fianna fáil submission to strategy for the rented sector ......fianna fáil proposes a three-step...

Rent Strategy Submission 1

Fianna Fáil Submission to Strategy for the

Rented Sector – Consultation Process,

Department of Housing, Planning and

Local Government


Rent Strategy Submission– Executive Summary

Fianna Fáil proposes a three-step new deal for renters and landlords based

on Tenants Rights and Rent Certainty, Quality of Accommodation and

Increasing Supply. These plans would help create a stable, viable rental

market for over 457,000 tenants and some 200,000 landlords.

Tenants’ Rights and Rent Certainty:

Strengthening Security of Occupancy for Families and Long Term Tenants

Deposit Retention Scheme

Delivering Affordable and Predictable Rent

Building an Affordable Cost Rental Housing Sector

Quality of Accommodation:

Overhauling the RTB

Stronger Inspection and Certification of Rental Properties

Strengthening Landlords’ Rights

Increasing Supply

Incentives to Encourage Rental Unit Supply

Financing for New Build-to-Rent Units

Empty Property Refurbishment Grant

Assistance for Involuntary Landlords in Negative Equity


Introduction

The massive growth in the size of the rental market in Ireland with over 300,000 households

renting privately, some 20% of all households, calls for a new deal for renters and landlords.

Rising rents, poor quality homes, homelessness and a lack of security of tenure are major

issues that need to be addressed. From a landlord’s perspective the government must

recognise the need to encourage greater investment in the area through incentives to invest

combined with measures to assist ‘involuntary landlords’ in negative equity and have to rent

their homes. New, quality housing stock and substantial investment in renewing existing

homes is vital in helping to create a vibrant, modern rental market.

Our New Deal for Renters and Landlords aims to boost renters’ rights and help create a

modern, professional rental market that can accommodate a variety of households,

stabilising the overall housing market. This means striking a balance between firming up

landlords’ as well as tenants’ duties and a creating a system that encourages investment in

new and current housing stock.

This policy submission complements Fianna Fáil’s primary housing document Supporting

Home Ownership – A National Housing Roadmap which was launched in April 2015. It forms

part of a holistic approach to housing supply and a stable rent market. Rather than relying

on one crude instrument such as rent control, our policy approach adapts a broader view of

increasing supply, securing occupancy, providing rent certainty and enhancing landlords’

rights. Fianna Fáil is committed to supporting people who want to own their own home

while strengthening protection for renters and encouraging greater investment.

Proposals outlined in this submission, represent a commitment to improving quality of life

for an often forgotten section of the housing market. We believe that implementation of

these measures is required immediately and would lead to a transformative improvement of

conditions renters as well as landlords.


Tenants’ Rights and Affordable Rent

Key Proposals:

Strengthening Security of Occupancy for Families and Long Term Tenants

Deposit Retention Scheme

Delivering Affordable and Predictable Rent

Building an Affordable Cost Rental Housing Sector

1. Strengthening Security of Occupancy for Families and Long Term Tenants

The lack of security of tenure is a major issue inhibiting the development of a strong reliable

rental market in Ireland. Unlike the European norm, Irish leases are primarily short term one

year leases. This generates great uncertainty for families and other long term renters,

limiting the appeal of renting for those for whom home ownership is not a preferred option.

In particular families with children require stability and certainty rather than the current

situation where tenancy can be brought to an abrupt end.

Legislation should be introduced that would enshrine a long term “family tenure” lease to

reform Part 4 of the Residential Tenancies Bill 2004. Revamping Part 4 tenancies would help

provide greater security to tenants such as families, stabilise the rental and housing market

as well as allow landlords the assurance of long term financial planning.

Specifically, this involves replacing the 4 year tenancy cycle with a move towards indefinite

leases which would enhance security of tenure. Indefinite leases would be voluntary for

landlords and tenants to engage in to their mutual benefit.

Tax incentives such as full mortgage interest relief against rental income could be put in

place for landlords that engage in family and long-term leases. The full restoration of

mortgage interest relief against rental income would cost €95m. Based on the DKM rental


1survey some 65% tenants renting for over 4 years there is potential for up to 65% take up

of long term tenures. Total cost to the exchequer of introducing this measure be

approximately €62 million.

