Amendments Nos. 1, 54 to 58, inclusive, 60 to 64, inclusive, 66 to 68, inclusive, 111 and 113 are related and may be discussed together by agreement.
Planning and Development (Housing) and Residential Tenancies Bill 2016 [Seanad]: Report Stage
I move amendment No. 1:
In page 5, to delete lines 30 to 33 and substitute the following:
“(3) (a) Subject to paragraphs (b) and (c), this Act comes into operation on such day or days as the Minister may appoint by order or orders either generally or with reference to any particular purpose or provision and different days may be so appointed for different purposes or different provisions.
(b) Sections 32 to 36, sections 45, 46 and 50 come into operation on the day following the passing of this Act.
(c) Part 5 comes into operation on the passing of this Act.”.
What are the timelines involved?
The first contribution is open and the second is restricted.
These amendments all relate to the commitment in action 1 of the rental strategy to introduce a time-bound system of rent predictability based on the concept of rent pressure zones.
Under the system, I am proposing that areas where rents are high and rising quickly will be identified and designated by the Minister as rent pressure zones. In those areas, annual rent increases will be limited to a maximum amount of 4%. An area will be designated as a rent pressure zone for a period of three years and the provisions limiting rent increases will apply both at the start of a tenancy and at each rent review.
This measure will give significant rent certainty to landlords and tenants by allowing for reasonable growth in rents while preventing the instability and uncertainty caused by the volatility seen in recent years.
Amendment No. 55 amends section 19 of the 2004 Act to provide that when a rent is being set in a rent pressure zone, either at the beginning or during a tenancy, it may not be greater than an amount to be determined by a formula set out in the section. The effect of this formula is that rent increases will be limited to a maximum of 4% per annum.
To ensure that new supply is not discouraged, the proposed subsection (4) relating to the 2004 Act in amendment No. 55 provides that these provisions will not apply to properties that are new to the rental market or those which have been subsequently refurbished.
The prohibition on charging a rent above market rents will remain in order that as market rents stabilise, rents set for new supply will be limited to the market rent. There is also an exemption from the provisions where the dwelling has been substantially refurbished.
Amendments Nos. 1, 2, 6 and 11 to amendment No. 55 and amendment No. 1 to amendment No. 68 propose that rent increases be linked to the consumer price index rather than the figure of 4%. Amendments Nos. 58, 60, 63 and 64 also seek to link rent increases to the consumer price index. We have discussed this issue several times in the past month in this House and the Seanad. There have been four Private Members' Bills, including three from Sinn Féin and one from the Labour Party. The discussion has been useful. At this stage, Deputies will be aware of my views on the proposals to tie rents strictly to the consumer price index in a blunt way. There are legitimate concerns regarding the potential for rent controls or caps to discourage investment. That is not to say I have not been persuaded by some of the arguments I have heard in recent weeks or by the well thought out submissions we have received from all parties during the consultation process on the rental strategy. I believe there is merit in providing for rent predictability as part of a stable rental sector underpinning a sustainable investment environment. This is why action 1 of the rental strategy commits to the introduction of a time-bound system of rent predictability based on the concept of rent pressure zones that I am introducing today. This measure will give significant certainty to landlords and tenants by allowing for reasonable growth in rents while preventing the instability and uncertainty caused by the volatility we have seen in recent years. Therefore, while I do not believe that linking rent increases to the consumer price index is an approach that serves the interests of landlords or tenants for a number of reasons and while I do not intend to accept the related amendments, I see considerable merit in the introduction of a system of rent predictability and I have provided for it.
Amendments Nos. 3 and 5 to amendment No. 55 provide that the figure of 4% to the formula in the proposed section 19(4) will be 0 instead of 4. Amendment No. 4 to amendment No. 55 seeks to reduce the maximum rate to which the landlord can increase rent annually from 4% to 2%.
The figure of 4% was chosen for several reasons. First, there is a need to ensure a modest but reasonable rate of return on investment. Second, there is a need to moderate the rate of increases in rent for obvious reasons. The figure of 4% means that the maximum rent inflation allowed in rent pressure zones will be less than half the current rate of annual rent inflation nationally. The figure of 4% has been selected on the basis of careful analysis and research as well as extensive consultation with a wide range of stakeholders. The consequences of not achieving the right balance in this case would be singularly negative for the rental market. Too high a level of inflation will not have any meaningful effect on rent levels for households. However, not allowing for some element of growth in rents will drive existing supply out of the market and discourage prospective additional investment. The statement from the ESRI yesterday to that effect is instructive.
The figure of 4% is a carefully measured response to the current extreme pressures in the rental market. It will provide certainty for tenants in the sense that they will not face a rental hike of the order many have seen recently and it will provide certainty for landlords in the sense that they will continue to see a return on their investment in a rent pressure zone. Therefore, I cannot accept these amendments.
Amendment No. 7 to amendment No. 55 proposes to remove the exemption for dwellings new to the market. The purpose of this provision is to ensure that we do not discourage new supply. Therefore, I cannot accept this amendment.
Amendments Nos. 8 and 9 to amendment No. 55 relate to refurbishment. The proposed new section 19(5) of the 2004 Act proposes that the restriction on rent increases will not apply where a substantial change in the nature of the accommodation occurs and where, as a result of that change, the rent would be different to the market rent at the time of the last rent review or at the commencement of the tenancy.
The ability to rely on the "substantial change" reason in respect of rent reviews has been a provision in the Act since 2004. What amounts to a significant change in the dwelling is not specifically defined within the legislation. However, guidance is provided within the Act in the context of a landlord’s right to terminate a Part 4 tenancy on the basis that the landlord intends to substantially refurbish or renovate the dwelling. To rely on this ground for the purposes of termination, a landlord has to provide specific details on the nature of the intended works, to provide planning permission, to identify the contractor retained, if any, and to set out the expected duration of the intended works. It is expected that a similar level of evidence will be required for rent reviews in rent pressure zones.
Where a rent review is the subject of a dispute referral to the Residential Tenancies Board, RTB, a landlord seeking to review the rent on the basis of a substantial change to the dwelling must satisfy an independently appointed decision-maker of the RTB that the changes to the dwelling warrant a rent review occurring. RTB adjudicators and tribunal members exercise a quasi-judicial function, replacing the courts in respect of the resolution of disputes in this sector.
The evidence presented is objectively scrutinised and must relate to a significant change to the dwelling resulting in an increased market value of the tenancy. This would involve significant refurbishments adding to the letting value and may amount to major improvement works or works requiring planning permission. For example, simple repainting or replacement of white goods would not suffice. While I appreciate that the purpose of these amendments may be to prevent abuse of this provision, I believe the processes of the RTB quasi-judicial process are robust and adequate in this regard and, therefore, I do not propose to accept these amendments.
I note that part of Opposition amendment No. 63 also provides for rent increases based on the amount spent on refurbishment. For the same reasons, I cannot accept that amendment.
Opposition amendment No. 10 to amendment No. 55 provides for the deletion of subsection (6) in order that these amendments would apply even where a notice of new rent has already been served. Subsection (6) was inserted on legal advice to ensure the section does not operate in a way that is retrospective. Therefore, I will not accept this amendment.
Amendment No. 68 provides for the designation of areas as rent pressure zones by means of inserting a new section 24A. Under this section, the Housing Agency makes a proposal to the Minister, on foot of which the Minister requests the director of the RTB to make a report whether the area should be designated as a rent pressure zone based on the criteria set out in section 19(4). Where the RTB confirms to the Minister that the area meets the criteria set out in subsection (4), the Minister must designate the area as a rent pressure zone. Section 24A(7) provides that the Minister may revoke an order designating an area on a recommendation made by the Housing Agency, following consultation with the relevant housing authority and the RTB.
A new section 24B provides that, immediately on enactment, the following areas will be designated as rent pressure zones: the four Dublin local authority administrative areas and the Cork City Council administrative area. Additional areas will be proposed for designation over time, subject to the criteria for designation being satisfied. Section 24C provides that the rent certainty measures introduced in December last year cease to apply in an area designated as a rent pressure zone. It is important to note this will not bring forward the next rent review, which will still happen on the basis of the 24-month timeframe. However, after the initial review, there will be a reversion to annual rent reviews thereafter until the expiration of the designation.
I have also given a commitment that we will prioritise the areas that are likely to see new rent pressure zones outside of Cork city and the four Dublin local authority areas. We will be looking at counties like Meath, Louth, Kildare and Wicklow and cities like Waterford, Limerick and Galway, and areas contiguous to Cork city as they are the obvious areas that are likely to see new rent pressure zones, as the RTB provides data on the basis of local electoral areas.
Deputy Ó Laoghaire, when tweeting yesterday, mentioned the fact that rent increases in my own town of Carrigaline were significantly high. Once I get data from the RTB, there is no reason that the Carrigaline-Ballincollig electoral area, for example, as long as it passes the thresholds, cannot be designated a rent pressure zone also. It is very important to reinforce the point that the restrictions we are legislating for here are not solely confined to Dublin and Cork cities. They will be extended to other areas as they qualify, but we will make decisions on the basis of independent analysis and data through the RTB. I think that is the only credible and legally sound way to do it.
Opposition amendment No. 2 to Government amendment No. 68 makes a number of changes to the provision. First, it links rent increases to changes in the consumer price index, CPI, or the average industrial wage. I have already explained my position on the reason for the figure of 4%. This amendment also seeks to involve the Dáil and local authorities in the designation process. The purpose of the Housing Agency’s role in this process is to provide an independent and objective assessment not subject to any political interference. The Housing Agency, which includes the Centre for Housing Research, has a significant research capacity and I believe it is the appropriate body to carry out this role. In regard to the matters that the Housing Agency must have regard to when providing a report to the Minister on the revocation of an order designating an area as a rent pressure zone, this amendment includes three additional matters. I believe that paragraph (d) on the level of homelessness would be encompassed by the operation of the housing market at paragraph (b). I do not believe changes in the CPI or the average industrial wage are appropriate. For those reasons, I cannot accept the amendment.
