Taoiseach signals possible end to Rent Pressure Zones

[faketales]

I wonder is that 42% figure right? Seems far to high to me.

Seems high. To be honest I wouldn't trust many numbers around rental as it seems to have been a Wild West for years. Aren't the numbers with the RTB up or the same?

 

[Premos]

There are a lot of landlords that were "caught" with very low rents

Many landlord were not caught with low rent but now have low rent. Rent were very low until 2013. Dublin had a rent freeze in 2015 and then RPZ were created. Many LL had market rent at the time but now are stuck in the past.

 

[Luternau]

Many LL had market rent at the time but now are stuck in the past.

Exactly. This scenario is also leading to overholding where owner wants to sell. A low rent property is gold for tenants. 3 bed semis rented for less than 1 bed apts in the same area, rooms in a shared house renting for more than the rent for the whole house, tenants sub-letting a room that covers the whole cost of their own monthly rent. No Tax to pay.. All these the result of RPZ.

 

[lff12]

Don't forget that RPZ for Dublin and a few other places came in 1.1.2016. For that group of tenants, its 9 years of lower than normal rent rises, although they did change the calculation mechanism after a few years to make allowance for years where the rent was not increased. Still would have resulted in very low rents - that's how I ended up with only going from 650 a month to 785 a month from the time RPZs were introduced. But literally anybody with a half decent job would have saved that aggressively and bought a house. I don't think I know anybody who was in a RPZ-protected tenancy with a lower rent who hasn't bought. It would be a shrinking group of tenants over time but that group will not be the ones who are in a good position if there is a sudden unwinding, and they will not be shy about it.

The approach seems to be to "look at research" rather than actually try to get a bigger picture of exactly how many properties are on considerably lower than average rents, are likely to be "at risk" of very high rent increases if the system is unwound, and what the circumstances of those tenants might be. That's a recipe for disaster, and suspect it could mark the start of serious organising in the tenant community (a la water charges or LPT campaigns).

 

[Dr Strangelove]

I don't think I know anybody who was in a RPZ-protected tenancy with a lower rent who hasn't bought. It would be a shrinking group of tenants over time but that group will not be the ones who are in a good position if there is a sudden unwinding, and they will not be shy about it.

That’s exactly the issue. Most people with a rent 50% below market rates today are going to be hard cases.

I hate to be party political but literally this entire mess was created by governments led by FG or FF being urged to go even further by SF and almost everyone else. They should have a collective “Bobby-in-the-shower” moment. Pretend it was all a dream and see what makes sense for 2025.

 

[Persia]

I wonder is that 42% figure right? Seems far to high to me.

There shouldn't be any ambiguity on this, the RTB should have this report to hand at the end of every Quarter, no one else has these figures that I'm aware of...

...but we all know how utterly dysfunctional and incompetent they are, so no one knows.

 

[faketales]

Was it the case in the early days of RPZ that the rent could be reset after a tenant moved out and a new tenant moved in?

And wasn’t there something about matching the rent to others in the same area / same size?

Don’t forget the Renters credit is worth up to 2k for a couple so many payments less rent than ever.

 

[faketales]

I hate to be party political but literally this entire mess was created by governments led by FG or FF being urged to go even further by SF and almost everyone else.

There has been a case of FFG being in government but not in power.

The same could be said with how they approach many areas. Implementing policies that they don’t believe in. Regardless of party never a good solution.

 

[Gushering]

Government last had courage in 2023 to lift the ban on tenancies being frozen. Hopefully they will make some hard decisions here for the common good.

 

[Premos]

Was it the case in the early days of RPZ that the rent could be reset after a tenant moved out and a new tenant moved in?

That was never the case.

 

[Premos]

And wasn’t there something about matching the rent to others in the same area / same size?

You have to show that the rent is not excessive with local examples. But you can't match.

 

[Nordkapp]

Being able to reset the rent to near market rent when a low rent tenant moves out is a positive that might help keep me in the rental market

 

[letitroll]

The thing scaring investors, the international investors for sure, is that in Ireland under RPZ rules operating costs, finance costs, as a landlord, are theoretically unlimited while their revenue growth (rents) are hard capped at a maximum of 2% annually. Feels like a good deal for tenants and who cares about landlords.........until you realize that international investors need to provide, by some estimates, €20bn of the €40bn required to substantially 'solve' Ireland's housing crisis over the next five years.

RPZ rules, like lots of well meaning socialist policies create winners and losers......the winners are the renters in situ, the losers are those condemned to live in their parents box bedroom in their 40's.

The issue for institutional capital - is its not crazy to envisage annual 4-5% inflation on operating costs in the future (opex, finance costs)....while you the investor can only capture 2% back in rent increases every 12 months. We just went through a period of it already (elevated inflation, rising interest rates) in that world you've got an asset that is contracting its cash flows in real terms annually not growing them.

Mobile international capital does not sign up for investments that could conceivably go upside down on them........not when they have other options......hence why PRS apartment development has dropped off a cliff (RPZ combined with sovereign bond yields rising did it).

A sensible tweak to RPZ would be that sitting tenants continue to benefit...but that rent increases on existing & all future tenancies can move up at something like CPI + 2% (this would help solve the PRS/institutional capital upside down problem while shielding tenants from very large moves in rent YoY)......likely sensible too to make it so that when a tenant moves out the landlord set rents at whatever the market will bear....you've got to return price signals to this market....this centrally planned supply/demand game the current Gov has got themselves into via RPZ, AHB, HAP is just not going to work over time.