We believe that the notice to quit criteria also have to be tightened up. Currently the broad

range of allowable reasons that can be given for removing renters weakens tenants’ rights

and reduces their stability. Notices to quit that are contested by tenants should be subjected

to RTB review and measures should be introduced to ensure more stringent enforcement of

the requirement that landlords provide proof of intention to sell.

2. Deposit Retention Scheme

Deposit disputes remain the single biggest source of cases before the RTB. Disputes over

refusals to pay back deposits or only partly refunded deposits are a serious bugbear for

renters and an on-going source of conflict for landlords. The government has consistently

delayed its own legislation in the area, resulting in continuing disputes and general stress on

the rental sector. Failure to re-pay deposits has a serious financial impact on tenants,

particularly those in low income groups looking for alternative accommodation. For many

tenants the deposit is simply transferred onto their next property, delays or failure to re-pay

it jeopardises their future accommodation options.

In a number of cases the breakdown of trust between landlord and tenant results in the

final month’s rent being unilaterally withheld damaging the financial planning of the

landlord and future references for the tenant. With the housing market making a tentative

recovery, particularly in the Dublin area where renting as a choice of tenure is highest, it is

vital that a new structure is put in place to protect tenants’ deposits.

We propose that a custodial deposit scheme under the remit of the RTB be brought in

immediately. The scheme should involve ramping up measures for non-compliance and

reducing administrative costs to ensure the system was self-financing.

1 2014. Rent Stability in the Private Rented Sector, available here:

http://dkm.ie/en/news/dkm_reports_on_private_rented_sector_published1


Under this model, all tenants would benefit from increased financial security while low

income and marginal households would require less exceptional social welfare payments to

compensate for lost deposits.

3. Delivering Affordable and Predictable Rent

With latest figures showing a 9.3% increase in rents throughout the country, people in

Private rented accommodation are really struggling to meet persistently rising rents.

This represents a remarkably persistent rate of rental inflation, with the average annual

increase in rents since the Q2 2014 to Q2 2016 being 9.6% (11% in Dublin). As the economist

Ronan Lyons says, this level of expected annual and monthly inflation could have a very

detrimental impact on the competitiveness of our economy as well as being disastrous for

individual households:

“There is the danger that this very high rate of inflation becomes something of a new normal. There is nothing normal – or indeed sustainable – about inflation in rents of 10%. This is particularly the case, given that the rate of inflation in the wider economy is close to 0%. In other words, if this situation persisted into the future, the average household would have to devote an ever greater share of its income, just to pay its rent”.2

Spiraling rent levels in Dublin and other cities are also hammering households’ disposable

income, forcing many marginal families into unsuitable accommodation and exacerbating

homelessness. Creating a rental market where quality accommodation is affordable for a

social mix of households involves striking a balance between encouraging investment and

protecting tenants. Calls for outright rent controls are disingenuous and would ultimately

harm the low income households such measures aim to protect, by reducing the number of

homes available for rent.

We need third generation rent certainty measures that allow landlords to make a fair profit

while helping to achieve affordable rents and predictable increases (as well as decreases) in

rental prices. A healthy rental market must create a stable environment for investors and

renters alike to plan financially.

2 Daft Rental Report, Q1 2016 available here: https://www.daft.ie/report/q1-2016-daft-rental-

report.pdf


In the context of such persistently high rent inflation, Fianna Fáil believes there is a need to

introduce Rent Certainty regulations into the market, which would link rent increases to an

average local market rental index. Any regulations should be introduced initially on a short

term basis with a sunset clause, pending analysis of their market impact.

We support the National Economic Social Council (NESC) proposal for a ‘’flexible market

sensitive model of rent regulation in an Irish context’’3 particularly in large urban areas

where demand outstrips supply. This regulation would anchor rents to a local market

historic average – both within and between tenancy agreements – and bring some stability

to the rental market.