Opposition amendments Nos. 3 and 4 to Government amendment No. 68 propose to replace “2 weeks" with "1 week" in section 24A(2) and to replace “as soon as practicable" with “2 weeks” in section 24A(3). I have considered these amendments and the arguments in favour of them and I have been persuaded by them. On that basis, I will accept these amendments.
Which amendments are these?
Amendments Nos. 3 and 4 to Government amendment No. 68. They are basically shortening the timeframe by which the RTB has to come back to the Minister when it is asked to look at the data and the numbers for an area. They are basically trying to speed up the process of getting areas designated. I have accepted a number of amendments in the Seanad in regard to this broader legislation and also the spirit of a number of other amendments on Committee Stage. To be consistent with that, I believe we can accept these two amendments, which make sense.
Opposition amendment No. 5 to Government amendment No. 68 proposes to make the criteria for designation as a rent zone area either (a) or (b), rather than (a) and (b). The criteria for determining whether an area is a rent pressure zone were arrived at following consultation with experts in the field and a careful examination of patterns in rental markets around the country, as well as long-run historical trends. The objective was to capture areas where rents have been increasing consistently over a period of time and also where they are already at a high level above the national average.
The combination of the two criteria is a key element of the rent predictability measure being put forward by the Government. Using one criterion alone would not necessarily capture the areas which require rent predictability measures such as this. For example, it is not uncommon for rental markets to display once-off quarterly characteristics that do not necessarily signify a long-term trend. For example, university and college areas often show spikes in September. Therefore, as well as exceeding the national average rent, the Government believes that rents in an area must also show a consistent pattern of annual increases of 7% or more in four of the last six quarters.
This is to take account of the reality that rents in some parts of the country, although increasing, are still well below the long-run average for those areas. Having regard to this, I do not propose to accept this amendment. For similar reasons, I do not propose to accept Opposition amendments Nos. 6 and 7 to Government amendment No. 68, which change the criteria from four of six quarters to two of six quarters, and remove the requirement that the rent be above the national average rent respectively.
Opposition amendments Nos. 8 and 9 to Government amendment No. 68 relate to the three year designation period. An area may be designated as a rent pressure zone for a maximum period of three years. This amendment provides that three months before the end of that period the housing agency shall review that area and make a report to the Minister as to whether the time period for the designation of the area as a rent pressure zone should be extended. Increasing supply is the ultimate solution to rising rents in most places. The Government's proposal for rent pressure zones is intended as a time bound intervention to be made while the market recovers to something resembling equilibrium and the supply side measures contained in Rebuilding Ireland take effect, getting us up to the required 25,000 to 30,000 units per annum by 2019-20. I do not expect that there will be any necessity to provide for further orders after the three year period has expired because additional supply, combined with three years of rent predictability will have eased the pressure in the rental market in the area concerned. I do not, therefore, believe this amendment is necessary and I do not propose to accept it.
Opposition amendment No. 12 to Government amendment No. 55, and Nos. 10 to 12, inclusive, 13, 15 and 16 to Government amendment No. 68 either propose to add additional areas to the list of local authority areas that will be designated as rent pressure zones immediately on enactment of this Bill or to state that the State is a rent pressure zone. I understand the motivation behind these amendments, but the only areas which currently meet the criteria set out under section 24A(4) are Cork city and the four Dublin local authority areas. This does not mean, and should not be taken to mean, that the Government is ignoring rent pressures in other areas. Due to low rents in rural areas of some local authority areas having a drag effect on averages, prices may not have reached rents in excess of the national average. This is why we are putting in place a mechanism to enable smaller geographical areas, the local electoral areas, to be examined against the criteria. Once the Residential Tenancies Board, RTB, has commenced its work, and it has, in looking at the data on a more granular level, it is very likely that areas that have the highest level of demand, for example, areas surrounding Dublin, and the urban areas of Galway, and possibly Limerick and Waterford, will be designated as rent pressure zones within those areas. I have asked the RTB to make this examination an absolute priority. I have given a commitment that by the end of February the areas I have mentioned already will have data that will allow me make decisions. I want to ensure that the process is streamlined, responsive and we will ensure that, once an area meets the qualifying criteria, designation as a rent pressure zone will be swift. Therefore, I do not propose to accept these amendments.
Opposition amendment No. 14 to Government amendment No. 68 provides for an avoidance of doubt provision to state that the rent increase in a first rent review cannot exceed the maximum rent increase limit. I believe that is already provided for and therefore I do not accept this amendment.
Finally, Opposition amendment No. 17 to Government amendment No. 68 proposes to delete section 24C(1)(a). I do not propose to accept this amendment which would move tenants in rent pressure zones back to annual rent reviews immediately. The current 24 month period should be allowed to continue and all subsequent reviews should take place on an annual basis where the tenancy is in a rent pressure zone. That is why when many people have been quoting the numbers in recent days I have taken issue with them because people are assuming that, as we are allowing for an annual maximum rent increase of 4% over the next three years, there will be a 12% or 12.25% rental increase. That is not true for most people. It is a misrepresentation of the facts because many people are not due a rent review for another 18 months or year, or six months. Only after that period when the restrictions are imposed and at the next review the maximum rental increase is up to 4% that we begin to see that over the next three years there will not necessarily be three reviews. In most cases it will be two. It is not accurate to say that everybody will be asked to pay a 12% increase or 12.25% increase, if it is compounded, in rent. It is simply not true.
It is true and I will explain why later.
I am afraid it is not. People are trying to exaggerate for effect. We have said that we will continue to respect what is in place at the moment, a 24 month rent review requirement until the next review so nobody's circumstances are changed in terms of when the next review takes place. Only after that takes place will limitations of the rent pressure zone apply and annually after that.
Amendment No. 54 provides for an additional obligation on a landlord at the beginning of a tenancy to provide a tenant with details of the previous rent under a tenancy, and a statement as to how the rent has been calculated under section 19(4), so that a tenant can ensure that his or her rent complies with the legislation. Opposition amendment No. 1 to Government amendment No. 54 provides that, in addition, the landlord should provide the tenant with a certificate from the RTB that the rent is in compliance with the Act. The RTB registers over 100,000 tenancies a year. That does not take into account the numbers of rent reviews that would arise within tenancies. The resources required to allow the RTB to check each rent increase would be prohibitive. I believe that by providing the tenant with the appropriate information, these provisions will be enforced and disputes taken to the RTB where necessary. Therefore, I do not accept these amendments.
Government amendment No. 67 makes a similar amendment to section 22 of the 2004 Act to provide that when a landlord is serving a notice of new rent, the tenant is informed as to how the rent is calculated having regard to section 19(4) and whether the landlord is claiming that any exemptions apply. Opposition amendment No. 1 to Government amendment No. 67 provides that, in addition, the landlord should provide the tenant with a certificate from the RTB that the rent pressure zone measures do not apply to the dwelling. As I mentioned earlier, the RTB registers over 100,000 tenancies a year. That does not take into account the numbers of rent reviews that would arise within tenancies. The resources required to allow the RTB to check each rent increase would be prohibitive. I believe that by providing the tenant with the appropriate information, these provisions will be enforced and disputes taken to the RTB where necessary. Therefore, I do not accept this amendment.
Amendment No. 111 makes a consequential amendment to section 115 of the 2004 Act relating to disputes brought by a tenant to the RTB regarding the setting of a rent. Amendment No. 113 is a consequential amendment to provide that the making of reports under section 24A will be a function of the board. Finally, in recognition of the urgency of the problems that we are facing, amendment No. 1 provides for the commencement of these provisions on the day following the passing of this Bill. It also provides for the commencement of Part 5.
Amendment No. 56 proposes to delete section 19(2)(b) of the 2004 Act. Section 19(2)(b) provides that a reference to the "setting" of a rent under the Act is a reference to both setting the rent at the beginning of the tenancy and at each review. This is an important provision as it is linked to section 19(1). Section 19(1) provides that in setting the rent, a rent may not be set that is more than the market rent. By deleting section 19(2)(b), a landlord could set a rent, by way of review, in excess of the market rent. While I understand that this is not the intention of the amendment, it would be the effect and therefore I do not propose to accept it. It is important that the rent may never be increased above market rent.
Amendments Nos. 61 and 66 propose that the Minister, within three months, brings reports to the Dáil on rent controls, security of tenure and an expansion of social and affordable housing. Under pillar 4 of Rebuilding Ireland: Action Plan for Housing and Homelessness, on the strategy for the rental sector, the Government has set out a practical and readily-implementable set of actions to create a functioning and sustainable housing system. Taken together, and vigorously implemented, the proposals in the action plan and, more particularly, the strategy will deliver a strong viable and attractive rental sector that delivers affordable and high-quality accommodation. The proposals in the action plan and the strategy set out the Government’s position and future plans on rent predictability, security of tenure and social housing. Therefore, I do not believe any further reports are necessary in that context.
Amendment No. 57 seeks to alter the definition of market rent under the 2004 Act. Under the current law, landlords may not charge more than the market rent for a dwelling under the Residential Tenancies Act. Market rent is defined as the rent a willing tenant would give and a willing landlord would take for the dwelling concerned, having regard to the other terms of the tenancy and the letting values of dwellings of a similar size, type, and character and situated in a comparable area. This is a robust definition, which is enforceable having regard to the RTB rent index. I do not propose, therefore, to accept this amendment.
