Committee on Budgetary Oversight debate -
Wednesday, 17 Jan 2024

Residential Premises Rental Income Relief and Mortgage Interest Relief in Budget 2024: Discussion

An Cathaoirleach

I welcome our guests and thank them for making themselves available, in particular Mr. John Kennedy and Ms Lisa Kearney from the Institute of Professional Auctioneers and Valuers, and Mr. David Hall from the Irish Mortgage Holders organisation.

Before we begin, I will explain some of the limitations to parliamentary privilege and the practice of the Houses as regards reference witnesses may make to other persons in their evidence. They are protected by absolute privilege in respect of the presentation they make to the committee. This means that they have an absolute defence against any defamation action for anything they say at the meeting. However, they are expected not to abuse this privilege and it is my duty as Chair to ensure this privilege is not abused. Therefore, if their statements are potentially defamatory in respect of an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or any official either by name or in such a way as to make him or her identifiable. I remind members of the constitutional requirement that they must be physically present within the confines of the place Parliament has chosen to sit, namely, Leinster House, in order to participate in the meeting. I will not permit a member to participate where they are not adhering to this constitutional requirement. Therefore, any member who attempts to participate from outside the precincts will be asked to leave the meeting. Some members are present and some are online.

I invite Mr. David Hall to make his opening statement.

Mr. David Hall

We sent in the opening statement so I will be brief. For clarity, personally I am not a landlord. I have a dual role in the sense that I am chief executive of iCare Housing which is an approved housing body and a voluntary landlord with 510 homes and 1,500 tenants.

This statement has been circulated and everyone has read it so I will be brief in commentary around it. This is a relief that some find somewhat controversial in being given to landlords. It is as though there is a fire, and there is a question mark as to whether a levy is to be put on the fire brigade. There is a housing crisis which is a major issue and is now an emergency. Therefore this is a small relief being given to landlords. It should be much greater. Mr. Kennedy and his colleagues will know much more about this from the sector. We need rented properties and landlords. We can vilify landlords as much as we want but ultimately we need landlords. We need good, honest, decent landlords, which the majority of landlords are. Vilifying landlords, indeed criticising a small element of relief - and let us be absolutely clear, this is a small element of relief being given in one part of a proposal to solve a very complex and difficult situation that arises within the country at the moment - is pointless. There is an abject failure of former policy in regard to sorting out the housing situation. This is now a knee-jerk reaction to come up to speed with some of the vulture funds which have been given significant relief over the past number of years. They have been encouraged and incentivised on a great scale ahead of normal landlords. Statistically 80% of those have one and two properties. Everybody in this House is dealing with those and their residents or tenants for a long time. The relief involved is small. Somebody with a €400,000 property and even a €200,000 loan whose case I was looking at today, is getting rent of €2,500 and will pay 40% of that in tax. What would possess anybody to get involved in a system that effectively funds a State service - and they are providing a service to the State - but is not necessarily profitable?

We have to remember the marketplace is completely different now that we have significant interest rate rises as has happened over the past 12 months. This makes things very volatile for landlords. I am not speaking for landlords, I am speaking for those who have mortgages, of whom some are landlords many of whom have mortgage difficulties and challenges themselves. The secondary part of the Bill obviously purports to give some rent-back scheme, similar to renters, in order to give them some tax back or some credit in the same way. The levels at which the rates have increased and the amount of money being paid per month and per year dwarfs this into insignificance. It is a welcome attempt but it is too little and some will say, too late, as many will be under immense difficulty from a mortgage holder’s perspective and indeed from a landlord's perspective. This is welcome and a couple of questions will arise during this on the rent-a-room scheme. Does it extend to the rent-a-room scheme? Why only apply it to mortgages of €80,000? Why not apply it to mortgages above €500,000? A few questions arise. Ultimately, this is an emergency. When the banks got into difficulty, as we all remember, 296 pages of legislation was produced and a significant amount of money was involved, which was needed at the time. A similar response is needed now. A couple of quid to landlords is welcome. We need landlords more than they need us.

An Cathaoirleach

I thank Mr. Hall for the summary of his presentation and the clear concise nature of it and his views and opinions pertaining to same. I call on Mr. Kennedy to give his opening statement.

Mr. John Kennedy

I thank the Chair for inviting us today. I am John Kennedy, president of the Institute of Professional Auctioneers and Valuers, IPAV. I am joined by Ms Lisa Kearney, senior vice president of IPAV.

IPAV has more than 1,500 members. We operate a comprehensive system of professional education and development for members and for those wishing to enter the profession. IPAV welcomes the introduction of the residential premises rental income relief and the mortgage interest tax relief in budget 2024.

In regard to the mortgage interest difficulties at present, the challenge with increased rates for borrowers is the ability to fund these. Many borrowers were taken aback by the pace of mortgage rate rises last year and cashflow difficulties arose for many. On the extra repayments, four scenarios arose. Borrowers funded the increase from surplus monthly salary or from savings as there was no surplus salary to absorb the extra cost. This may not be sustainable for many as the borrowers' savings could erode. In another scenario, borrowers were not able to meet the extra repayment or borrowers moved their mortgage from tracker to fixed rate mortgage, so they had certainty for the fixed term.

In our submission document on this matter, we recommended that relief interest is capped at €10,000 to give a maximum income relief of €2,000, which is €166.66 per month; the outstanding loan balances range of €80,000 to €500,000 should be removed, for example, the range penalises a mortgage holder who has say €50,000 of a mortgage to, on the other hand, a mortgage holder of say €750,000 of a mortgage; and we are concerned about the requirement to file a tax return to obtain the relief, given it is well known that considerable refunds are not claimed by normal PAYE taxpayers. We recommend the aim that borrowers' bank credits, the refunds to a bank account nominated by the mortgage holder directly, be given in February 2024 as a lump sum refund. As of this morning there was a submission from an accountant to try to log the actual tax refund; it is not available currently with the Revenue Commissioners to submit and get the actual refundl. I do not know whether the committee is aware of the fact that the actual Revenue software system does not support the refund at the moment.