The difference between this model and traditional rent controls is that, by tying to a historic

local market average, rents do not become completely divorced from the dynamics of the

market. Rather, this model allows rents to be set relative to the market but with a ‘dragging

anchor’ that helps to prevent excessive annual increases and moderate inflation. As the

NESC says, this would not only help the housing system but also help to maintain costs and

competitiveness in the economy4.

We propose specific legislation to establish a median benchmark per sqm set annually by

the RTB per geographic area to set initial rent levels for new leases. Newly built and

renovated units should be exempted from this measure in order to encourage investment.

Rents would be indexed to a five year historical area average (e.g. for 2016 it would be from

2011 to 2015) and rent increases both within and between tenancy agreements would be

restricted to within 10% (+/-) of the historical area rent index. In the case where rents are

already 10% above the area average, this would mean no rent rises would be permissible.

Rents would be allowed to rise by no more than 10% each year above the historic local

market average.

These rent certainty measures would be subjected to a five-year sunset clause whereby the

Oireachtas would have to pass another set of measures to renew the law. This would ensure

that the operation of the measures are thoroughly reviewed and measured in light of other

housing supply steps that have a medium to long-term impact.

3 p.66, 2015. Ireland’s Rental Sector: Pathways to Secure Occupancy and Affordable Supply.

4 p.69 Ibid.


4. Building an Affordable Cost Rental Housing Sector

Fianna Fáil is committed to achieving a genuine social mix in developments moving away

from welfare only housing. We believe the key to transforming the Irish rental market in the

long-term, is to make affordable cost rental units designed for households with

intermediate income levels a large component of the overall sector.

Affordable housing can be distinguished from existing social rental housing in that it would

receive limited subsidies in comparison to social housing in which most of the costs are

covered. Creating a new affordable rent sector earmarked for households with low to

intermediate income levels would help to build vibrant new developments.

The commitment in our primary housing document Supporting Home Ownership – A

National Housing Roadmap to restore Part V to 20% and remove exemptions reflects this.

Restoring the Part V obligation to 20% of new developments would enable affordable

housing to become central to housing policy again. This could be done by ensuring a

minimum 5% and maximum 10% of all new developments have to be composed of

Affordable Housing (with minimum 10% and maximum 15% being Social Housing). These

can be a mix of cost rental units and cost purchase units.

We also propose that a scheme be established to attract investment into cost rental housing

projects, which would then be run by Voluntary Housing Associations. In such mix-use

developments, 25% of these units would be earmarked for social housing and 75% for

households with low and intermediate income levels. As an approximate guide to eligibility

to affordable housing, under previous affordable housing schemes single-income

households with gross income between €25,000-58,000 and two income households of

€75,000 or less were potentially eligible. In previous affordable housing schemes in Ireland,

households with means that would prospectively be spending more than 35% of their net

income on housing were eligible to apply for affordable housing support.

It is proposed that in affordable cost rental units, rents would be set at 70-80% of the

market rate. In order to secure this investment would enable local authorities to establish

step-in guarantee agreements if the Voluntary Housing Association fails to meet its


obligations. In addition the Minister for Social Protection should make adjustments to

pension reserved asset rules to allow pension funds to invest in this new sector. A new

affordable rent sector would help to keep key workers in the city and tackle social housing

waiting lists.


Quality of Accommodation

Key Proposals:

National Inspection Regime and Quality Accommodation Certificate for Rental Properties

Reforming the RTB

Strengthening Landlords’ Rights

1. National Inspection Regime and Quality Accommodation Certificate for Rental Properties

The 2004 Private Residential Tenancies Act introduced by Fianna Fáil significantly

transformed the rental accommodation market in terms of quality and security. Over a

decade on from that act further work must be done to continue to improve the overall

quality of homes available. Warm, comfortable homes are a right for all citizens regardless

of their choice of tenure.

Local authorities have a major role to play in maintaining and improving private rented

accommodation standards. Best practice exchange between local authorities for inspections

is a useful mechanism to ensure that local authorities can highlight and prioritise high risk

properties. A national inspections regime should be established by the Department of the

Environment, Community and Local Government outlining the need for a clear regularity of

inspections.