Amendment No. 62 proposes to give a tenant 180 days - six months - notice of a new rent, rather than 90 days. The provision to increase the notice of new rent from 28 days to 90 days was introduced last December in the Residential Tenancies (Amendment) Act 2015 on foot of a recommendation in the DKM report, Rent Stability in the Private Rented Sector. I am of the view that a 90-day notice period is a balanced and proportionate measure, In such circumstances, I do not propose to accept that amendment either.
That is a pretty long submission-----
-----to the process. I wish to say one other thing in the context of rent pressure zones. There has been much conversation in recent days with various different parties, but from my perspective, particularly with Fianna Fáil. There are a number of matters I would like to clarify in that context. Until now, the data has not been available to allow an area analysis deeper than at local authority level. The only local authority areas in which the qualification criteria have already been met according to the most recent available data from the RTB for the third quarter of 2016, are, as I said earlier, Cork City Council and the four Dublin local authority areas. For this reason, I propose to designate these areas immediately upon the enactment of the Bill before the end of the year.
What we urgently need, therefore, is to establish a means by which we can look at more local circumstances in real pressure areas in order that towns or electoral areas can be considered in their own right. Following extensive discussions with my colleagues in Fianna Fáil, the Government is proposing to acknowledge the pressures in commuter towns and counties contiguous to, and in cities outside of, Dublin and Cork. We acknowledge that families and households in these towns are under extreme pressure and face real challenges, as well as having difficult choices to make in their monthly payments. By way of ensuring that other areas can be designated soon and on the basis of sound evidence, we propose to have the RTB look at a more granular level at local electoral area data. The RTB has already commenced this work in advance of the agreement of the legislation by the Oireachtas. I accept the need to immediately examine and include several areas beyond the Dublin local authority areas and, of course, Cork city. On the basis of current trends, these areas are very likely to meet the criteria when data becomes available for this quarter in early 2017.
Any designation of an area as a rent pressure zone must be based on legally-sound data to ensure that it is sound from a legal perspective. I agree with Deputy Cowen and his party that we need to bring in other areas and I think I have made that very clear. I propose, therefore, to instruct the RTB to accelerate its work in order that I can put together the more detailed picture of conditions in these counties and urban areas in smaller geographical areas that better captures pressures. With a more detailed local assessment, it is more likely that the real pressure parts of counties around Dublin, for example, will meet the criteria sooner.
I wish to respond directly to conversations we have had with Fianna Fáil in particular. I am asking the RTB to immediately prioritise the commuter areas of Meath, Kildare, Wicklow, Louth, as I mentioned earlier, areas contiguous to Cork city, and the cities of Waterford, Limerick and Galway. Naturally enough, these are areas that are more likely to qualify as rent pressure zones and it makes sense, therefore, that we look at them first. The director of the RTB will be requested to make a priority to ensure that the data on an area-specific basis is available for all of these areas by the end of February to allow the designation process occur where the qualification criteria have been met. I have also instructed the RTB to progress this work on a rolling basis in order that where data is available for the first areas in January, the process can get under way quickly. If it needs them, the RTB will be given extra resources to get the work done. I expect to be in a position to make new designations by mid-January in some cases.
As already stated, we are accepting amendments Nos. 3 and 4 to amendment No. 68. These propose to shorten the timeframe for the overall designation process, which help to ensure that tenants in pressure areas will get the benefit of protection from the rent pressure zone designations without delay. In other words, I understand the pressure that people are under to try to get other areas included in rent pressure zones. We are going to move as fast as we can to assess those areas but we can only make the decisions to designate areas on the basis of the data.
Following extensive discussions with Fianna Fáil, I confirm the actions that will be taken by Government as part of the implementation of the overall rental strategy. The Government commits to reviewing the effectiveness of the implementation of the rent pressure zone criteria in June 2017 and to asking the RTB to refine its guidelines on the use of substantial refurbishment in order to ensure that the relevant exemption in rent pressure zones is properly applied. It is a genuine concern that some people have that landlords may use refurbishment as an excuse to try to bump up the rent. We need to make sure that if a refurbishment is taking place, it is substantial and that guidelines are clear on that. The Government will ensure the use of the District Court by the RTB to ensure more effective enforcement will be prioritised as early as possible in 2017. There is a strong commitment on that in the rental strategy. In order that the RTB will resolve disputes quickly and enforce those resolutions quickly, it is important that the District Court can be used quickly in that regard. The Government commits to ensuring that the RTB is fully resourced and that it undertakes the enhanced role that is envisaged for it within the rental strategy. It also commits to rolling out the repair and leasing scheme nationally in the second quarter of 2017, as committed to in the strategy, and to bringing forward initiatives to encourage property owners to bring vacant properties into use in the private rental sector, also as committed to in the strategy.
In the broader housing context, the Government will introduce a revamped local authority mortgage product in the first quarter of next year and will also undertake an independent financial assessment of financing costs across the construction sector, which is a concern that has been raised. Finally, the Minister for Finance, as a priority, will establish a working group on tax and fiscal treatment of landlords, property owners and accommodation providers, as outlined in the rental strategy. The Minister will invite Fianna Fáil and all other stakeholders to make detailed submissions to inform the work of that working group at an early juncture.
After that marathon contribution, I look forward to hearing the views of other Deputies.
We have had a hokey cokey on this legislation, which is posed as an amendment, all day. Now we have it. The debate was on and then off. The Dáil was a bit of a farce earlier on and was treated like a farce as Fine Gael and Fianna Fáil, behind the scenes, were trying to work things out. They have worked things out and we have the legislation before us which is almost exactly the same as what was presented yesterday, for all of Fianna Fáil's huffing and puffing. That is no surprise whatsoever because both parties, Fine Gael and Fianna Fáil, are landlord parties. Both parties represent the interests of landlords and not the interests of tenants. Both genuflect before the free market, including in housing, and are unwilling to tackle that free market. Both parties are unwilling to take the action necessary to deal with the crisis facing tenants.
All of that is and has been dressed up in the debate over the past few days and again today in a number of different ideas. One is the idea of balance, that there must be balance in this debate between the needs of tenants and landlords and that everyone must benefit from whatever legislation is passed. That was epitomised by Fianna Fáil's approach which attempted to doff the cap towards the needs of tenants by saying that it was in favour of a rent increase cap of 2% rather than 4%, something that was very quickly forgotten, and for extending the cap to other areas while in the same breath, the same statement and the same amendments, talking about the need for further tax incentives for landlords, one of the groups in our society that gets more tax incentives than anyone else apart from the major multinationals and those in the IFSC.
We reject that idea of balance. There is no balance in society between tenants and landlords. If one is a tenant right now, paying €1,500 per month and one is asked to pay €2,000 per month, if one does not have anywhere else to live or nothing else to fall back on, then one has no choice. There is not a balance in power between landlords and tenants. There is a complete imbalance of power, particularly as there is a shortage of supply, as the Government is fond of reminding us, and all of the cards are in the hands of landlords. When the State is not building houses which people can afford to live in, then people have very little choice. The relationship between tenants and landlords is the very opposite of balanced, economically.
There is no balance politically either. Mr. Tom Parlon, the Construction Industry Federation and the landlords organisations are able to get access to Ministers and to the Government. During the three month period of consultation that we heard about, how many tenants were spoken to? The reality is that the Government listens to the landlords. That is reflected in this House, where approximately one in four Deputies is a landlord, which is five times the rate among the general population. Landlords are represented in this House but tenants, for the most part, are not. The idea of balance is a joke because all of the power lies in the hands of landlords and that will continue to be the case.
The other idea used to justify the Government's approach and its unwillingness to introduce rent controls, which is what is needed, is that of supply. It is a trickle down theory of housing supply and of dealing with the housing crisis. The idea is that the Government must incentivise landlords and builders, via profit, in order for ordinary people to be able to access what should be a basic right - the right to a home. That finds its zenith in the discussion about landlords. The idea is that if the Government does not allow them to get an extra 4% per year, then they will go. The Government uses the same argument about Apple and many other companies. They make the case that Apple will leave and bring jobs with it but what are landlords going to do? Are they going to leave the country? Are they going to put their houses in their suitcases and take them out of the market? The houses are still going to be there. They are going to exist and people are going to live in them, unless the Government is saying that they will remain empty. It is another genuflection before the altar of the free market. The belief is that only by incentivising landlords and allowing them to maximise profit will they deliver. That belief has been a failure. This free market approach is the reason so many people are spending an average of 40% of their income on rent, which is completely unsustainable. It is the key factor driving people into homeless and it is why all of us are meeting people on a daily basis who are faced with rising rents which they simply cannot afford to pay, with wages that are nowhere near to keeping up with those rents and who are in crisis situations.
Let us look at what the Government is actually proposing, which is a 4% cap on rent increases. The Minister was on the radio this morning and was emphasising that the 4% figure was evidence based and that he did not just pluck it out of the sky. When asked what evidence it was based on, he just reached for a figure that was also four but it was a different figure. It was a figure for the amount of yield landlords would like to realise. We are talking about an increase in rent, right now, of 4% per year but this market is the most profitable for landlords in all of the European Union. We have the highest rental yield for buy to let properties in Europe at 6.54%. This market has been created because of the absence of governmental action to deal with the issue of supply, which means investment in building homes using funds from the National Asset Management Agency, NAMA, and the Ireland Strategic Investment Fund, ISIF. The absence of such investment and the absence of rent controls means that rents have gotten completely out of control. There has been a massive transfer of wealth in our society from workers who cannot afford it to landlords, from people with no property to those who have, in many cases, multiple properties. The result, as the CSO statistics show, is that profits on rents on dwellings rose from €1.6 billion in 2010 to €2.7 billion in 2015 - an additional €1.1 billion in profits going into the pocket of landlords. That is what they are getting now, at current rates. The Government and Fianna Fáil think it is okay, in the so-called rent pressure zones - forget about the rest of the country - for landlords to get an extra 12% over the course of the next three years. That will costs tenants in Dublin, for example, in the region of €4,000 and many will simply be unable to afford that.