On investment property owners' difficulties, rental income is taxed at between 52% to 55% for higher rate taxpayers. Investment property owners are allowed to deduct property expenses and mortgage interest but the actual mortgage repayment is not deductable. If investment property owners purchase fixtures they do not get a full deduction in the year of purchase but get a deduction for 12.5% of the cost of the fixture over eight years. Given the above, different scenarios arise for investment property owners - a cashflow deficit whereby the investment property owner either has to fund the deficit from savings or monthly income but the reality is that owning the property is costing the owner; a cashflow surplus arises whereby the surplus can be small, moderate or substantial; or the property is break even.

Many investment property owners are normal PAYE tax workers, who may be accidental landlords. Common examples would be an owner who would have bought a small property and subsequently got married so needed to purchase a bigger property for their family, or someone who bought an investment property, or properties, many years ago or inherited a property. Clearly, in a scenario where a deficit arises for an investment property owner, it is not sustainable for them to retain the property. The big challenges they face at the moment are a high income tax liability on the rental income each year and increased mortgage repayments. Many investment property owners find themselves in a straitjacket as a result and reach the conclusion that they cannot afford to continue in this loss situation. In our submission document on this matter, we recommend that the relief should be increased by a further €200 per year and be given in the form of a credit, like the married credit. For a landlord who has a section 23 property - that is probably less prominent now - in reality they will not benefit greatly from this so we recommend the relief be given as a form of credit, as outlined. For a landlord whose expenses exceed the rental income in a tax year he or she will have a taxable loss so do not appear to be able to avail of this and, hence, we recommend the relief be given as a form of credit, as outlined. Finally, we are concerned about the clawback provision and recommend that this be removed. The sentiment on the ground is that any sort of conditions are feared by the landlords. Whether significant or not, that has not been communicated and they are not. They are afraid to avail of the tax credit, which is an issue because they fear that there are other conditions buried in that.

In summary, we welcome the changes but feel greater supports are needed, and changes should be simple and straightforward in their implementation. I would also like to echo some of the comments of Mr. Hall who spoke very eloquently.

An Cathaoirleach

I ask members to respond in the usual order, as per our own rules and regulations. Deputy Conway-Walsh is first.

Deputy Rose Conway-Walsh

I thank both Mr. Hall and Mr. Kennedy for their statements.

On mortgage interest relief in terms of the parameter for qualifying of having a mortgage remaining of more than €80,000, I know of many people where the amount of their outstanding mortgage is less than €80,000 and they happen to be people who are on very low incomes. They are people who are parenting on their own and are really struggling. What do our guests think the rationale was for ensuring those people would not benefit? Can they see the rationale?

Mr. David Hall

I do not think there was any. I am sure, somewhere along the line and buried in the Department of Finance, that there is some logic but it makes no sense. I say that because many older people who are nearing the end of their life or are retired have peripheral tail ends of mortgages remaining and there seems to be an injustice in them being penalised. Arguably, as one goes into the higher scale, people get a bit excited about people with larger mortgages as it is assumed that there is a natural correlation to their wealth. There is an asset wealth but not a real wealth. The point made by the Deputy is 110% correct. Many people have worked and have gone through the crisis, have survived and have a modest mortgage, which they are very fortunate to have and are very thankful to have. However, in the past 12 months these people have been penalised because, again, there has been a bit of an obsessive compulsive disorder regarding people with tracker mortgages and the Department thinks it is okay for those with tracker mortgages to be punished. There is no logic in penalising a very special cohort of people who are as vulnerable. Just because they have a low mortgage does not mean that they are super wealthy, safe and secure. Plus, the cost of living and everything else that has happened with it will have caused great difficulty. I, respectfully, would say the same applies to landlords as they are in the same situation. It does not correlate to what the assumption is and I think the provision is a silly insertion.

Deputy Rose Conway-Walsh

Yes, I agree with Mr. Hall.

Ms Lisa Kearney

On the same point, the people who are above the threshold were forced into this, a lot of the way, by competitive bidding and rising house prices. It is not as if these people intentionally decided to get a house worth over €750,000. A lot of those houses might have been on the market at a lower price but with the scarcity of housing at the moment, and competitive bidding, buyers were forced into paying that price. Therefore, it is very unjust on both sides, both under €80,000 and over €500,000.

On another point, the maximum value of the relief is looking at about €1,250 per property. It is estimated that only 165,000 mortgage holders will benefit from this relief at the moment. The Banking & Payments Federation Ireland has produced statistics which show there are more than 712,000 mortgage holders in this country. Therefore, the fact that only 165,000 will benefit from the relief speaks volumes, and I think it is a very poor return.

Deputy Rose Conway-Walsh

Yes, I agree. We have proposed that for a long time but what came out the other side from the Government has been very disappointing. My time is limited so I do not want to dwell on the matter.

I cannot make sense of the interest relief for landlords because rents are higher than ever. Rent pressure zones have been mentioned. Let us consider County Mayo and Westport, which is a rent pressure zone. In the rest of that county, landlords can on any day of the week or month of the year, which they have done and I know of many such cases, say to tenants "I am increasing your rent by another €300, €400 or €500 a month". If tenants do not like it there is nothing they can do and there are no other properties to rent so it does not make sense to give the subsidy. I understand that the subsidy will cost €459 million, which is a lot of money. We are in a time of ever-increasing rents and rents have never been higher so why a subsidy? It has been claimed here that the subsidy will help change behaviour and stop people from selling their properties but where is the concrete evidence that shows that? I ask our guests to explain the matter.

Mr. David Hall

There are two parts to this matter. We are trying to fix a problem that arose over the past decade or two due to utterly bad housing policies. There are all of these little insertions coming in but it is a small amount of money and small collective quantum. The sum of €450 million is very significant but for the individual people involved it is quite small.