A Local Authority Quality Accommodation Certificate to be issued once every three years

would help to build up a strong level of quality homes. The certificate should be based on a

points system across a range of criteria such as insulation, water supply, quality of

Households’ conveniences etc.. The new certificate system would be similar to BER system


and would help ensure the highest standards are maintained in rental accommodation.

Renters can use the certificate and rating to assess the quality of the house.

2. Reforming the RTB

In order to re-balance rights and responsibilities between landlords and tenants the RTB

must have a ramped up role with additional resources. The government has whittled away

its staff over the past four years leaving it unable to deal effectively with complaints and

broader issues. Tenants and landlords are suffering with long waiting times and inadequate

support as a result. A reformed RTB should have additional duties and an increase in

resources to ensure it can carry out its work effectively.

Reducing waiting times for complaint adjudication has to be a priority for a reformed RTB

and this requires that the RTB be properly staffed and resourced.

Expanding the data collection remit and capacity of the RTB in terms of rent comparison

and assisting Local Authorities in quality assurance inspections would be vital in

transforming the private rental market.

Linked with this expansion is the need for the RTB to promote greater awareness of tenants’

rights and responsibilities. Utilising traditional and social media to create a greater

knowledge around renters’ rights is important in ensuring all households have access to the

legal entitlements.

This would help ensure the vast majority of properties are registered and subjected to the

full remit of rules and regulations necessary to create a healthy private rental market where

tenants and landlords alike have stability and security. The expansion in the role and

resources of the RTB could be financed via an increase in registration charges ensuring the

agency remains self-financed.

3. Strengthening Landlords’ Rights against Rogue Tenants

A strong rental market means a balance between rights and responsibilities for both tenants

and landlords. A small number of tenants consistently engage in anti-social behaviour,

refuse to pay due rent and inflict serious damage on property. Landlords deserve to have


their property and investment protected. Fianna Fáil propose to tighten up rules for rogue

tenants who refuse to pay rent, engage in consistent anti-social behaviour and damage

property.

This could be achieved with an amendment to the Residential Tenancies Act to create a new

fast tracked “Rogue Tenants” section in the RTB to handle cases from tenants who have a

serial record of such instances.


Increasing Supply of Rental Units

Key Proposals:

Incentives to Encourage Rental Unit Supply

Reduce Commercial Rates on Residential Units Above Commercial Premises

Allow Local Property Tax as an Expense against Taxable Rental Income

Strategic Investment Fund Financing for Build-to-Rent Accommodation

Empty Property Refurbishment Grant

Assistance for Involuntary Landlords in Negative Equity

1. Incentives to Encourage Rental Unit Supply

A strong rental market needs responsible landlords and tenants. Currently landlords are

under severe pressure and are leaving the rental market in droves without other investors

stepping in to provide units. Establishing a taxation framework that incentivises investment

in new homes and renewing existing stock is an integral part of revamping the Irish rental

market. Landlords must be encouraged to take the risk in capital expenditure on housing

stock. The tax regime should create an environment that facilitates greater

professionalisation and heightened expenditure levels on homes, old and new. Bringing new

stock on line, built and maintained to the highest standards would ensure that renters have

access to affordable, comfortable homes into the future. Fianna Fáil proposes the following

measures to revitalise private spending on the rental housing stock.


2. Reduce Commercial Rates on Residential Units Above Commercial Premises

Residential units above commercial premises have a very high vacancy rate. Reducing

commercial rates would encourage units above commercial premises to be fully occupied in

order to reduce the commercial rates burden on the whole area.

3. Allow Local Property Tax as an Expense against Taxable Rental Income

Landlords incur legitimate expenses while investing in accommodation. The Local Property

Tax should be allowable as an expense to reduce the tax bill of landlords in order to

encourage further investment in the rental sector. This would cost approximately €25m per

annum.