There is no basis for the 4% figure. The Minister has not produced any basis for it, just as Fianna Fáil has not produced any basis for its 2% figure. It looked at the 4% figure and decided to go for something lower. There is no basis for setting a cap other than on the Consumer Price Index, CPI. There is no basis for anything other than linking rent increases to inflation which, right now, is 0%. We would also argue and have argued repeatedly that it should be backdated. Rents should be linked to the CPI and backdated to 2011, which was when rent was somewhat closer to being affordable for people.
The other main point I want to make relates to the other areas of the country that are not deemed to be rent pressure zones. As part of this deal between Fine Gael and Fianna Fáil, they have said that they are going to speed up the process of looking into naming other areas as being in need of rent control. What is that but a green light? A green light has already been signalled to landlords in all parts of the country, apart from Dublin and Cork, to get their rent increases in now. The two year rent review rule applies to some and that is fine but over the course of the next year, a lot of tenancies will be due a rent review and landlords will go for as much as they can possibly get from their tenants; they will jack up the rent as high as they can. That is the signal that has been given to landlords right across the country. What signal has been given to landlords in Limerick, Galway, Waterford and the commuter belts around Cork and Dublin? If tenancies are due for a rent review in the next month, what are those landlords going to do? They are going to increase the rent but not by 10% or 15% as they might have done prior to today. Now they are going to go for 20% or 25% because they fear that the 4% cap will kick in soon. That is what has happened here and that is what Fianna Fáil has contributed to.
There is an alternative. It is contained in the amendments we and others have put forward. It is that the Minister could immediately link the consumer price index, CPI, for the entire country and designate other areas, if that was the approach he intended to take, instead of doing very little. That is not even to mention the rest of the measures in the Minister's proposal, which go further in terms of the balance of power. In the context of landlords, for example, there is eviction for non-payment of rent and the absence of dealing with the key issue of eviction. Ignoring all that, however, there is the complete inadequacy of the 4% measure the Government and Fianna Fáil have signed up to as an honest reflection of their position. They are under pressure because this is the major crisis in society. They want to be seen to be doing something but even all that pressure has not changed their basic approach, which is to represent the interests of the landlords and dress it up in an ideology which states that as a result of landlords profiting, tenants will eventually benefit. All the evidence is that the latter is not the case.
The vacuum we were told was being created, has been created elsewhere as a consequence of not including areas that should have been included in the first instance. Amendment No. 2 to amendment No. 55 and amendment No. 1 to amendment No. 68 deal with the entire country and with linking rents to the CPI. Someone who is up for a rent review in a high pressure area outside Dublin will be very worried, even with a short delay. The Minister must realise that the delay has to be short.
I do not know what planet the Minister has been living on when it comes to rents. The Government is not known for throwing money around the place when it comes to rents. The housing assistance payment and rent assistance have been paid in respect of a sizeable amount of the housing stock. Approximately one-third if not more of the housing stock would be for people on housing waiting lists but, for example, the housing assistance payment in Cork city for a couple with two children is €925 a month. For the same family type in Kildare, it is €1,050. It is worse than that in Wicklow where it is €1,200. The reason those amounts are different is because there is high pressure on rents in those locations and those rents have been driven up. There is a decent amount of evidence that this is not the extent of the rents being paid and that people are topping up those rents because there is such a high demand for housing in the areas in question.
The commuter belt is spoken about as some sort of small peripheral part of Dublin. I will compare the three counties of Meath, Kildare and Wicklow to the area the Minister would know best, that is, Cork city and county. Those three counties have a greater population than the combined city and county of Cork. When I contested the 2005 by-election in Kildare - another such by-election took place in Meath on the same day - it was a big surprise that child care, for example, was an issue and all of a sudden it got on the political agenda. That is what happens when the Minister does not understand an area. There is no county with a population the size of that which obtains in Kildare that does not have a city in the middle of it. Kildare has a bigger population than that of Limerick city and county combined. The problem is that the thinking about the commuter belt areas is different. I am quite sure the same pressure applies in respect of areas on the peripheries of Cork and Galway. However, I am focusing on the area I know best. We do not get the services when we are on the periphery because the city to which the commuter belt relates is Dublin. There has to be new thinking about those areas. I have come across people who are in bidding wars because there is such a shortage of supply. Those bidding wars will put the most disadvantaged people at an even greater disadvantage. That is part of the reason there must be some baseline and that is why we are talking about the CPI. We are also talking about this measure being extended to the entire country, rather than picking and choosing areas because if there is a market, presumably the market will find its level.
It is vitally important that the Minister gives us certainty with regard to a timeline. It is bad enough that we have that vacuum. I was contacted by a person from Maynooth yesterday who had just been told that his rent will increase by 20%. That is 20% on one of the highest rents to be found in the country. The idea is that advantage will be taken in the vacuum the Minister was talking about trying to avoid. How he could have ignored areas under such pressure makes me question the kind of information available him.
We have not ignored any areas.
The Minister has done so because he had to be dragged kicking and screaming to broaden the area from Dublin and Cork. He talked about the science of it. I do not know at what he was looking. The Government has the information-----
Read the strategy.
-----on the housing assistance payment. In fact, there is information available even in respect of the housing assistance payment. Perhaps the Departments do not talk to each other but the facts are available on the housing assistance payment and the areas in which both rents and the level of demand are highest in the country. If that is not evidence, I do not know what is. This is evidence that should be available to the Government.
As we know, there is huge pressure in terms of supply. We have to stop thinking about the property ladder and terminology of that sort and start thinking in a different way about the provision of homes. Essentially, tenants are at a huge disadvantage because they are not as organised as landlords. They are not in a position to impose the kind of pressure that landlords are able to impose.
The two main factors driving the cost of living are rents or mortgages and child care. They are also driving demands for wage increases. It makes perfect sense to link those to the CPI rather than encouraging rent increases at a time when we have zero inflation.
I do not understand the science or the information the Minister is using when there is perfectly good information that has been ignored. I have concerns about the RTB being in a position to offer a response - in a timely way - in respect of the areas to which this scheme will be extended because, as we all know, it is already under a great deal of pressure regarding other work. I would like an accurate timeline for the areas to which the scheme will be extended to and to know if resources are to be provided to the RTB to ensure that it can do this in a timely way.
I refer to the final part of the Minister's contribution. I presume this is an aspect of what was hammered out during the day in terms of the delays that have been experienced. The Minister said he would look at other areas outside the four Dublin local authorities and Cork city fairly quickly and that this will include the commuter areas around Dublin and the cities of Waterford, Limerick and Galway.
I sincerely hope that false hopes are not being created here that will be dashed because the Minister has also stated that he will use the criteria that have already been outlined on how to designate pressure areas. Obviously, I want to see Limerick city and those other areas included as quickly as possible if we are to go with this measure of pressure areas, but my preference, which is contained in the amendment and was contained in the Bill that was voted down today, is not to have any pressure areas but to designate the whole country and to use the changes in the consumer price index as the indicator in terms of increasing rents. The 4% is far, far higher than the consumer price index at present. In effect, this is a licence for landlords to increase rents more than they would be likely to be increased in normal circumstances in many parts of the country. It is far simpler, and it is far fairer to tenants, to use the consumer price index.
There is also the issue of those who are just outside any of the areas that become designated, literally, in the next electoral area which will not be included. That is fraught with danger. The reason I worry about the fact that today's hammered through agreement may give false hope to tenants is that already there are tweets going out stating that now Limerick and Galway will be included, etc., but that does not seem to be quite what the Minister is saying.
They will be assessed and if they pass the criteria, they will be included.
I understand that is what the Minister has said but that is not the message that is going out.
One has to have an independent assessment.
That is why I am concerned that tenants will be given false hope.
We tried to get some data on the criteria that have been set. I am not sure whether the criteria will remain the same. The RTB keeps quarterly rent price data on 446 areas of the country. One can check, using that data, which areas fulfil the year-on-year price increase for four of the last six quarters as well as checking whether the rents in an area are above the national average which, the Minister can correct me if I am wrong, are the two basic requirements. The data that we have been able to assess would suggest that there are a small number of areas - these are only portions of cities and portions of the areas in the counties around Dublin that have been referred to, such as, Meath, Wicklow, Louth and Kildare - and only small portions of those would fulfil those criteria. I hope this is not the case, but I would be worried that we are sending out messages to members of the general public who are hard pressed to pay their rent who believe that there will be some kind of certainty coming out of this process, although not the kind of certainty that we and members of other parties would like. I am concerned that this is being put out there as a panacea to address the real pressures that tenants are under but that when the data - the Minister referred to looking at it at more granular level - is assessed, I am not sure what areas will qualify as pressure areas. That is my main concern. It still makes a lot more sense to simply link proposed rents to the consumer price index, as is done in other countries.
We acknowledge in my amendment No. 63 that where improvements are made - we have a mathematical formula for that - one must recompense landlords who have put a significant amount of money into a property. Apart from that, where there have not been changes, the logical and fair course is to simply link increases to the cost of living.