On rent pressure zones, there is a lunacy and impracticality around them. There is the bureaucratic nonsense encountered by the people who are looking for homes and looking to rent places. A client of ours, Lisa Brady, was on "The Late Late Show". She is a lovely lady. Her landlord is good but she lives in a rent pressure zone in Clondalkin where the limit is €1,000. Local rents now are €1,900 and the limit cannot be increased so Lisa is forced to avail of homeless accommodation. It is crazy to give a landlord relief when there is an opportunity for rents to be synchronised locally. It makes common sense to ensure rents are synchronised locally rather than have Ms Brady go into emergency accommodation, which costs a fortune each night for herself and her three children, or avail of emergency HAP at a rate of €1,950. At that level there is a whole host of dysfunctionality. I do not need to tell the Deputy about the matter. The Deputy and her colleagues are well aware of the issue, and have spoken about it in many other fora outside of here. There is an element of dysfunctionality and the relief is like a sticking plaster being stuck in among a massive haemorrhage.

Deputy Rose Conway-Walsh

Why give a subsidy to somebody, say in Castlebar today, who can tell a tenant that he or she must pay €400 extra and the total rent now to be paid is €1,500 a month?

Mr. David Hall

In my experience there is a handful of bad landlords. Despite the good name that landlords have, there is a handful of greedy landlords but there is a handful of greedy people in all walks of life and society. Strokes are being pulled left, right and centre and people will act inappropriately so a stronger mechanism is needed to deal with them.

To answer the Deputy's question, the Residential Tenancies Board canvassed a number of landlords about eviction notices or notices to quit given to tenants. The board learned that there were 5,735 such notices in the second quarter of 2023, and 63 tenants said that they were a direct result of the landlord wanting to sell up. What is proposed seeks to prevent landlords selling up. Will the initiative prevent that? I am not sure that it will. The proposal also seeks to compete with the fact that the REITs have been given a much faster, bigger and more significant phenomenal vulture tax windfall.

Deputy Rose Conway-Walsh

Surely that is the problem. From the beginning incentives or budget funds have been given to the real estate investment trusts but that has created an inequity and the new initiative seeks to fill the gap. Surely the solution is to take the relief away from those who commodify houses and make millions and billions of euro.

Mr. John Kennedy

I do not think one can put REITs and landlords in the same category.

Deputy Rose Conway-Walsh

No, I would not do that but one puts them in the same box by saying there is an unfairness.

Mr. John Kennedy

One is saying that it is unfair but they are exclusive. What has happened is that they got massive tax relief-----

Deputy Rose Conway-Walsh

They did.

Mr. John Kennedy

-----and that is completely unfair but that is not what we talked about.

Deputy Rose Conway-Walsh

Does Mr. Kennedy think that it was right to give them massive tax reliefs or make things tax free?

Mr. John Kennedy

In hindsight, no.

It is too much. The landlords are our clients. We are acting for the landlords. The sentiment that is coming back from them is that they have been subjugated. This was supposed to give them some sort of an olive leaf to bring them along and encourage them not to leave the market because if they do, rents are going to go even higher because there will be less supply. This was brought in to try to mitigate landlords leaving the market. As Mr. Hall said, the small subsidy per landlord is very small. As to whether people outside the rent pressure zones should get a subsidy, maybe that was missed and should have been considered. That does not mean the whole thing should be scrapped, however. I do not know in that regard. I think something drastically needed to be done for landlords in that regard.

Deputy Rose Conway-Walsh

Do we know how many are selling because prices are at the top of the market? Looking into the future, I cannot see that house prices will continue to escalate. Surely, they are not going to continue to escalate all the time. They must be reaching some limit. Would that not be the optimum time for anybody to sell? In terms of the timing of when people bought these properties as investment properties, and they are now coming of age-----

Mr. John Kennedy

They are maturing, yes.

Deputy Rose Conway-Walsh

If you like, it is a natural cycle rather than-----

Mr. John Kennedy

On the flip side, however, nobody is coming into replace them. The whole system is set up not to be conducive to an individual landlord filling that void. Therefore, we have people exiting the market and nobody replacing them in terms of coming to the table.

Mr. David Hall

The exact point the Deputy made was that when people bought them, they bought them at a certain level. There have been ups and downs and bumps and bruises and they are now exiting the market at the height or at the top as best they can. As Mr. Kennedy said, however, the challenge - this is where there a further incentive needs to be looked at - is about how we encourage the people who are leaving to be replaced by others. All that are going to be left are real estate investment trusts, REITs. While the cost is significant, what is the cost of us housing people elsewhere? We all know about the indignity of people sleeping in and sharing rooms in multiple properties. We do not want to encourage bad set-ups for people on a health and dignity basis. There is a cost involved.

The Deputy's point is valid, as is Mr. Kennedy's reply. These people are not being replaced. If they are exiting, they are not being replaced. One of the big vulture fund sales last year on the buy-to-lets was set at €1 billion. That is what the quantum was for an all-performing portfolio being moved across. There is a six-month lead-in period before that happens. When it came to the actual sale in October, the red-line date, landlords to the value of €650 million transferred, and €350 million cashed in and exited. They are-----

Deputy Rose Conway-Walsh

That is a business decision. When a person commodifies homes, he or she is making very hard business decisions. They are decisions people can make.

I will finish on this. We are spending €459 million on a tax relief at the height of the market when revenues have never been so large and then we have targets in County Mayo like €150 million and €170 million. That would buy hundreds of homes in any county, which are not being provided for at the moment when we missing our targets all the time. The more we talk about this, the more dysfunction is revealed within the system.

An Cathaoirleach

I thank the Deputy. We will move on to Deputy Durkan.

Deputy Bernard J. Durkan

I thank our witnesses for appearing before the committee and for the information they have given. I will take up the theme of the debate at this moment. There are two ways we can replace landlords or how landlords who sell off and go out of business can be replaced. I would be interested in finding out, for instance, about the large transfer that was referred to moments ago, in other words, an investment fund. Who bought those houses? If a big landlord is getting out of business by way of an investment fund to take advantage of the top of the market and so forth, who is expected to buy and who is buying? We need to know a little bit about where we are going. I find it very frustrating that despite all the assistance that is available, and there is a great deal of assistance available, when it comes down to it, there are an awful lot of cases that I deal with where despite all the supports and grants, people do not qualify. The applicants do not qualify.

