of the property. In many cases, they walk away scott free and never repay the outstanding rent. If they cause damage etc, there are no consequences either. This is just wrong and again, it's encouraging landlords, good landlords, to leave the market.

All the fannying about the edges with small changes. Do the above and you will entice landlords to remain and christ, maybe start attracting mom-and-pop landlords back into the market. Ireland are a nation of house owners, with a history of investment in property, so we should be doing better if the environment permits it. The government should be facilitating investment not discouraging it. All parties are part of the solution. It isn't one side the problem.

 

[Groucho]

I agree with all of the above - but I cannot see our floundering, invertebrate government having the cojones to take such steps as the howls of outrage from both the opposition and the homelessness industry would be heard as far away as Mongolia.

 

[NoRegretsCoyote]

For me anyway the seven-year period has just completed and I am considering selling this particular property I bought seven years ago.

Exactly. As less and less of the paper gain is sheltered from CGT it acts like a de facto tax.

If you made a €100k profit over 7 years you can sell it now CGT-free and pocket the full gain.

But in three years only 30% of the gain is sheltered. So 3/10*33%*€100k=€10k in CGT. That's a big chunk (if not all) of your rental profit for the period.

 

[lff12]

Just to back up my point about there being no new landlords (outside of institutional funds which tbh are grossly exaggerated in terms of size and impact). Going by Michael Byrne's Week in Housing weekly newsletter the figure for buy to let lending is now currently 1.4% of mortgages whereas in 2006 it was 19.9%. Yes there is cash buyers (including councils) but these surely include owner occupiers and those buying-to-knock rather than BTL.

 

[Sarenco]

A flate rate at 35-40% would make a difference and stop pushing existing people over the edge.

A flat rate of that order would be a disaster for landlords with a low marginal tax rate (e.g. retired folk) and, IMO, would trigger a further exodus of landlords.

There are certain tweaks that could be made to the tax code (e.g. LPT should be a deductible expense, PRSI should not be levied on unearned income, etc.) but the more fundamental problem, IMO, is the regulatory framework.

If a landlord's costs (maintenance, insurance, etc.) are rising by 9%pa but rents can only be increased by 2%pa, it should be obvious that is not a viable long-term business.

Add in the ineffective regime for resolving disputes and the risks inherent in operating a property rental business are simply too high for most folks.

 

[lff12]

Is it that apartments are not financially viable or that the margin of profit is smaller than other builds?

People are willing to live in many different types of accommodation and with demand so high; market forces may be driving the building of the more valuable housing types rather than apartments.

As of 2016 census, only 30% of apartments were currently owner occupied, which helps indicate that there is an aversion towards apartment buying by FTBs in particular (I suspect there is a small downsizing contingent buying high end apartments).

I think this upcoming Budget is critical for the government to act to entice/reward/attract landlords to remain in and invest in the rental sector.

As I said - the problem is as much about there being no new landlords than old ones exiting, and their reasons for leaving might not be just about taxation - most landlords are now in their 60s and reaching an age where they wish to cash in on capital appreciation rather than wait until they are dead.

I think the crucial issues are:

1) taxation is too highly and unfairly punished mom-and-pop landlords with taxation rates of 52%. A flate rate at 35-40% would make a difference and stop pushing existing people over the edge.

Point I keep making is that this is about income tax and not rental income per se. If you have no other income and rent out 2 or more properties at under 32k per annum you'll pay the lower rate of tax.

2) properties below market rent and I mean way below market rent, need to be afforded some facility to bring the rents up. I hope imagine that the landlord leaving the market are ones charging much lower than the average/headline rents in Ireland due to been punished and limited to 2% increases year-on-year. Its for this reason, that new properties coming onto the market are charging/quoting far in excess of market rent because they are conscious of not being able to increase more than 2% a year going forward. I see 3/4 bed semis renting for 2500 euro in Cork when these should be 1500 max. If you have an existing landlord with rent of 1300euro a month who didn't increase rent for years due to a good tenant, that tenant now leaves, the landlord is likely/encouraged/rewards to sell up a property, and if they want, go in and buy a new property. The exit and entry costs would be covered within 12-18 months from the higher rent.
3) ability of landlord getting back vacant possession (stop threatening them that this shouldn't be allowed).

Are you actually suggesting that good tenants who have cared for properties over perhaps 8 or 10 years, and paid their rent on time, should now be punished with rent hikes of hundreds (or as you suggest, even a thousand euro!) just because you've enviously looked at daft and see other landlords are getting more than you are? If you want a bunch of tenants to come and tear you apart with their bare hands and put your decapitated head on a pike (along with the elected reps who enabled that), its a sure way to do so.