I will raise one other technical point on amendment No. 1 because I assume that is the first amendment on which we will vote. Amendment No. 1 amends the clause that states when the Act will come into operation. It states: "Sections 32 to 36, sections 45, 46 and 50 come into operation on the day following the passing of this Act", and among those sections is the section that deals with the termination of tenancies for the purpose of sale. It deals with that issue of the number of units - it was originally 20 units, then it came down to five in the Seanad and there is an amendment from Government to bring it back up to ten in the Dáil. We will not reach those amendments until probably later on this evening or tomorrow, but yet we are being asked to vote on bringing them in immediately after the Act comes into operation. We do not have the information because at this point we do not know what will happen - maybe we can guess - in relation to those sections and yet we are being asked, as the first vote here today, to decide that we will bring that measure in after the Seanad deals with the legislation. It is not appropriate that we are being asked to make this decision when we do not know what will be in those sections.
Overall, my real concern is that we are being asked today to bring in legislation that will effectively put an increase of 4% on certain areas and exclude other parts of the country. There is a great deal of uncertainty in relation to the new proposals that are coming before the House today and I genuinely worry that it is unclear what areas are likely to be included. That allows landlords, as previous speakers stated, to immediately go out there and put up the rent where they can. Obviously, if they are tied down to the two years criterion and the review is not coming up, then they cannot do it but there will be many landlords who are in a position to increase the rent in anticipation of it being controlled and that has to be a significant cause of worry for many tenants around this country.
On a point of order, it is difficult for Members to contribute to the debate without having the written version of the comments that the Minister made earlier. I wonder could they be circulated to us because they have a significant bearing on the legislation.
We will try and arrange that.
I thank the Ceann Comhairle.
It is difficult to contribute to the debate, given the-----
I am sure Deputy Boyd Barrett will do his best.
I thank the Ceann Comhairle for making light of the comment, but it is a serious comment. We are having to deal with a rake of last-minute complex amendments dealing with a range of complex issues and then amendments to amendments. Whatever way one looks at it, it is not the way to deal with an issue of such importance. Added to that is the backroom or side-room dealing of Fianna Fáil and Fine Gael where the whole thing is stitched up in effect outside this House in any event, making the debate that we are conducting here something of a charade. I make that comment in all seriousness.
We are covering such a wide area in this grouping of amendments, all dealing, broadly speaking, with the critical issue of rent certainty, rent control, rent affordability and rent pressure zones. In a way, all of these deserve separate and distinct debates rather than a single grouping. The length of the Minister's initial introduction and the range of issues covered in it, in itself, makes this not a proper debate. All of these need to be gone through forensically. There is an incredible amount of detail here.
We were not responsible for the groupings.
I am merely saying the net effect of this is making a charade of the most critical issue facing this country and tens of thousands of people, and I fundamentally object. I have literally dragged myself out of my sick bed because I consider this so important. Really, we should not be dealing with this issue in this way.
However, I will have no choice but to move our amendment to the Government's amendment No. 54, our amendment No. 66 and amendment No. 2 to the Government's amendment No. 68 in this complex group of amendments. If anybody outside the House can follow that, they deserve a Nobel Prize.
These cover three critical issues. The first, obviously, is the 4% annual increase the Government is permitting in the designated rent pressure zones. Where do I begin? The Minister justified this when speaking on the radio by saying that a modest return was needed by landlords to incentivise them to stay in the market. Can the Minister honestly make that argument with a straight face when landlords are enjoying an absolute bonanza? Rents have gone through the roof. They are currently at unaffordable levels. Landlords are making a fortune. Statistics and figures show that the profits being made in the rental sector have jumped astronomically in the last number of years. The Minister seriously suggests that if we simply cap rents now and not let them increase any further, as we propose in our amendment to the Government's amendment, they will go running for the hills. The landlords are creaming it at present, so that is not a serious argument. When the public representatives of real estate investment trusts, REITs, are saying there is an unprecedented bonanza in the money being made from rental income in the areas we are discussing, is the Minister seriously suggesting they will go running for the hills? It is absolutely preposterous.
The ESRI also says it.
I do not care what the ESRI says.
Clearly, the Deputy does not.
No, I do not.
Only about what the Deputy says.
What I care about is something that is lacking in the Bill but is contained in our amendments - affordability. I emphasise affordability, because it does not feature anywhere in the Bill-----
Did the Deputy read the plan?
-----or in the amendments, or in any of the Minister's proposals to deal with the rental sector. Is it affordable? Before the Minister allows for these 4% increases, which he is crowing is some type of unique unprecedented intervention in the market, the current rents in the areas he refers to are unaffordable for the majority of people. He simply has not addressed that.
I raised this on Leaders' Questions today, I have raised it with the Minister on multiple occasions and I will raise it again now. I am not suggesting that south Dublin is unique, I just happen to know south Dublin. Deputy Catherine Murphy has made the argument for Kildare and others will make the argument for other parts of the city and country. The average rent for a three-bedroom house in the south Dublin and Dún Laoghaire-Rathdown areas is €27,360 annually. That is more than the take-home pay of somebody on the minimum wage. How is somebody supposed to afford that rent? How do the Minister's proposals address that? They simply do not. I seek an answer to my question. If the Minister does not give an answer, he will give no answer to the people who are streaming into my clinic each week, and into the clinics of all Members of the House, to tell us they just cannot afford it.
The extent of it is shocking. Over the last three or four years, the people coming to my clinic to tell me they cannot afford it when their landlords put up their rent were initially people on very low incomes. Later it was people on medium incomes. More recently, however, people such as senior nurses and tenured lecturers in third level institutions have been coming to my clinics to say that they are facing homelessness because they cannot afford the rents in Dún Laoghaire-Rathdown. When it is reaching that extent, what good is this Bill? That is happening to people on €60,000 per year, because they happen to be single and have three or four children. They cannot afford the rents.
The Minister's rent proposals will allow the rent for a three-bedroom house which is currently €27,360 potentially to increase to €30,636 under the 4% annual cap by the beginning of 2019, in other words, if the 12% increase starts in January of this year. I accept that some will not be able to do this until later in the year or even until the end of the year, but some will be able to do it in the next month. Those people will be able to increase the rent by 12% by the beginning of January 2019. That is two years, not three. It will be 4% in January 2016, 4% in January 2017 and 4% in January 2018, so within two years they will have the 12% increase. Even if it is July or the end of the year when the 4% starts, within the three years the vast majority of people will potentially have their rent increased by 12%. That is the reason I pulled the Minister up earlier. Allowing the increase of 4% to be done every 12 months means it can be done potentially within two years. That is 12% within two years.
I mentioned the rent figure for a three-bedroom house. The current annual rent for a one-bedroom unit in south Dublin and Dún Laoghaire-Rathdown is €21,600 per year. Under the proposed increases that will increase potentially to €24,192 by January 2019. How are people to afford that? The Minister's measures do nothing to address that. The rent is totally unaffordable. However, the Minister is worried about the greed for profit - there are simply no other words to describe it and I am not being rhetorical in saying it - of people who have been systematically evicting people, with spurious excuses in many cases about relatives moving in or the need to sell when, in many if not most circumstances, it is patently not true, to jack up rents to levels that are unaffordable for people on low, middle and even higher than middle incomes. Evicting those people leaves them subject to homelessness services, which are unable to cope. It is breaking up families and leading to depression and people being homeless on the streets in unprecedented numbers.
None of the Minister's measures does anything to address all of this. The Minister is not addressing the fundamental issue, but is allowing for increases which are dictated by the thirst for profit of private landlords and the various financial and property speculators who appear to be dictating Government policy on tax and almost everything else. It is precisely the type of behaviour that led to the last property bubble and its disastrous consequences. To conclude that point, our amendment to the Government's amendment No. 54 essentially proposes that there will be no increases allowed in the rent pressure zones. Rents are at unaffordable levels and there is no justification for any increases to be permitted. We do not accept the argument that the landlords will run for the hills.
In amendment No. 66 we request the Minister to provide a report immediately on the actual rent controls we need. That is the core issue. We have our amendments and other amendments, and Bills have been put forward proposing that rent increases would be linked to the consumer price index, CPI. We agree it is a good minimal measure at least to limit increases to the inflation level, the CPI, as against the proposed 4% cap on rent increases, which is a nonsense, excessive, exorbitant and unaffordable. However, for the reasons I outlined we need to go much further and discuss bringing rents back to affordable levels now that the horse has already bolted and the level of rents in many parts of this city and are beyond affordability. We need seriously to consider pinning them to 2011 levels when they were at something resembling affordability and designating particular areas as fair rent areas. In doing so, in addition to some of the criteria the Minister mentioned which referred to market conditions and market rents, issues such as level of wages, wage increases and the level of homelessness in a particular area should be taken into account as well as all the factors that combine to make rental accommodation affordable rather than, as in the case of the Minister's proposals, linking it to how much profit the developer needs to make and what collectively that adds up to in terms of market conditions.
The need for this is acknowledged in the public housing rental system in local authority housing. That is what the differential rent scheme acknowledges. That is reason we promote, as the solution and alternative to the Minister's complete reliance on the private sector, publicly provided local authority housing where the rent is based on people's ability to pay. That is what is necessary to resolve the housing and rental crisis. The Minister is not willing to provide the scale of public housing that would achieve that, but short of that, the rent control system that is needed is one that would pin rents to a level that is affordable based on people's income.