A typical example is where the county council will set the formula for people to qualify for a local authority loan or a particular classification with regard to registration on the housing list and the degree to which help can be offered, and if people do not fall within that formula, the council can walk away. My worry is about how we accommodate them. How do we help them out? The councils will say, and I know what the reply will be, that people can go on the local authority housing list. No, they cannot, because their income is invariably too high. Therefore, on the one hand, their income is too high to qualify for a local authority house and on the other hand, it is too low for them to purchase a house or apartment or something similar. How do we go about it?

Mr. David Hall

There are two parts. To take the last part first, the social housing system, and the evaluation for the social housing system, is dysfunctional. In a sense, it is too rigid and too fixed. All these views and processes are very bureaucratic, as the Deputy knows and has outlined. Anybody who is within the system will know that housing in general, when it comes even to social housing, which the Deputy mentioned, is very tricky. It is not for the faint-hearted. It is designed to fail. It is not designed to be easy. For all Deputies and Senators in the House, and elected representatives the length and breadth of the country, this is now one of their number one issues on a daily basis. A PhD is required to understand how this thing works

I can tell the Deputy categorically. I am running an organisation with €100 million in assets, 510 houses and 1,500 tenants, and every single day is a very big learning experience with regard to how to manage the bureaucracy of this. I do not think that is going to be mastered, but the Deputy's challenge around the investment funds is a very important issue. That is really the dysfunction.

Commercial is not profit. When people mention the word "commercial", they make the natural assumption that it means profit. There is a lack of a commercial approach to housing. What I mean by that is when we are in a crisis and we have a supply issue and some investment portfolio is for sale, logic dictates that somebody along the line, be it the Land Development Agency or the Department of Finance, through an approved housing body purchases that and instantly brings an affordable housing scheme to the market. There does not seem to be that logic and coherence and drive and energy that is required to do what used to be done in the Ford Mondeo, which is someone driving around as a salesperson knocking on doors looking for stuff. Stuff that is on the open market and closed market needs to be protected to ensure that we do not have rents increase and that we protect supply, be that from landlords or institutional landlords. A commercial approach needs to be taken to protect all those who need accommodation.

Deputy Bernard J. Durkan

What we are seeing now is a progressive increase in the price of houses based on the costs associated with land acquisition, competition, market forces and so forth. The price is going up all the time. One of the things we should have learned from previous experience is that there is no provision whereby the price of housing property can go up all the time and survive. It cannot survive at that. Something has to give in order to ensure those who have invested in homes are protected. I am not suggesting for a moment that we meet housing needs by way of public or private landlords. Members of the public, particularly those with reasonably good incomes, should be able to purchase a house in their own right unrestricted. They were always able to do that in the past. The reason they were able to do that in the past was that they had a couple of options. They could have gone to the local authority, which is a housing body and not a bank, as some people nowadays refer to them. They could get a loan there on certain conditions provided they were in a certain income bracket. It worked very well. In some cases, there were more than the 25-year or 20-year loans and so on, but it worked extremely well. We are missing that.

I am dealing with a customer today who has a very good income that is not to be sniffed at but does not qualify for anything from the county council. This person cannot and will not get a loan from the bank because of the effects of the crash and a previous mortgage issue. We cannot condemn people who were thrashed in the crash either.

We cannot condemn them for saying that if they waited for another five years, their credit would be cleared and so on and so forth. The fact of the matter is they need that now. Waiting for five years, until the credit facilities have been satisfied, is not going to solve the problem. It may solve the problem for the lending institutions but not for the population of the country.

If there is large-scale offloading by investment companies, the question that comes to my mind is this: how many of those companies are funding the construction of particular housing developments? That leads to the next question: are they involved in funding the development in general? Are they funding the builder or developer to build the house, or whatever the case may be? Then they are coming back afterwards and laying down the regulations whereby an applicant for one of these houses, be they affordable or otherwise, is going to increase the rates. I have to say I am amazed at the kind of prices that are being considered at the moment. I have to ask serious questions about the wisdom of enabling that to continue indefinitely. I have a last question, if somebody might comment on that.

Mr. John Kennedy

I am going to nitpick on parts of it that I can answer. I cannot speak to social housing or the structures there are there. Members would know far more than I would.

On the Deputy's question around whether investment funds or REITs are building purpose-built, large developments, yes they are. They are in the market. We do not get any of that business. REITs are not clients of ours. The question is whether those blocks would have been built if they had not funded that. It is a good question. I do not think a lot of them would have been. In one way, they are bringing supply to the market. The Deputy asked about price. The only way to really reduce price is to have supply in the market. That is the biggest driver of affordability. Obviously, we completely oversupplied and it went into a crash situation the last time but right now, in the market, prices are increasing because demand is exceeding the prices. Supply is not growing, and the demand is now suppressed a little bit more by the interest rate increases. That is why we are seeing prices holding and increasing from our perspective. Demand is decreasing because of the interest rate rises, and supply is decreasing at the same time. When the supply is decreasing more and there is more demand than supply, prices increase.

Deputy Bernard J. Durkan

That sounds as if the funds are actually controlling the price and the market.

Mr. John Kennedy

No, I do not think so. When they brought in the exemption of price fixing of the rent caps for new developments, they did not want to hamper new stock coming into the market. That is why the REITs or the new builds are able to price at whatever the market rent is and get a premium for the new builds they are bringing to market. That makes it attractive for them to bring in and build those. As I said, we do not get any of that business. They typically manage it themselves.

Deputy Bernard J. Durkan

Is it true that some housing developments are built and completed, with the exception of some snags or whatever, and are being held up for months in order to see how the price fluctuates?