 

[The Horseman]

One of the reasons small landlords are leaving is because the beneficial treatment institutional landlords are getting. If existing landlords in well below market rent and recent institutional landlords at or about market rate get the CPI plus 2% as suggested the gap between both parties widens even further.

Not sure this will work as the small/older landlords will most probably sell up. This removes bed spaces from the market.

Still think the best way is to extend the rent a room scheme it treats all landlords equally and reduces the cost on the tenant and allows tenant save for a deposit on a property of their own should they wish.

 

[letitroll]

One of the reasons small landlords are leaving is because the beneficial treatment institutional landlords are getting.

Not sure small landlords know or care too much about whatever advantageous structuring institutional landlords can do........small landlords leave the market for the same reason that institutional ones don't enter......the math simply doesn't pencil....or the math pencils but the qualitative stuff (tenants rights vs. landlords, time to evict rogue tenants under PRTB rules/arbitration) makes it so that on a risk adjusted basis its dumb to pull the trigger on a buy-to-let....and they choose to direct their effort, capital and time elsewhere.

RPZ is a failed experiment.....predictably so.....and I think Martin/Harris realize that.....they are in quagmire now though....supply wont react to a price controlled market.....but the political reality is removing RPZ would be suicide...and so we are starting to get layers upon layers of various bureaucratic schemes to incent behaviour that would otherwise occur in a free functioning market.....the political reality is such that some version of RPZ will remain and they'll need to drive funding into various schemes/ incentives that prop up the supply side.....or as the HTB does load up the demand side (more politically palatable) with incentives that just ultimately flow through to developers anyway.

The would want to get their skates on......they've got five years to turn the tanker.....housing supply is not a tap you can turn on and off.....it has long and variable lags to changes in underlying policy...a change today might only change supply dynamics in 2027 or 2028...this government can credibly speak to its five year term as a foundation of stability and certainty for institutional capital....they need to set the rules of the game setup (incentives, tax breaks, RPZ roadmap) and then get out there and start selling the opportunity to Blackstone, Brookfield, whomever.

Lest there's accusations of selling Ireland to foreigners.......they should setup up an SSIA-like scheme.......where mom and pop investors can pull some cash from AIB and BOI and invest it (with tax breaks) into a housing infrastructure vehicle that sends money into a dedicated Blackstone/Brookfield Irish housing infrastructure vehicle.

 

[Luternau]

reset the rent to near market rent when a low rent tenant moves out is a positive

Barring a significant change in their needs or circumstances (location of work etc), a tenant on low rent in a good property won't just opt to leave. Currently, evicting them to relet is not possible That has to change and then, how long to get them out? The process is very drawn out and very tenant focussed.

 

[faketales]

Have the RPZ rules ever been challenged. I can understand the argument that an in situ tenant needs some level of certainty and that a max increase is there based on what rent was agreed.

But it’s very different for the government to say that when that tenant moves on of their own accord that you are still tied to that rent which may have initially been set well before RPZ and in completely different circumstances.

Does the government regulate any other private contract as much.

I could understand it if there was a quid pro quo that was signed up for such as tax breaks.

For example crèches can’t increase but they get a government subsidy in return and they can opt out. Although many recently got an exemption as they were below market rate.

 

[letitroll]

Does the government regulate any other private contract as much.

In terms of the aggregate euro amounts involved I'm pretty sure rent control now constitutes the largest state intervention in private sector transactions outside of war time rationing.

RPZ has basically grown to encompass the majority of the country - as best I can tell about 60% of the population of the country now lives in an RPZ area.

The government really needs an articulated plan to exit RPZ's in five years and I would also include a phasing out of HAP over 10yrs.......10yrs should be enough time to transition those out of HAP into the other tenure types available (AHB, Social, Cost-Rental etc.).....monthly cash transfers from central government to private landlords to house citizens unable to house themselves should pretty much always be temporary in nature...I understand how we got here successive governments ran down the social housing stock...when the reality is that there will always be in a civilized market economy/society a group of citizens whose labor is unable to command a price sufficient to house themselves and their family.......that Ireland has ended up without this social housing foundation layer is part of the problem around how the private market has got so screwed up.....social tenants are competing with private tenants in the same market.

 

[faketales]

HAP over 10yrs...

Almost 300,000 (293,673) households received support for their housing costs in 2020, up from 134,973 in 1994. This amounts to 16 per cent of households overall and 54 per cent of those renting.


I think about 200k of that is Council / AHB rental. Maybe 65k HAP. 25k or so on other schemes like rent supplement.

There is about 600k rental properties in the country and excluding the 200k council thats 400k private rentals. So about 1 in 4 private rentals has government support.

I’m no economist but surly it’s clear at that level of intervention you alter the market.

If one landlord controlled 25% of the market they would clearly be able to drive the market rate. If one buyer buys 25% of the market they drive the market rate.

The State is driving up rents by pumping more and more money into the rental market. Instead of rental rates being set but what different percentages of the market can afford they are blown past with all this extra money.

Luckily RPZ are there to try and safe the state some cash.

 

[lff12]

The state hasn't quite so much to lose from supporting the private market because 90% of the time they'll get nearly half it back in taxes.
As opposed to building social housing where they have to cover the capital cost, service the interest & then have a tenant who is highly likely to get into arrears as a huge proportion of social tenants are.
Does it alter the market? Absolutely - HAP/RAS etc all act as a floor on rents. The upper limit is dictated by the market itself.