And if a tenant stops payment of rent, the RTB should be siding with the landlord and not the tenant. If a tenant stops paying rent, it shouldnt take the guts of 2 years to get them out of the property. In many cases, they walk away scott free and never repay the outstanding rent. If they cause damage etc, there are no consequences either. This is just wrong and again, it's encouraging landlords, good landlords, to leave the market.

I fully agree with this - but generally such tenants are evicted eventually, overholding does happen but currently we still have no fault eviction clauses where properties are being sold or reused for families (we had 2 such evictions in my tiny development here and the adult children and their families of the landlords now live there). In reality there is no legal protection where a sale is mooted or landlord wants to move in themselves, and populists are howling very loudly to remove these reasons, which I don't see current government giving in to.
The issue with tenants vanishing into the sunset leaving bills or unpaid rent is as old as the hills and long precedes PRS reforms here - I recall a bad tenant in one house I lived in leaving unpaid rent/bills of 1700 pounds behind as far back as 2001.

All the fannying about the edges with small changes. Do the above and you will entice landlords to remain and christ, maybe start attracting mom-and-pop landlords back into the market. Ireland are a nation of house owners, with a history of investment in property, so we should be doing better if the environment permits it. The government should be facilitating investment not dicouraging it. All parties are part of the solution. It isn't one side the problem.

There is little chance that someone who is approaching retirement now and can cash in value of anything from 150k after fixed rate CGT upwards right now with the market as is, rather than drip feed in rent at marginal tax rates over say 14 years, is going to be tempted to stay. The only thing that *might* change matters is a considerable drop in property values which makes sales less palatable, or a change in upfront requirements from the banks - which currently require a 30% deposit and charge an interest rate of 4.8% typically.

 

[lff12]

A flat rate of that order would be a disaster for landlords with a low marginal tax rate (e.g. retired folk) and, IMO, would trigger a further exodus of landlords.

There are certain tweaks that could be made to the tax code (e.g. LPT should be a deductible expense, PRSI should not be levied on unearned income, etc.) but the more fundamental problem, IMO, is the regulatory framework.

If a landlord's costs (maintenance, insurance, etc.) are rising by 9%pa but rents can only be increased by 2%pa, it should be obvious that is not a viable long-term business.

Add in the ineffective regime for resolving disputes and the risks inherent in operating a property rental business are simply too high for most folks.

Since income tax is based on income why not have a separate "rental tax" based on the actual level of rent levied?
Thus - landlords charging a rental income of under 1k per month attract a lower tax rate than those who charge more than 2.5k per month?
So thus, someone who has 3 properties let at 800 per month each pays a net lower rate of tax than someone who has 1 property rented out for 2.4 per month?

 

[lff12]

I think there's another issue which is kind of an elephant in the room, but there was a "gold rush" element around property investing in the early 00s that left a lot of urban tales around with regard to debt, equity collapse, the actual reality of working as a landlord. People thought they were buying into some kind of get rich quick scheme, when the reality was that it required a lot of work people just didn't realise they would have to do, and dealing with people, in many cases difficult people. So there's been a huge backlash against the sector as a whole, worsened of course by the fact that so many people perceive the rents they pay now as being unfairly high.
I did a stint on contract in one of the foreign owned banks from 2014-2015 & recall from working with the arrears teams that more than half of their arrears cases involved BTL investors. There was a degree of hubris in the early 00s that encouraged people to not do the math with regard to property investment that has huge consequences now.

 

[PebbleBeach2020]

most landlords are now in their 60s and reaching an age where they wish to cash in on capital appreciation rather than wait until they are dead.

that's incorrect according the Residential Tenacies Board figures. Look them up for your information.

Point I keep making is that this is about income tax and not rental income per se. If you have no other income and rent out 2 or more properties at under 32k per annum you'll pay the lower rate of tax.

that would be rentals at approximately €1,300 a month. Where are these rentals at those rates? Outside the major urban centres anyway.

Are you actually suggesting that good tenants who have cared for properties over perhaps 8 or 10 years, and paid their rent on time, should now be punished with rent hikes of hundreds (or as you suggest, even a thousand euro!) just because you've enviously looked at daft and see other landlords are getting more than you are?

No i'm not. Did you read my post?! I didn't say to bring the rate upto market rent, I suggested to facilitate increases more than 2%. It's a fact, mom-and-pop landlords charge on average lower than average rents and significantly lower than market rent. This is about keeping supply up, its not about landlord milking it and screwing tenants to the wall. This is a two sided issue and it needs both sides to find the solution. If you want numbers, if you had a property rented at 1000 a month and market rent was 2000 a month, I think permitting a landlord to increase rents by 10% for a fixed number of years say 3 years instead of 2% a year, would encourage at least some of these landlords to remain in the sector. The alternative is the tenants leave the property and it's sold, likely to an owner-occupier. Yes, the rent for the current tenants will be higher. But still well below market rent. I know many landlords and they are disgusted at the market rents at the moment. They wouldn't charge anything like that. But these same people rented long term and didn't increase the rents as the tenants were good. Now they are seeing the potential value of these property being reduced as low rents can adversely affect selling price and limit interested parties to purchasing.