Mr. John Kennedy

I have no evidence of that. Again, if there were developments, they would be outside of our vision.

Mr. David Hall

The only thing I will say is that they would be more likely to be waiting for Irish Water or the ESB to be connected. There is no arrangement in place with any State body, housing body or association, despite the need for social housing, to have any fast-track mechanism with Irish Water or ESB. They might be sitting around waiting for someone to turn up in a van and connect them.

Deputy Michael Healy-Rae

I must apologise because I am splitting time between here and another committee, which is ongoing right now. At the very beginning, I have an obligation to declare, before I ask any questions, that I have been involved in the rental market since I was 19. I provide accommodation to students, workers, families on HAP and RAS, local authority applicants for housing, doctors, nurses, Ukrainians and all sectors of society. When I am speaking and asking questions, I am obviously using my own life experience in this business but I am also speaking on behalf of the many people I deal with in County Kerry on a daily basis who are involved in the provision of housing. I deal with auctioneers on a daily basis. I would like to think I know a lot about the housing market. I want to preface what I am going to say and the questions I am going to ask by saying I am sure it is a great source of wonderment to the witnesses how people in Dáil Éireann, who shout most about the need for housing, are serial objectors. They object not to ten or hundreds of houses but to thousands of houses. We have TDs who, to their credit, have made 3,000 or 2,800 - and 5,000 by one TD - objections to housing in their own constituencies. They are serial objectors, and at the same time, they are saying we have a housing crisis. Many people in Ireland do not realise that. They do not realise we have serial objectors who use their positions as TDs and Senators to continuously object to housing. That is one of the mysteries of the world.

There was one thing that I was grateful for. I think it was Mr. Hall who said it. He was a small bit factually incorrect when he talked about 40% tax. We must make it quite clear. The actual average rate of tax that is paid is 56%, for example, on €1,000 of rent. I agree because I am dealing with people on a daily basis who are on these housing lists and are paying higher rents. Everybody has to think when they talk about greedy property owners. I welcome the fact that the witnesses are not talking about landlords because we got rid of those people a long time ago. What we have is property owners who rent out properties. That is what they are. They used their heads and borrowed money in the majority of instances, unless they inherited property, which is rare enough. When they get in €1,000 in rent, that is €460. They have €460 to service the bank, insure the property and maintain it to the highest of standards. I hear politicians talking about bad people in that sector of society. Of course, there is bad among everybody. However, the majority of people are good. People talk about religious persons and say, "Well there were bad people". Of course there were but the vast majority of them are very good people. The vast majority of people who are into property are very good people too, and if they were not there, we would be relying on our local authorities throughout the country. This is no criticism of this Government. Absolutely not. I am talking about this Government, the last Government and going back as many decades as one likes to go. We need people involved in the private property market because if they are not there, we would have many more people who would not have accommodation or a place to stay.

My own belief is that I have no problem with people starting out in life renting but I love to see people then getting sorted. It could be that they are allocated a local authority house, and have to wait the seven, ten or 11 years - it depends on where they are - but they would get their own local authority house. There are also the many people, for example, who came to Dublin many years ago and lived in bedsits, which geniuses in government thought it was a good idea to get rid of. They would be damn glad of enough bedsits now if they had them. That will tell you that you cannot rely on politicians a lot of the time. People came to this city from all over, and to other cities, and they rented for a while. Eventually they got going themselves. Now, of course, that is getting harder and harder to do because of the cost of property. Why is property so expensive? There is no supply. Why is there no supply? First, it is so difficult to get planning, when one has all these people objecting. Then, the banks are not lending anymore, and the sums do not actually work out anymore. It is not financially viable now in Ireland to buy a property and rent it out. It makes no sense, whether that is a guesthouse, house or apartment.

Any person would tell you that you would want to have something wrong with you to consider going into that business right now. Between the politicians and media that are on top of you and the fact that you are giving away 56% of whatever you bring in in tax, you would be deranged, insane and fit to be locked up somewhere to think you could make profit out of this.

At the same time, we have politicians shouting about greedy people. If we take away all the greedy people, what will we be left with? We will have a hell of a lot more. The people who shout the most about housing in Dáil Éireann and everywhere else never provided so much as cover for a hen. If you were relying on those people to do something positive, I can tell you that they are doing nothing positive. What is being proposed, including the incentives, is absolutely ridiculous. The only good scheme is the one that helps a very small number of people in a very small way. I refer to the rent-a-room scheme and the expansion of it. That was a great scheme. It was brought in many years ago by, I think, Bertie Ahern. It was a good, sound, sensible scheme. If a person had a spare room in their house, they could rent it out and obtain tax relief on the income involved.

We need meaningful changes. In my own stupidity, I thought that because of the crisis the Government would realise that it needed to do something meaningful in the budget. I was waiting for it to happen with previous budgets but it did not. Neither did it happen with the most recent budget. What is being proposed now is absolutely nothing. I very much appreciate the witnesses being here and I appreciate their experience. However, if anybody thinks that the existing incentives will encourage one person to stay in the private rented market, they are raving. At the moment, we have an exodus out of the rental market. We do not have a supply coming on stream because nobody is getting into the market. Those in the market are getting out of it. The only people who will stay at it are those who are long established. I am not talking about big people in this at all. Rather, I am talking about people with one or two or five or ten different properties that they might have rented out. People who have been at it a long time might stay at it. Will there be any such thing as new people coming into it or anything like that? Not at all. If people watch “Oireachtas Report” or “The Week in Politics”, that is enough to send them straight to the auctioneer to say, “Sell it right away. Get rid of it because I do not want this hassle." Why would they want the hassle?