There are incredible double standards and hypocrisy in the arguments the Minister has made in addressing the concerns of landlords as against addressing the wage demands of workers. That hypocrisy is not lost on workers who have been vilified over the past year or two for having put in wage claims, many of which were motivated precisely by the unaffordabiltiy of accommodation. When Luas, bus or public sector workers have said they want their wage levels to return to 2009 levels, the Government has said that is completely unaffordable, the country cannot afford that, that is unacceptable, that is what led us to boom and bust in the past, and we are not going there. The Government has demonised and stigmatised workers who have made those demands precisely because of rents and property prices going out of control. Workers say they are not taken seriously by the Government, but when landlords say they need 4% rent increases as an absolute minimum, that is okay. Workers cannot ask for a 4% wage increase to keep track with rents but landlords can ask for 4% additional profit on top of the profits they are already making in a rental market that is now in excess of the average rents that were being charged in 2009. There is no problem for landlords to return to 2009 levels and levels prior to that in terms of the rents they are charging and the profits they are making, but if workers ask for their wages to return, even to 2009 levels, that is not acceptable. That is crass and class hypocrisy. There is one law for landlords, speculators and developers and another law for workers. It is as simple and straightforward as that. We ask in our amendment that the question of workers' wages and the relationship between workers' wages and rents should be a factor that is considered and determines the setting the levels of rents. Otherwise we are not going to deal with the problem. It is as simple as that.
This is a very important debate. I welcome Minister's comments when he introduced the measures and the additional measures he announced. The Opposition is wrong in saying that the Minister is not listening. He is listening to everybody.
I did not interrupt Deputy Cullinane. He might have the manners to stay quiet if it is possible for him to do that. I would appreciate that.
The reason we have this problem is that the demand for housing exceeds the supply. I agree with Deputy Catherine Murphy that rents have increased exponentially in the areas we represent. Indeed, in some cases they are not rent but extortion being extracted from families who cannot afford to pay.
In County Louth the subsidies given to people in the form of housing assistance payment, HAP, are the third highest in the country, even higher than they are in County Kildare. I refer specifically to Drogheda and its environs, Stamullen, Julianstown and Laytown, which are the places mentioned in the HAP analysis of the M1-M4 zoning outside of Dublin. Therefore, it is a hugely important issue. An examination of rent increases since 2015 shows they have increased significantly in Drogheda. Comparing Drogheda and Dublin, rents increased by 12.45% in Dublin since 2015 while they increased in Drogheda by 18.63% in that period, according to the Private Residential Tenancies Board website. Rents in County Louth have increased by more than they have in Dublin city. I welcome the Minister's commitment in regard to County Louth.
I received a letter from a constituent whose family is living in a property and the two years applying to their current rent level will expire in 2017. Their rent is €800 per month but the rent for other apartments that become vacant in the complex this family is living in is 63.5% higher than their rent. They would pay €1,300 if their rent was allowed to be increased unless it is capped as the Minister proposed. His proposed cap on rents, and I agree there are arguments on both sides, will mean that if it is extended to Drogheda, the rent for that family will not be anything like the landlord's current extortionate demands from families who are in this very difficult position. I welcome what the Minister is proposing.
I also want to address rents in Dublin. I do not live here but many people from my town live and work there. I am talking about young people in particular. We have not spoken about young single people working in this city. They may not have families, and three or four young men or women may share an apartment, but their rents are also extortionate. I know a person whose rent has increased by 35% and the four young people who share that apartment space have to leave Dublin because, on their wages, they can no longer afford to live in Dublin. They will move out of the city. That is a serious problem for young people with talent on lower wages.
The more rents increase, the less attractive our economy will be to workers to come to live and work in our cities. People have spoken about extending the 4% cap on rent increases to the whole country. I agree with the Minister that this must be rational and based on evidence. There is no problem with the evidence in the areas we are talking about. The greatest demand is where there is least supply.
On that point, I believe Dublin has been treated badly by its local authorities. More than 800 houses were offered by the National Asset Management Agency, NAMA, to local authorities in Dublin, but they did not take them. Across the country, NAMA offered 4,000 houses to local authorities which they did not take. I have grave concerns about the credibility of local authorities to explain that fact because they cannot. I seriously question their commitment to the building programme.
One has to consider the impact of Airbnb on the rental market in Dublin. I know of four people being kicked out of an apartment. Their landlord - a friend of theirs until he made his kind announcement to them that he wanted them out - is living in the apartment too. He wanted them out because he was going Airbnb from which he would get 62% more income for the very same rooms he was renting out previously. We need to ensure we tackle the issue of Airbnb in exceptional cases, particularly in our cities. I understand the Minister will have some comments on that later.
I welcome the Minister's announcement on the tax working group. I do not know what the pluses and minuses will be but it will release properties into the market. There are 36,000 empty homes in Dublin city alone while, according to the last census, there are 196,000 empty homes in the country. These are not specifically holiday homes. We do not have the data as to how long they have been vacant. However, from January, owners will be required to register with local authorities if they are vacant for terms of registration purposes. Will the tax working group examine penalties for people who have empty homes for two years or more? In England, local authorities have the powers, should they wish to use them, to double the property tax on a property empty for two years or more. While incentives to let and to lease for landlords act as a carrot, we also need a stick to ensure there is an empty homes tax on properties which remain empty for significant periods of time. I do not believe any Member will disagree with that.
I welcome the reforms and the investment the Government has made into house construction. However, they will not be there tomorrow. Notwithstanding the great efforts being made to produce more homes for many families, they will not be there next year or the year after. If we can get into the marketplace the homes that are empty tonight, the hundreds of thousands of bedrooms that nobody is using this very night, then it would release a significant number of homes and help families and individuals who need them. The immediate release of these homes into the marketplace would also increase supply. That would have the effect of driving down rents. The more properties available, the lower the rents will be.
It is wrong to say all landlords are bad. I know they are not. We have all received letters from them and we all know people well who may have a home they got when their parents passed on or whatever.
There are loads of them sitting across there with the Deputy.
I did not interrupt Deputy Smith. I would ask her not to interrupt me, no matter how difficult it may be for her to remain silent for another minute. I hope that does not stress her too much.
That would be impossible for me.
That is what I thought. If she were in my class at school, I would send her home to her mammy with a note about her behaviour.
The Deputy is not that old.
She probably would not go home.
Yes. I would have to send Deputy Barry Cowen for her mother.
Me ma would come up and bash you.
She is after disturbing my train of thought. That is disastrous as it was my final and most important point. No doubt I will have to return to it later.
That was the whole point.
We need a comprehensive analysis of how we will deal with this issue. A significant and important part of this analysis should be of these actions which are being proposed in this legislation. Whatever else we can say about this Government, and we can all say different things, regardless of where we sit, the housing issues are being tackled, but we need to release all those empty homes.
This group of amendments relates to the Government's strategy for the rental sector launched this week. As we have no other formal opportunity to discuss the strategy, I want to open my comments on these amendments by making some observations on it.
Given the fact we were led to believe this was going to be a comprehensive strategy for the fundamental reform of the private rental sector over the next several decades, it is deeply disappointing. There are 26 measures listed in the document, ten of which were previously announced by the Minister. For some of them, it was the fifth time they were announced. Of the other 16 measures announced, the majority of them will not come into effect until the last quarter of next year or they were so ambiguous in the document that it is not clear whether they will have a positive or beneficial effect on the reform of the private rental sector. This is not a long-term strategy. It does little in dealing with real security of tenure or the urgent need to reduce evictions. As far as I can see from the limited amount of detailed information in it, it does little to address the dysfunctional underpinnings of the rental sector. In fact, it seems to be based on the same failed policies of the previous review and strategy for the rental sector going back to before the creation of the Private Residential Tenancies Board and the introduction of the Residential Tenancies Act.
While we all have been trying to facilitate the Minister in bringing forward measures to tackle the housing and homelessness crisis and taking him at his word, there is part of me that wonders if it was not a mistake to launch the strategy, as important as it is, in the last week of this Dáil term and to table such substantive amendments when we would not have detailed committee scrutiny but only a few hours in the Chamber. When the Minister spoke on Committee Stage when he gave us first sight of some of the amendments, he said the strategy was being broadly welcomed. When the Minister read the following morning’s newspapers, I am sure he took a different view.
Donal McManus, the head of the Irish Council for Social Housing, not somebody known for vocal criticism of the Government’s policy given the membership he represents, wrote in The Irish Times the most devastating critique of the measures contained in these amendments and the overall strategy. His key point was that this strategy and the measures we are debating today were a missed opportunity, in some senses will make matters worse, and will not deal with the kind of issues many of us who went to the stakeholder consultation meeting that the Minister organised hoped it would.
Donal McManus is not the only one. The Minister indicated the non-governmental organisations, NGOs, thought the strategy was good. Most of the NGOs said that while it may be a step in the right direction, it has fundamental flaws. Some of the homeless charities have expressed deep concern at the gaps and absences, especially in the rent so-called predictability measure and its potential impact to lead to greater levels of homelessness.
On the rent predictability issue itself, the only one thing predictable about this measure is that people will face consecutive years of rent increases, both in the rent pressure zones and outside. We had a debate in this Chamber over recent days about whether Fine Gael believes in intervening in the housing market.
Of course it does. Like Fianna Fáil, Fine Gael has a long history of direct intervention in the housing market, whether through the use of tax incentives, incentivising private home ownership, incentivising investment in various types of property activity or even, for example, in rent supplements such as RAS and HAP. There is no ideological objection or obstacle to Fianna Fáil and Fine Gael intervening in this market. The issue is who does it intervene for, in whose interests and for what outcome? That is really the nub of the difficulty many of us have with this measure. The Minister also repeated on a number of occasions at the press launch, which I attended, that this measure is a major intervention in the market but, in fact, it is not. Rent supplement is a much more substantial intervention in terms of a price setting mechanism in the private rental sector and is far more significant than this measure.
In his comments today and previously, the Minister keeps talking about balance, saying that whatever this Government does, it has to balance the interest of investors and the need to maintain and increase the stock of private rental properties with the needs and interest of tenants. The difficulty is the market, as it currently stands, is so skewed against the tenant that when the Minister talks about balance, what he is really doing is continuing to tip the scales against those who most need this Government's help at this point in time.