You seem to make out the relationship between landlords and tenants is a confrontational one and it's one or the other. I believe more can be gained through engagement and collaboration. There needs to be give on both sides and make it one for each. Not having the scales heavily biased to one side, be it tenant or landlord. That's no way to operate and continue.

 

[PebbleBeach2020]

I fully agree with this - but generally such tenants are evicted eventually, overholding does happen but currently we still have no fault eviction clauses where properties are being sold or reused for families (we had 2 such evictions in my tiny development here and the adult children and their families of the landlords now live there). In reality there is no legal protection where a sale is mooted or landlord wants to move in themselves, and populists are howling very loudly to remove these reasons, which I don't see current government giving in to.
The issue with tenants vanishing into the sunset leaving bills or unpaid rent is as old as the hills and long precedes PRS reforms here - I recall a bad tenant in one house I lived in leaving unpaid rent/bills of 1700 pounds behind as far back as 2001.

I 100% believe that a landlord should be able to regain vacant possession of their property provided they give the tenants sufficient notice of this. Whether it's for selling or moving in themselves, I don't see the differentiation. The landlords rights as owner should be respected and adhered to.

Tenants have rights but they do not extend to possession of someone elses property indefinitely. Regardless of the rightful owners financial/personal/family circumstances. The constituents of the tenants (singletons or single parent with 3 children etc) doesn't make a difference. Again, this is a two sided transaction and each sides rights need to be respected and honoured, within reason.

 

[PebbleBeach2020]

There is little chance that someone who is approaching retirement now and can cash in value of anything from 150k after fixed rate CGT upwards right now with the market as is, rather than drip feed in rent at marginal tax rates over say 14 years, is going to be tempted to stay. The only thing that *might* change matters is a considerable drop in property values which makes sales less palatable, or a change in upfront requirements from the banks - which currently require a 30% deposit and charge an interest rate of 4.8% typically.

Again, you are back to the retired/retiring landlords. These do not make up the majority of mom-and-pop landlords in Ireland. Yes, if government can retain them in the sector, then excellent. They will contribute to the solution. But the majority should not be penalised and not enticed/rewarded/incentivised to remain in the sector for fear of upsetting the retirees and soon to be retired persons.

 

[lff12]

Again, you are back to the retired/retiring landlords. These do not make up the majority of mom-and-pop landlords in Ireland. Yes, if government can retain them in the sector, then excellent. They will contribute to the solution. But the majority should not be penalised and not enticed/rewarded/incentivised to remain in the sector for fear of upsetting the retirees and soon to be retired person.

from CSO
Age breakdowns are - 0-29, 30-44, 45-64 and over 65. You can be fairly sure that the 45-64 category is weighted heavily at the upper end.

Statistic	Rental Year	Age Group	Landlord Tenancy Size	Unit	Value
Percentage RTB Landlords	2017	65 years and over	All Landlords	%	16.4
Percentage RTB Landlords	2018	65 years and over	All Landlords	%	17.7
Percentage RTB Landlords	2019	65 years and over	All Landlords	%	19.0
Percentage RTB Landlords	2020	65 years and over	All Landlords	%	20.4
Percentage RTB Landlords	2021	65 years and over	All Landlords	%	22.0

 

[Sarenco]

So to suit retired folds who are landlords, we should keep a tax rate of 52% on rental income for all working landlords. That's a strange logic.

There are plenty of landlords that pay tax on their rental profits at an effective rate of far less than 52%.

For example, a single 66 year-old taxpayer with rental profits of €12,500 and no other income would pay precisely zero in tax.

If that person had €25,000 in total income, including rental profits, they would pay a grand total of €1,767 in tax - an effective rate of just over 7%.

Your proposal for a flat tax rate of 42% on all rental profits would be a disaster for taxpayers in those circumstances and would be grossly unfair.

 

[NoRegretsCoyote]

For example, a single 66 year-old taxpayer with rental profits of €12,500 and no other income would pay precisely zero in tax.

Your proposal for a flat tax rate of 42% on all rental profits would be a disaster for taxpayers in those circumstances and would be grossly unfair.

Why is it so unfair to tax the same activity in broadly similar ways? LPT is like that, so is VAT. There are many unfairnesses built into how rental income is treated such as the approach to resident and non-resident landlords.