My life experience tells me that you deal with some of the nicest people in the whole world and you get to see them going through their stages in life, namely, being young, starting out and then going off on their own. It is lovely to see that. However, you certainly have the hiccups along the journey as well. Those hiccups can be very expensive. Nobody in politics wants to admit that because it is not a popular thing to talk about. Those are the nightmares that some people go through. Politicians would not want to repeat those stories at all because there are no votes whatsoever in what I am referring to. That should be camouflaged and hid under the table. I have dealt with an awful lot of property owners over the years - not just in Kerry but throughout the country – who have told me what they have been put through and the fact that people can now stay in a property for a very long time and not pay not so much as one penny of rent. I would hate to see people being painted with the same brush. Definitely, the majority of people are sound, honourable, straight, respectable people, as are the majority of the property owners. Of course, there are rogues on all sides.

Regarding regulation, which is great, I compliment our local authorities on the standard they set. In other words, housing inspections are brilliant. Whether it is from the point of view of fire safety, ventilation and so on, it is great to have that sort of regime. It is proper and right. It is no more than farm safety and having things right on the farm or having things right on a building site. Things must be right in your sector as well. Remember, one thing that is definitely not right is to be paying 56% tax and to think you will be providing that service and the Government is putting no incentive whatsoever in place.

If any of the witnesses were the Minister for Finance tomorrow morning and budget day was looming, what would they say with regard to taxation? What would they say with regard to trying to incentivise the market? I do not care who will be in power in the future. If I thought they could, I would be delighted, but I cannot in my lifetime see any Government being able to provide all of the accommodation needs for the different people, whether it is students, workers or people waiting on the housing list. Where will they put them all?

Just to show how foolish policies can be, remember it is not that long ago when, in all seriousness, a person said that after four months of being here, we will give people their own homes and a legal right to them. That was to people coming into this country. Imagine making a promise like that to people who are not in the country. Where did they think those homes were going to come from at a time when we have thousands of people languishing on our own housing lists? Those people could come here and we would guarantee them a legal right to a home. They could have sued the State if that law had been adopted. If they were here for four months and did not get a key to their own liveable property, be it apartment or house, that was assigned to them, they could have sued the State. We were actually going down that path. We had people in the Dáil shouting about it and saying, “This is great. Bring it on.” Where were the houses and apartments going to come from? People are living in cuckoo land. Some people’s lack of knowledge of the housing market is frightening.

At my clinics on Fridays, Saturdays and Monday nights, I hear from hundreds of people. I voted against the abolition of the eviction ban because I thought it was going to cause an awful lot of people to face having to leave their properties. The reason I thought it was wrong at the time – I still do and have been proved right – is because the number of people now on notice to leave their properties is frightening beyond belief. These people are coming to me with horror in their eyes, saying they have been served with that paper and have to leave. Where will they go? There is nothing in the market for them to go to. These are people who were paying their rent. Of course, I respect the property owners. Perhaps they want to sell because of all the reasons I have outlined. However, where will those people go? It is an impossible situation, and what is being proposed will not solve it. If any of the witnesses were Minister for Finance tomorrow, what would they do? I hate to put them on the spot but I would love to hear their answers.

An Cathaoirleach

How much would they have available?

Mr. David Hall

Mr. Kennedy is looking to me to go first. Thanks, John. I have a few comments. One of the most important things is that this is ultimately about people at different stages of life, different circumstances and different financial situations. It is sometimes forgotten, depending on the comments made, that these are humans and accommodation, and a home is one of the most basic rights. Whatever construct that might involve, be it social housing, a rental, cost rental, RAS or whatever, is irrelevant. Regarding whether people are employed and well paid, those who are well paid are as equally frustrated as those who are not well paid because they cannot get accommodation; it does not make a damn bit of difference. Ultimately, a lot of gesturing, shouting and roaring happens.

If anybody has a conspiracy theory to the effect that politicians were trying to protect landlords, the Bill is pathetic in that regard. It does nothing. There is no way anybody was trying to protect landlords or property owners in giving such a pathetic incentive. It is incumbent upon everybody to remember that housing has a massive impact on people, not only in terms of shelter - tonight the temperature will be -5°C - but also on mental health, dignity, living, relationships, development of communities and employment. Every single aspect of life, including mental health and our health services, is integrated with and linked to housing. Unfortunately, in a place nearby to here, people operate out of silos and deal with matters using calculators.

Ultimately, this is about humans and the connectivity of all of that has a massive impact and a cost way beyond €449 million. It sounds vast, but it is an insignificant sum to those people and their kids who are without accommodation and certainty.

One of the most important things that has not been mentioned at a time when there is a lot of commentary about renting is the fact that we do not have a European rental scheme or have not had a system of certainty for 25 or 30 years. When we say that people are gasping for oxygen in trying to get a place for 12 or 24 months or do not have security of tenure at all, that has nothing to do with the property owner or the landlord. It is purely about people trying to survive where they are.

There is a bridge from infants to primary and secondary school. That is all people see. In January, everyone says it is a new year. In housing, the new year is the beginning of the school year in September. That is real life. It is not an academic calendar year. If I was Minister for Finance, I do not think I would last long. I would spend everything very fast.

We need meaningful incentives and not just from a regulatory perspective. We need to recognise the emergency we are in. The regulatory system needs to be examined. The condition of properties and the status and standing of tenants needs to be addressed on a graduated scale to encourage people to come into the market. Obviously, there needs to be a financial incentive.

More importantly, things need to be done in a non-bureaucratic way. Mr. Kennedy mentioned the system of going through Revenue and everything else. It is not about somebody being blind; rather, part of the incentive needs to be the access and not just the quantum. A meaningful amount of money needs to be given back in tax credits, up to 50% of the rent. The example I gave earlier was 40% for a person; other people's circumstances are slightly different. The Deputy is correct. The rate of tax is 56%. It is a joke. We need landlords more than they need us. This is part of the solution to a major issue.

Deputy Richard Boyd Barrett

In my area, the average rent is €2,500 a month. A person will require €30,000 a year in after-tax income to pay the average rent. That is pretty much 100% of all of the after-tax income of the average worker. It is completely unsustainable. How do we address that completely unsustainable and unaffordable rental situation?

