Rents are at a record high, so why are private landlords quitting the market in droves?
Mark Rose of Rose Property Services
RENTS are at record highs - so, how is it possible that we're watching a disorderly exit from the rental market of 'small-time' investors, who the RTB tell us, currently provide 86% of all supply in Ireland?
The other 14% are large investors or REIT's (mostly in Dublin) who are apparently now out of favour politically, even though we desperately need those large supply providers to turn on the taps in the biggest way possible.
As a letting agent, most of my clients are the 86%, let's call them Mary & Joe who rent out one property.
They have a mortgage on that property and pay tax on the rental income at 52% so the Exchequer is taking over half the rent each month, which can then be used to build more social housing. It's difficult to spin that as bad policy.
A survey in July 2021 by the RTB stated that 79% of all tenants surveyed in 1,038 face to face interviews said their experience with their landlord was "positive or very positive". If the Minister wants to understand why Mary & Joe no longer want to provide rental supply in Ireland, despite record high rents, then the following points cannot be ignored:
1. Legislation that changes every few months terrifies investors who now don't know which way is up. I'm paid to understand the Residential Tenancies Act and even I struggle, as each new Minister applies sticking plaster solution on top of previous ineffective solutions in their own 'knee jerk' reactions to political pressure.
2. Rent Controls mean that no investor will buy a property that's been rented in the last two years at a low rent. When a property is sold in Ireland then the rent controls pass to the new owner with the threat of a €15,000-€30,000 fine if they step outside (or don't understand) the law.
If Mary & Joe keep their rent low then the current legislation 'thanks' them by almost guaranteeing that this property will not receive bids from another investor. If no investor is willing to bid then that means the property is worth thousands less because only an owner occupier will now buy it.
Is this really the incentive/penalty situation the Minister intended?
Rent Controls do not affect large scale investors who build/buy new apartment blocks as new supply is exempt. This law almost guarantees that the most affordable rental properties will be lost to the market when sold.
3. Lack of ANY effective enforcement or regulation if a dispute between Tenant/Landlord arises.
It is fair to say that both tenants and property owners are not being served well by the Residential Tenancies Board. I have witnessed multiple decisions by adjudicators in the last two years that I'd argue could be described as highly questionable, lacking in rigor or legal basis and multiples were subsequently overturned later by their peers in the RTB at Tribunal, which is a waste of time and very scarce resources.
A Tribunal costs the RTB thousands of euro. Delays at the RTB (which were reducing impressively in the years 2016-2020) are now on the rise again and out of control. I'm aware of one case recently with over €30,000 of rent arrears where the RTB process went over 13 months and by that time the tenant left of their own accord i.e. the RTB process was still going, at snail's pace.
There, the property owner won each hearing which was then appealed by the tenant, as is their right. On the very final appeal, the tribunal panel members were clearly affected by the case as they submitted their decision internally inside the RTB within 48 hours (impressive!) but that piece of paper sat inside the RTB for nearly 11 weeks before a result was issued. This is while the RTB knew that zero rent was being paid on arrears over €30,000. Not one euro has been recovered since.
These delays, especially on exceptional cases are inexcusable and just one of the reasons that spooked investors are leaving in large numbers.
I tried to advise a tenant in another county about what I strongly believe was an illegal eviction. The tenant lodged a dispute on my advice and was told by an RTB adjudicator that because there was no written lease agreement then the RTB has no jurisdiction. Incorrect.
The RTB also released a new web portal in 2022 whose rollout was an unmitigated disaster and which caused unwanted problems for the very people providing badly-needed supply to the rental market. This new system was supposed to cost €3m but ended up costing €7m.
Taxpayer funds used to cover the cost overruns could have been used for more social housing. The rollout of the new system also coincided with multiple data protection breaches where landlord and tenant personal contact details were sent to totally unrelated third parties.
Frustrating supply providers hurts supply at the very moment we need that supply most. The new head of the RTB was appointed in 2022 and on his first presentation to a large group of licensed agents which i attended he apologised for the new "system" and conceded that he has no property industry experience and will be learning on the job... Not reassuring considering this is the regulator for approximately 300,000 tenancies during Ireland's worst ever rental supply crisis.
Tax has been mentioned as an issue. I'm sure my clients would prefer to pay less tax but the tax burden has been the same for a long time while rental supply only started to decrease after 2016 which is when rent controls were introduced. Co-incidence? I don't believe so.
If we tell Mary & Joe that they are; not allowed to set the rent on the property they own; that they are not allowed to sell the property (at certain times of the year) or in the future (as certain opposition parties are calling for); that they may not be allowed to get vacant possession for selling or moving a family member in, then you are going to see a very alarming supply situation get worse.
What that will look like does not bear thinking about. Let's all hope the Minister is listening...
Mark Rose is MD of long-established Rose Property Services
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