I will talk about the details of the proposals, particularly in Government amendments Nos. 55 and 68. I put this question to the Minister the other day. A number of other commentators, some of whom think this is a good measure and others who do not, have asked this same question. I would like to get an answer at some point this evening. When the Minister, Deputy Coveney, was asked at the press launch what was the basis for the figure of 4%, he said repeatedly that it was about the yield or return on the investment of the investor he is hoping to attract to provide greater levels of private rental accommodation. When the particular question of where the 4% came from, he talked about the benchmark investment yield of 4% that the strategic investment fund operates. The difficulty is that this is not what is in this amendment. What is in the amendment is an annual rent increase of 4%, which over three years would probably add another one percentage point yield to the 6% or 7% yields that investors can currently get at market prices and market rents. I do not understand. Perhaps I do not read these things properly or perhaps I am not smart enough but at some point the Minister should explain to us the interaction between the investment yield and the rental increases in a specific way, not in the very ambiguous and contradictory way he did on an RTE radio over the past day or two.
The Minister is right that the 12.5% would be the impact over three years for those worst affected by these measures. Nobody in our party has claimed everybody in the private rental sector will be hit by 12.5%. Even if it is only 10% of the 300,000 tenancies, it is bad for those people and therefore it is wrong. It is wrong even if it is 20%. Perhaps the Minister has figures in terms of how many rental tenancies are up for review next year, the year after and the year after that. If he has that information, he should share it with us so at least we know how many people would be affected. For those worst affected by these measures, it will be 12.5% in the affected areas.
A number of people made a point which I will repeat. The families we are talking about do not have the money the Minister is now giving landlords free rein to charge them. The total cost for an average family in Dublin over the three years, if they are hit with the full 12.5%, is €4,500. That is the total cost of increased rent over three years. Where will they get it? There will not be wage inflation of that amount. There will not be reductions in the cost of living of that amount. There will not be tax cuts for low or middle income workers to that amount. Where will they get the €4,500? For people in Cork, the figure is about €3,200. That is based on current average rents in the affected areas according to the RTB.
One of the points that has not been debated enough today is with regard to the other areas. The Minister said he wants a rational and evidence-based way of determining whether other areas outside the four local authority areas in Dublin and Cork city are included. The national rental average is one of his benchmarks. There is nothing rational about that. The national rent averages are simply too high. We have had three or four years of dramatic rent inflation. If the starting point for including other areas is the national average of the rental index, that is simply too high. I agree with previous Deputies who said one of the consequences of setting that bar so high is that many areas where people are struggling with rent increases will not be included after they are assessed by the RTA and therefore will not benefit from this. That includes many of the areas that Fianna Fáil has made such a huff and puff about over the past number of days. Equally, 7% rent inflation in four of the last six quarters sets the bar so high that areas that fall slightly short of that but which should be included in any rent relief measure will not get any benefit.
I listened to the Minister very carefully and perhaps I misunderstood his comment at the end of his initial intervention. He seemed to suggest that the reason these other areas could not be included now is that we do not have quarter four data from the RTB rent index and therefore we have to wait for that data to process it and assess it over the last six quarters.
We are also moving to local electoral areas-----
Okay. That is-----
No, I am interested to hear the Minister.
-----which is the key change.
Deputy Ó Broin without interruption.
I am quite happy to have the additional information.
I will come back to it.
Anybody who uses the quarterly RTB index knows it has sub local authority areas. That information is already available up to quarter three. There is no reason that those areas could not be included now on the basis of those sub local authority areas. I also suspect, and the Minister can correct me later if I am wrong, that the RTB has the raw data and all it would require is a sufficient number of staff over a short period of time to provide it. I would be very surprised but I will stand corrected if that is not the case. Even with the sub local authority data that they have published, it would have been a better basis than the one that has been provided. There is no guarantee, and I say this with the greatest of respect to the Deputies from Fianna Fáil, that any of the other areas outside the four Dublin local authorities and Cork city are guaranteed access to this, in my view, poorly designed measure depending on those assessments.
I want to raise a technical question, and I do so in all sincerity. I am not a mathematician and I always find mathematical equations difficult to understand. The end of the equation the Government has included in amendment No. 55 refers to "t/12", where "t" is the number of months between when the rent was originally set and when the new rent is set under these measures. In the first year of these three years, "t" would be 24 because it would be two years from the period the last rent was set to the end of the two-year review. If my calculations are right, and again I could be wrong, what that actually means is that in the first year when this equation is used as the basis of the rent review, it would be an 8% increase, not a 4% increase. That could be a drafting error. If it is, we have a serious problem because the Minister is asking us to vote on something here today which will actually lead to double the rate of increase than what the Minister has said. Perhaps it is by design. It is important that the Minister clarifies that point.
In terms of Sinn Féin's two amendments, amendment No. 1 to amendment No. 55 and amendment No. 11 to amendment No. 68, I will not rehearse the argument we have had here repeatedly. The first is to link rent reviews to the consumer price index. Deputy Jan O'Sullivan has a very helpful amendment to my amendment to amendment No. 55. While I do not expect that Fianna Fáil and Fine Gael will support it, I am ever the optimist, so I am more than happy to accept Deputy O'Sullivan's amendment to mine. I have tried to provide a better proposition in terms of including areas, not just other major urban areas, but also local electoral areas, to ensure they benefit.
I will take the opportunity to respond to Deputy O'Dowd because he made a number of points which are important. In terms of AirBnB, he is right but he sat in Cabinet and Government for a number of years when we all knew this was a problem and nothing was done about it.
I did not sit in Cabinet regrettably.
The Deputy was in Cabinet for a period of time.
I was not.
The Deputy chastised people for interrupting him.
I am far more tolerant than Deputy O'Dowd. At least, the Minister has agreed to regulate for this. I suggest that the Deputy work with the Minister to try to bring forward the regulations as a matter of urgency. I accept the Deputy's core point.
I was a member of a local authority and we scrutinised the issue of NAMA houses very carefully. Two of the main problems for local authorities - apart from those properties which were unsuitable for social housing use - was the length of time it took the Department to approve decisions for the local authorities. What Deputy O'Dowd said may be the case in his local authority, but in my local authority there was interest from the authority and the approval process took too long. Funding was not being made available by the Minister of the day, which is as much a reason for what happened as any of the others to which reference has been made.
More importantly, there are 1,000 vacant units, half of which are owned by AIB and half of which are owned by Permanent TSB, and they are being offered for sale to the Government and the Housing Agency. Perhaps the Deputy could raise this with his party colleagues at the next meeting of the Fine Gael Parliamentary Party. They are vacant and ready to go, and a large number of them are in Dublin. In a reply to a parliamentary question tabled by Deputy Pearse Doherty only a week ago, the Minister for Finance, Deputy Noonan, indicated that money was being provided for only 200 of them. I put a parliamentary question to the Minister, Deputy Coveney, recently and the answer was deeply disappointing. I asked why money was being made available for only 200 of the 1,000 units. If we could have an answer to that today or at another time, it would be very helpful.
There is a notable absence in the Chamber. While I do not doubt the ability of the three Fianna Fáil Deputies to replace the party spokesperson, and I sincerely hope it is not an urgent family matter that has taken him away, Deputy Cowen's absence is notable. If it is not due to some family emergency, I wonder if it is because he is so embarrassed at the extent of the capitulation he has had to make to Fine Gael in the so-called deal they have struck that he is not prepared to show his face. Fianna Fáil knew the details of the plan before it was launched. We know this. All of us knew, because the Minister had informed us, that the amendments would be coming. We have known it for three or four weeks. There would have been no surprises for the Fianna Fáil Front Bench at least, whatever about the Parliamentary Party, regarding what the Minister announced on Tuesday.
For all the policy criticism I make of the Minister, at least he has the decency to keep Members informed as to how matters are progressing. He has been very true to his word in that regard.
Here is what happened, in my estimation. Fianna Fáil saw the negative reaction of many people to the measures when they were announced. Fianna Fáil backbenchers realised that many of their constituents would not be covered by the 4% cap and would be hit by higher increases, or would not even be able to handle the 4%. Pressure mounted on Fianna Fáil to try to change what was proposed. The result is that the 4% increase remains and the legislation includes only Cork city and the four Dublin local authorities. While the Minister has promised to prioritise the assessment of the other areas, he promised it yesterday morning. There is nothing new in this. As he said earlier, there is no guarantee that any of the areas will be included. This is a climb-down of enormous proportions. I am not surprised that Deputy Cowen is not here. Had I made such a climb-down, I would be embarrassed to sit in the Chamber and say anything in support of the legislation.
I am firmly of the view that this is a badly-designed scheme that will not provide struggling renters with the relief they need. The justification for not moving towards linking rent increases to the CPI or some other reference index is that it would lead to a flight of existing landlords or block future investment. I have yet to see the Minister provide any evidence of it. Perhaps he has it and is keeping it secret. That is okay, but I have yet to see any evidence - all I have seen is conjecture and opinion - that such a thing would happen. On this basis, Sinn Féin will strongly oppose the Government amendments and will support our amendments and amendments from other Deputies who are trying to do something in a similar spirit.
I refer the Minister to his response to the Opposition amendments Nos. 1, 2, 6 and 11 and Government amendment number 55, Opposition amendment No. 1 to Government amendment No. 68 and Opposition amendments Nos. 58, 60, 63 and 64. The Minister said, "This measure will give significant certainty to landlords and tenants by allowing for reasonable growth in rents". I do not know what the word "reasonable" means in the Minister's book. For the vast majority of tenants and families who have been subject to very high rent increases across the State in recent years, 4% each and every year for the next three years is far from reasonable. It is unreasonable. Worse, it is unsustainable. They cannot sustain it. I will not rehearse all the reasons for this or all the difficulties families face.