Things are worse in my part of Dublin. In most areas of the capital, however, when people find themselves evicted through no fault of their own because the landlord is selling the property for whatever reason or when they have to move out of their parents' home because it is unbearable or have a partner and kids and need somewhere to live, they are in deep trouble. I get the point that there is a big difference between some really nasty landlords - I have seen quite a few of them - and decent landlords. I have experienced good and decent landlords and I have also experienced the really ruthless ones. I will not go into the stories. I get that distinction, and I certainly would not be one for tarring everybody with the same brush. However, the problem is that with rents at that level, good, bad or indifferent, that is what landlords are charging. That is not affordable.

I suspect Mr. Kennedy will disagree with me, but I am not sure what he will say. We have to control rents and bring them to a level that is affordable for ordinary people. Our party view is that we should set rents. That would deal with some of the anomalies of RPZs. The legislation refers to an increase of 2% which means that rents are going up for those that might start at €2,000 or €2,500. A decent landlords who kept the rent at €500 month is limited to that percentage increase. Such landlords may well decide to get out of the market. To be honest, I am not massively sympathetic toward landlords who want to increase rents to €2,000 or €1,500. They have a case for saying that a rent of €400 or €500 may be a bit low. A better way to set rents would be to do what they do in some jurisdictions, namely, assess a property, have rough guidelines for what landlords can charge per metre squared and try to align those rents with what is affordable for people. We would then set rents at affordable levels. That is the sort of rent control we need. I am interested in hearing the comments of Mr. Kennedy on that proposal.

Dr. Lorcan Sirr made the good point that in places where there is more regulation of the rental sector, that leads to more rather than fewer rental properties. Regulation of the rental sector is not necessarily something that disincentivises landlords. Some of the most heavily regulated places have huge numbers of private landlords operating, but there is more security and certainty for everybody and more control and regulation. I would be interested in hearing comments on those matters.

Mr. Kennedy seems to be saying that the rent relief will not make much difference. In total, it is €450 million. That is quite a lot of money. If it will not make much difference and stop the haemorrhaging of small landlords from the market, then I do not see the point in it. To be honest, the people who are paying €2,000 or €2,500 per month in rent will not have a lot of sympathy for the idea that where there are limited resources, a sum of €480 million is being distributed to little effect to give landlords who are charging €2,000 or €2,500 per month an extra €2,000 or €3,000 each year, which is what it will do. That does not seem like a fair expenditure of limited resources. It would have little effect in terms of actually dealing with the rental situation. Maybe Mr. Kennedy could respond to some of those points.

Mr. John Kennedy

Much of the debate has centred on price, and we then moved to affordability from the point of view of the tenant, which is key. That should not be at the cost of the affordability of being able to sustain being a property owner. There is an old Newton's law of physics that for every action there is an opposite and equal reaction. For everything that was done for the tenant positively, which I have no problem with, no consideration was given to the other side in terms of creating equilibrium.

Deputy Boyd Barrett referred to fixing rents. Is it profitable to continue to be in that investment class if private landlords or owners continue to supply that? The burden has been put on the individual rather than the State in terms of dealing with rising rents. As I said, landlords are being subjugated. I understand the figure for rent is about 40% of net take-home pay. Even at a rate of 30%, people are overburdened in terms of paying a rent or mortgage. It is outrageous to have to put that much net income towards rent and have no disposable income left.

The problem with RPZs is that there is no relation to whether the cost of supply is linked to them. That has been a major policy fault.

We do not think of the other side. The result, unfortunately, is that the very opposite of the thing the RPZ system was set up to do has happened. There is less supply because of the RPZs and there will continue to be less supply in the market. I would like to see more reasonable rents for tenants. That can be achieved through supply. The RPZ system ultimately does more damage in the long term than-----

Deputy Richard Boyd Barrett

I have a quick supplementary question. I know Mr. Hall probably wants to come in. Mr. Kennedy has said what he has said, and it is a point to which Deputy Healy-Rae alluded. I often hear that mantra. I ask Mr. Kennedy to respond to the following. I challenge whether in practice, rather than in economic theory, an increase in supply brings down price. The obvious example is the Celtic tiger, where that did not happen. Prices and rents went up. Supply is ramping up in my area at the moment but there is no sign of prices coming down at all. In fact, if anything, they are going up.

Mr. John Kennedy

There is a latency to that. The Deputy is talking about the economic theory of supply and demand. People may be unable to rent their properties because there is a better or cheaper option around the corner and buyers or renters will substitute and go there to buy or to rent. No one would rent a more expensive property that is of lesser quality or exactly the same quality as the alternative. Price is controlled by supply. Standards also increase when there is more supply because people are competing against each other. Economic theory absolutely applies.

Mr. David Hall

I will return to the Deputy's original point when he said that household income needs to be €60,000. I looked at a case recently in Honey Park in the Deputy's constituency. A mortgage on a property there is now €400,000. A property owner's tracker mortgage now costs €5,000 per month. That property owner is funding the State to house a nurse and her husband. That €60,000 becomes €30,000 net rent. The owner of the property is paying a further €15,000 in tax. While there is €450 million being sent out, I do not know how much will be reclaimed. That is the total exposure on a good day when the computer works and everybody fills it out. It is not made as easy as that. That is the full package when all the people in the country who are eligible, some 165,00 people, are doing it. That will not happen. It is not an appropriate level.

Everybody is losing. Everybody is taking a cut along the line. This is an emergency. It is a single lens through which to view a much bigger and more complex problem. If we fix or control rent, that property will be gone in a heartbeat. On RPZs, I referred earlier to a lady, Lisa, whose rent with her landlord is stuck at €1,000. It is completely illogical not to be sitting down, as in arbitration, to say that €1,000 is crazy and €2,500 is mad, and adjusting to €1,600 and asking to stay. There is no commercial logic or sense to protect those tenants who are there at the moment. It is not just a quantum. There is a process failure involved in that regard. The people who own those properties have a debt on the properties and that debt is a mathematical equation that is completely out of control at the moment. Fixing rent would bust those people in a heartbeat, in my view.