I am all in favour of taxing people on their income when it is a return on their effort like going to work every day. But being a landlord is largely a return on your capital, not your effort, and should be taxed as such. A flat 1% LPT on all occupied rental property would be extremely simple to administer and understand. It would create the right incentives for getting into the sector and staying in it.

 

[Purple]

I am all in favour of taxing people on their income when it is a return on their effort like going to work every day. But being a landlord is largely a return on your capital, not your effort, and should be taxed as such.

Can you clarify that please? Are you in favour of higher taxes on work and lower taxes on return on capital or vice versa?

 

[PebbleBeach2020]

from CSO
Age breakdowns are - 0-29, 30-44, 45-64 and over 65. You can be fairly sure that the 45-64 category is weighted heavily at the upper end.

Statistic	Rental Year	Age Group	Landlord Tenancy Size	Unit	Value
Percentage RTB Landlords	2017	65 years and over	All Landlords	%	16.4
Percentage RTB Landlords	2018	65 years and over	All Landlords	%	17.7
Percentage RTB Landlords	2019	65 years and over	All Landlords	%	19.0
Percentage RTB Landlords	2020	65 years and over	All Landlords	%	20.4
Percentage RTB Landlords	2021	65 years and over	All Landlords	%	22.0

so 78% of landlords are (in all likelihood) paying the top rate of tax. You have validated my point against your argument so. The government shouldn't be in fear of upsetting these 22% by incentivising and enticing the remaining 78% of landlords to remain and/or invest further in the rental sector. The 22% of landlords who are retirees may have other income such as pensions (state and private) and also be paying tax at the higher rate (albeit with reduced prsi and usc) but it would still benefit some of them.

 

[PebbleBeach2020]

from CSO
You can be fairly sure that the 45-64 category is weighted heavily at the upper end.

Statistic	Rental Year	Age Group	Landlord Tenancy Size	Unit	Value
Percentage RTB Landlords	2017	65 years and over	All Landlords	%	16.4
Percentage RTB Landlords	2018	65 years and over	All Landlords	%	17.7
Percentage RTB Landlords	2019	65 years and over	All Landlords	%	19.0
Percentage RTB Landlords	2020	65 years and over	All Landlords	%	20.4
Percentage RTB Landlords	2021	65 years and over	All Landlords	%	22.0

How can you be "fairly sure"? You can't use your opinion as fact.

 

[NoRegretsCoyote]

How can you be "fairly sure"? You can't use your opinion as fact.

I'm fairly sure that Revenue research from a few years ago showed that (on average) about a third of rental income was paid over in tax.

That suggests a mix of people paying zero from right up to the top marginal rate.

 

[PebbleBeach2020]

For example, a single 66 year-old taxpayer with rental profits of €12,500 and no other income would pay precisely zero in tax.

If that person had €25,000 in total income, including rental profits, they would pay a grand total of €1,767 in tax - an effective rate of just over 7%.

Your proposal for a flat tax rate of 42% on all rental profits would be a disaster for taxpayers in those circumstances and would be grossly unfair.

you are focusing in on a retired person only. Just 22% of the landlords in Ireland in 2021.

it's not tax on rental profits either, it's tax on rental income that's charged (after allowable expenses are removed). There is a big BIG difference.

A flat rate I'm suggesting at doing something meaningful for the majority of landlords in Ireland. You example of a 66 year old singleton with absolutely no income other than a property rented for €1,041 a month, is far from the majority and more likely to be a frequency of less than 50 (I'm being generous with that arbitrary number I'm thinking too!!!)

If someone is paying 20% tax on rental income then I think they are getting a pretty good deal from government in terms of that. I would rather see government resources being directed to the majority of landlords aged under 65, working/earinng in full-time employment, who are being taxed upto 52% on rental income. I think a 10% reduction or more in this would have a major impact on peoples decision to sell or remain.

It's not so long ago the government decided overnight to make rental income liable to PRSI and USC. So the effective tax went from 40% to 52%. To pay this tax, landlords had to increase rents 24% just to maintain their current income. This was neither fair on tenants or landlords, yet the only winners were the government in terms of extra taxation revenue. The only losers were tenants, in terms of higher rents. And the only ones who got the blame and nothing else was the landlords.

 

[PebbleBeach2020]

I'm fairly sure that Revenue research from a few years ago showed that (on average) about a third of rental income was paid over in tax.

That suggests a mix of people paying zero from right up to the top marginal rate.

how many years ago was that? Prior to Revenue making rental income liable to PRSI and USC? Any link to same please?

The median would be a much better and informative insight than the mean. If you had six landlords and four were paying tax at the top rate of 52% and twowas paying no tax, the average would be 34.6%. However, the median would be 52%. The median is a lot more representation of a population than a mean.