4. Strategic Investment Fund Finance for New Build-to-Rent Accommodation

Lack of supply is driving the dramatic increase in rent levels that has characterised the rental

market for the past number of years. This damages the competiveness of the capital, the

attractiveness for new firms to set up here and the life and vibrancy of the area. Promoting

increased rental accommodation would help ensure Dublin remains cost competitive and

can tackle the increasingly evident social problems of people being excluded from stable

accommodation. The Strategic Investment Fund should be directed to invest in private

home building including home suitable for rent. These low cost loans for rental

accommodation would encourage greater investment and building levels to meet demand.

Fianna Fáil published “Supporting Home Ownership: A National Housing strategy” which

outlines a series of measures to ramp up overall new build construction across Ireland with

the target of 150,000 new units by 2021. This could be achieved via Strategic Investment

finance, revised density guidelines and shaking up the Irish mortgage market. Many of these

homes would be available for investing and renting


5. Empty Property Refurbishment Grant

Census 2016 revealed that there were almost 260,000 homes – 15% of total housing stock –

are vacant across the country. While there is a ‘natural’ vacancy of about 5 per cent, in

many urban areas of high demand including parts of Dublin, Galway, Waterford and Carlow

the vacancy rate is far too high at about 10 per cent.

While the recently announced Housing Agency initiative to buy vacant properties in large

portfolios for use as social housing is welcome, given the scale of the vacant property

problem there is scope for additional schemes to get vacant properties that may be in need

of refurbishment back into use.

This is especially the case for properties that have been vacated (by an elderly parent, for

example) but whose owners do not wish to sell the property outright nor can they afford

the capital costs of refurbishment.

We propose the introduction of an ‘’Empty Property Grant’’ scheme to encourage owners to

lease properties to AHBs or directly rent to Local Authority nominated tenants on long-term

leases. In return AHBs or Local Authorities would refinance the full or partial costs of

refurbishment. Similar schemes exist in the UK and could be introduced on a pilot basis in

local authorities that have high vacancy rates.

6. Assistance for Involuntary Landlords in Negative Equity

Stabilising the property market would help to alleviate the pressure on homeowners in

negative equity. Another immediate measure to help address the issue and open up

additional properties to the private rental market involves small changes to the tax code to

facilitate renting. In the absence of being able to sell, many families are choosing to rent

their home and in turn rent a new property for themselves. Anyone that takes this course of

action faces a mind boggling array of charges including income tax, universal social charge,

non-principle private residence tax, fees to the Private Residential Tenancies Board and PRSI

on rental income. They also face losing their mortgage interest relief and their tracker rate.

This means more and more families are trapped in negative equity even when they may

wish to move for work.


We propose a simple change to the income tax code which would allow people who bought

their house between 2000 and 2009, who wish to rent out their home, to offset this

payment against the rental income for a period of 3 years. In practical terms this would

substantially reduce or eliminate the tax bill on their rental income. This would only be

available in respect of a property that was someone's principle private residence. It would

not be a subsidy to investors.


Conclusion – A New Deal for Renters for Landlords

The rapid changes in tenure in Ireland present a fresh challenge to how we provide

affordable, comfortable homes in the right location for people. Our competitiveness and

quality of life is reliant upon putting forward strong measures to ensure we have a balanced

rental market between landlords and tenants. A range of measures addressing supply,

secure occupancy, rent certainty and landlord’s rights is vital to establishing a strong

framework for a stable rent market.

This “New Deal for renters and landlords” presents a series of steps that would revamp the

quality and quantity of stock and bolster renters’ rights. Strengthening the rental sector will

help to stabilise a volatile housing market while promoting Ireland’s attractiveness to

inward investment and skilled workers, vital in securing Foreign Direct Investment.

More importantly the “New deal for renters and landlords” would significantly enhance the

quality of life of over 457, 000 renters and 200,000 landlords across the country. It’s time for

government to start recognising Generation Rent and putting into place real actions to

deliver for a forgotten generation.


Appendix – Costings

Costs to the Exchequer Table

Allowing Local Property Tax as an Expense €25m

against taxable rental income

Family Tenure Tax Incentives €62m

Local Authority Quality Accommodation €10m

Certificate Fund

Total €97m

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