Deputy Patricia Ryan

I agree with what Mr. Hall said about the ESB and Uisce Éireann. I am inundated with contact from people who cannot get into houses and are waiting for months. It is a disgrace. That is the first thing I will say. Deputy Boyd Barrett was talking about the cost of rent in his area. In Kildare, the average rent is €1,450 per month. I represent the south Kildare constituency, which is very different from the north Kildare one because north Kildare is in the commercial belt so there is more employment and benefits to that. In south Kildare, we still have quite a high level of unemployment, in particular in certain towns such as Athy and other areas that are not very well off and where poverty is an issue. Renting and getting houses is an issue there. There are 7,000 people on the Kildare County Council waiting list. Houses are not being built to fix that, which is an enormous problem that we need to address.

In the light of all that, I want to ask about the recent bulk purchasing of family homes for rental at huge rates by vulture funds and institutional landlords. Why do these enormous institutional landlords pay no tax on their rental properties? Ordinary landlords can be subject to a rate of 52% of tax on their properties. How does this disparity of treatment incentivise ordinary landlords to remain in the market? What measures would our guests envisage to address that disparity?

Mr. John Kennedy

We do not represent real estate investment trusts, REITs.

Deputy Patricia Ryan

I know that.

Mr. John Kennedy

It is clear the situation is unfair. I do not know why it has not been pulled back a little. I understand that during the crash, the Government wanted money coming in to plug a hole. It threw out massive incentives to get as much cash in as possible to create a catalyst. The estate agents, our members, got no benefit from that. The country got back on a good path and whether that was part of the catalyst or not is debatable. Certainly at this point those tax incentives and benefits seem to be unfair. I do not know why it has not been clawed back at this stage.

Mr. David Hall

I would have a slightly stronger view. The red carpet was shown to vulture funds. Their bellies were tickled and they were brought in. What other jurisdiction in the world allows vulture funds to legally set up a charity and gives them automatic charitable status? Other charities the length and breadth of the country are being tortured by bureaucracy and waffle from the regulator, yet we opened the door, put out the red carpet and tickled the bellies of vulture funds. At one stage, the Department of Finance met vulture funds on 65 occasions and met debtor organisations on three occasions. It was obscene. I know capital had to be brought in but an element of control has been lacking. This is money that is being presented as expenditure by the State. How much money has been lost and left in the back pockets of vulture funds? It is a completely unequal comparator. It drives me bananas and is frustrating to see. With respect, some of the Deputy's colleagues, those who are here and not here, say this is a lot of money to be putting in the pockets of landlords when we have left billions in the pockets of vulture funds. We need to go and address that.

Deputy Patricia Ryan

I agree. I am dealing with people who are in homes owned by vulture funds. They are worried about when they turn 65 and are no longer able to work. How are they going to keep a roof over their heads and pay €1,500 to €1,700 per month to do so? It is becoming a huge problem for the people who are coming through my door in my constituency.

With regard to mortgage interest relief, particularly those standard variable loans already sold to vulture funds, and passing an increased cost risk to the relief scheme, have any of our guests had any further engagement with the Minister, Deputy Michael McGrath, on pathways for mortgages to return to high-street banking entities from non-banking vulture funds to protect mortgage holders from price gouging?

Mr. David Hall

I will give the Deputy a few blood pressure tablets after the meeting. I was before the joint committee on finance and said the same things. We were assured at the time that vulture funds would protect consumers in the same way that the mainstream banks would. The Central Bank has been fast asleep for many years when it comes to consumer protection. It has a dual regulatory function in relation to funds and banks, which is completely inappropriate, unsafe and not in the consumers' best interests. I met representatives of the vulture fund Pepper Finance on Monday. It has a structure that allows it to charge 9% interest rates. Believe it or not, the mainstream banks have held back quite well because they have gouged us in respect of deposits. They have held back on rates and have made great profits. They are terrified of touching them because the profits for last year will be rocket fuel. We borrow, transact and owe so much money but hedgehogs have more rights. There is an association to protect hedgehogs that are walking across the road. It is frustrating that politicians, the Department of Finance and the Central Bank fed into the media that people should not be worried if they are moving to a vulture fund because they will be protected and their consumer protections will follow them. Those were utter lies. Everyone needs to be clear and careful about that. In one of our submissions to the committee, we refer to the Central Bank rules on capital for those who get into mortgage arrears. It will inevitably happen again because all the lenders are preparing for another mortgage arrears crisis, as is the Central Bank, which the Governor told us face to face.

If they do that, the Central Bank is the one that applies pressure. Let us be absolutely clear. It is a stupid rule which the Central Bank introduced that required banks to hold capital on par with those in arrears that forced them to sell to vultures and that is an organisation that is held to account to this House.

Deputy Patricia Ryan

So I have no solution for those who are in vulture funds currently.

Mr. David Hall

No. If people are under pressure, Pepper will reduce it. Mars Capital will also. Those are the two that have been most engaging in relation to interest rates and will look at fixing them and reducing them, by 2%, for those who are eligible.

Hopefully, the rot has stopped - the rate rises have stopped. We will hopefully see a decrease. There is not great excitement about that at the moment but I would say the most important thing with anybody in difficulty is that they must engage. There is MABS, there is the insolvency service and there is ourselves - the Irish Mortgage Holders Organisation. We receive referrals from all of the members' colleagues all the time. They do not, and should not, do it on their own.

Deputy Patricia Ryan

I thank all the witnesses and thank the Chair.

An Cathaoirleach

One should avoid mentioning company names if at all possible during one's contributions.

Mr. David Hall

All the vultures.

An Cathaoirleach

Strange as it might seem, it is just something for us to be careful and conscious of, especially given what I said initially before we began.

Aside from that at all, and I have no problem with that, I thank the witnesses for their contribution and for the manner in which they sought to respond and give further information in their responses to the members. We are thankful and appreciative of them making their time available to do so.

The select committee adjourned at 7.01 p.m. until 5.30 p.m. on Wednesday, 24 January 2024.