Rent controls would kill off property investment, landlord group warns

One of the country’s largest landlord groups has warned the Coalition over introducing rent controls, saying they would kill off investment in the property market and rental sector.

The caution to Finance Minister Michael Noonan emerges as the Government scrambles to find a solution to the housing crisis and soaring rents in the capital.

Documents obtained by the Irish Examiner reveal the attempts made, just before the budget, to influence Mr Noonan to drop plans for “rent certainty”.

US investors Kennedy Wilson advised Mr Noonan’s officials by letter that investment in property here could be “eliminated” if rent controls were introduced.

The plans would reduce “quality” accommodation and see “misbehaving” tenants taking advantage of rent controls, the global estate company claimed.

Instead, the investors urged Mr Noonan to “reduce the cost of construction” and for a “temporary” reduction in development levies for building apartments.

In a letter to Mr Noonan’s officials on September 30, the Kennedy Wilson Europe managing director Peter Collins wrote: “Investors and their funding banks will see the new proposed regime negatively, i.e., in a rising rental market, returns will be capped but in a falling market all the downside will be with the landlord. This will certainly limit and, potentially eliminate, future investment.”

Rent certainty would have a “huge impact” on the numbers of units available, with tenants tied into four-year agreements linked to the consumer price index, he said. Tenants in similar apartments could also be on very different rate.

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“Misbehaving” tenants may “be tempted to unofficially sub-let their unit and take advantage of the ‘value’ of having a rent-controlled unit”, Mr Collins said.

“From an owner’s perspective in a rising market it will now take a lot longer for an asset to generate market rents.

“This will become a disincentive to invest in either new facilities, unit upgrades or simply the day-to-day cost of maintaining properties. This will ultimately reduce the quality of units available on the market.”

Kennedy Wilson has put €1bn into Irish property over the last three years and owns more than 1,250 apartments across Dublin. It is also jointly funding a €200m office and apartment project in Dublin’s docklands.

Mr Noonan is against interfering in the property market, while Environment Minister Alan Kelly is determined to get his rent certainty plan over the line.

It originally envisaged rents being tied to inflation for a number of years, but there is now speculation that a watered-down package will only strengthen leases and tenants’ rights instead of controlling rent rises.

Government sources last night said that talks would continue between ministers’ officials this week, but that a deal is unlikely to be agreed by Cabinet until next week, at the earliest.