Deputy Coveney is a decent politician, a decent Minister and a decent person. However, he has the brass neck to also state that the measure will prevent "the instability and uncertainty caused by the volatility we have seen in recent years". Surely the Minister will take responsibility for the instability and uncertainty in the private rented sector and in the housing sector that he, his party and its policies created in the first instance. The reason we have volatility, instability and uncertainty is, first and foremost, that his Government failed to build public housing. This has forced tens of thousands of people, for whom the State should provide roofs over their heads as part of a public housing strategy, into the private rented sector. They are competing with those who are in a position to rent and who want to rent. This is one of the primary drivers of rent increases in recent years. It is not an accident, it is by design. It is by Government policy that we have instability and uncertainty. Before and after the election, the Minister and his party had to be dragged kicking and screaming even to accept that we had a problem, that the State had to intervene in the market and even that there was a housing emergency.
Who was dragging us?
Has the Deputy tried dragging him? He is a big lad to try to drag.
Deputy Cullinane, without interruption.
I was chastised in the past. I do not mind being interrupted. The Minister went on to say, "I do not believe that linking rent increases to the consumer price index is an approach that serves the interests of landlords or tenants". The Minister should have put a full stop after the word "landlords". He cannot say it about tenants. Is the Minister saying that tenants will favour an annual 4% increase in the next three years, a potential increase of 12% overall? While it will not apply to everybody, some will be subject to it. Is he saying this is better for tenants than linking it to the CPI, which would be a minimum of 0.7%? It will not serve the interests of tenants. It may serve the interests of landlords.
Deputy O'Dowd referred to the Opposition being critical of landlords. I know many landlords. They are decent people. I have no difficulty, in principle, with people who rent out homes. There are many decent landlords and there are many who are not decent. I am not against a private rented sector as such. However, I am of the view that the State has a role to play in providing public and social housing and that it has failed in this regard. This entirely misses the point. Wanting reasonable rents and affordability is not anti-landlord or trying to squeeze landlords unfairly. This is all about trying to help struggling families.
The Minister stated that there is a need to ensure a "reasonable rate of return on investment". This is the most significant statement the Minister has made today. For Fine Gael, that is what it is all about. It is about investment and investors. It is about protecting investors, not protecting tenants, families and ordinary working people. Fine Gael is protecting those who have money.
It is about protecting a certain class. It is about protecting the elites, not ordinary people.
The Minister spoke about rent pressure zones. We have a saying in Waterford, "Call a spade a spade." The Minister may have forgotten that Waterford exists. There are problems and rent pressures in Waterford as well. Waterford is not too far from Cork. The Minister knows where it is. It does exist. Families in Waterford have problems just like families in Cork-----
I have been to Waterford many times.
-----and Dublin. The Minister spoke about rent pressure zones, but the entire State is a rent pressure zone. Just because certain areas do not meet the Minister's benchmark and the criteria he puts in place does not mean there is not rent pressure in all parts of our country. There certainly are rent pressures in Waterford.
To return to the Waterford phrase of calling a spade a spade, the reason the Minister has only designated a small number of areas as rent pressure zones is that he is ideologically opposed to market intervention in the interests of ordinary working people. That is really what this is about. He has been forced into proposing this measure kicking and screaming. There have been statements by the Taoiseach and others in Government, before the previous election and since, in which they argued robustly against any market intervention. The Minister is on the record as being opposed to market intervention. At least he has made a U-turn on the principle of it, which I welcome, but all he is doing is dipping his toes into it because he is ideologically afraid of and opposed to such intervention. This is why he has constructed the model he has constructed.
In these rent pressure zones, the pressure is on the people and on families. It has been said by others that families have a real problem with the cost of living. They are forced to take out private health insurance, they have taken huge cuts in pay over recent years and they have been subject to many other cuts and stealth taxes. Any reasonable demands for pay restoration in the public sector or pay increases in the private sector are met with resistance from Ministers who talk about wage restraint and so on. The Government preaches this to these families. This has been the Government's mantra. However, rent increases for landlords can be facilitated without a problem. An Teachta Ó Broin made this point already.
It is not that the Minister is afraid of market intervention. His Government and Fine Gael and Fianna Fáil have always intervened in the market but they have done so in the interests of developers, builders and sometimes landlords, mainly in the interests of elites and bankers and so on. We know this and the Minister knows it. Even before this Government assumed office, before the Celtic tiger, Fianna Fáil put in place all kinds of tax incentives for builders to build as much as they wanted, particularly apartments. This was market intervention but it was market intervention for the wrong reasons and is part of the reason for the current crisis.
I will deal specifically with Waterford city and county because the Minister is now considering speeding up the process that may or may not allow Waterford city to become one of these rent pressure zones. This will be a real Hobson's choice for renters in Waterford. I imagine they are trying to figure out what will be best for them. They have been faced with 12% rent increases. They will now face the prospect of being included in a Government scheme which will guarantee rent increases of 4%. What they will not get is affordability or the certainty they want. They will be forced between what will happen in the market and potential increases, which have been high, on the one hand and, on the other, the Government's guaranteed increases of 12%. They are stuck between a rock and a hard place. They will struggle to understand whether this will be good or bad for them. I do not know how to advise them in this regard, but one thing is certain. They will not be better off, they will not be protected and they will not get the benefits they need because the Minister's policy is fundamentally flawed.
This is a landlord's charter. It will not be in the interests of ordinary families. I concur completely with my colleague's comments about the absolute farce we have witnessed over the past 48 hours. I genuinely believe that the Minister is a decent person, but I am sure he understands that the past 48 hours and the way in which Fianna Fáil and Fine Gael have handled this issue has been an absolute farce and a joke, has really damaged politics and has laid bare for people the farce that is this so-called new politics. It was a game of one-upmanship between Fianna Fáil and Fine Gael. The victims in this were people struggling with rents. It was they who had to sit back and watch this game unfold over the past 48 hours.
I join my colleague in asking where Deputy Cowen is. He has made himself available to every media outlet over recent days to give Fianna Fáil's position on this issue. He was forced into a humiliating climbdown on the issue, as was the Fianna Fáil Party, and they have put themselves in this position. Very few Fianna Fáil Deputies are here. None of them has spoken. I do not know if any of them even intend to speak on Report Stage. They have gone mute all of a sudden on the issue of rents, yet they have been jumping up and down, as it were, on this issue in recent days. They have done a huge disservice to themselves, a huge disservice to politics and a huge disservice to those in the State who are suffering. I am afraid this episode has been very bad.
The last point I will make goes back to what an Teachta O'Dowd said earlier about the Opposition being wrong. How many times have we heard this from Fine Gael? I heard it from an Teachta O'Dowd when he was a Minister of State with responsibility for water charges. I was one of the Senators who spent 14 hours debating the Water Services Bill, mark 1, only to have to debate the Water Services Bill, marks 2, 3 and 4. We will see more Water Service Bills because the Government still has not finished making a mess of that issue. I have no doubt the Minister will return with his tail between his legs on the issue before us with a housing Bill, mark 2 or mark 3 because the Bill is fundamentally flawed. It will not work. It will not provide the affordability tenants need. It will not deal with the pressures on families, which will quickly become apparent. I have no doubt that the Minister will return on this issue but, unfortunately, for many of the families I represent, it will be too late.
Could the Acting Chairman tell us the next speakers so we know what-----
If the Deputy comes to me, I will show her the list-----
Okay. I just thought the Acting Chairman could read out the names.
We are totally transparent. I remind Members that it is not fair to make comments about anybody who is absent from the Chamber. To be fair to every side, many people are tied up in different meetings. I would rather people-----
The housing spokespeople are all here.
The next speaker on my list is Deputy Donnchadh Ó Laoghaire. If Deputy Coppinger comes forward, I will show her the list.
I just thought the Acting Chairman could tell us all the names.
We would all like to hear the list.
Read it out for the craic.
This is like "Echo Island".
Okay, I will read it for the Deputies. It is totally transparent.
We are all curious.
Fine. Deputy Ó Laoghaire is the next speaker. Deputy John Curran follows and Deputy Ruth Coppinger is here. Following on will be Deputies Mick Wallace, Clare Daly, Eamon Ryan, Mick Barry, Seamus Healy, Róisín Shortall - shall I go on? - Bríd Smith, Pat Casey, Thomas Pringle, John McGuinness and Brian Stanley.
And Deputy Catherine Connolly.
There are therefore quite a number of speakers on the list, and I am sure there will be others.
There are two more.
Two more are offering, namely, Deputies Ellis and Connolly.
May I raise a point of order? Why are so many of the amendments grouped? There are about 15 amendments in this grouping. I have tabled about seven or eight amendments.
That is not a point of order.
I am just wondering who grouped them. It is very difficult to listen to hour-long speeches-----
I have ruled that that is not a point of order. We will move on with-----
On a point of order-----
May I not ask who grouped the amendments?
In response to Deputy Eoin Ó Broin-----
I am not-----
This is a point of order. Deputy Eoin Ó Broin earlier questioned the whereabouts of a Member of the House, namely, Deputy Cowen. Deputy Cowen will be here.
I have ruled-----
He is on "Six One". It is not usual that one would question someone's absence from the House. I could have questioned the absence of Deputy Mary Lou McDonald for the past week but I did not do so, so just so the House knows-----
I have ruled on that. I have asked Members not to make reference to any Member who is missing because many people are tied up in different business.
Has that happened already?
Yes, it is done.
Has it been corrected?
Did Deputy Pringle indicate that he wants to speak as well?
Yes. I am already on the list.
Grand, he can speak twice now.
I call Deputy Donnchadh Ó Laoghaire, without interruption.
I am sure that having listened to the list of speakers, the Minister, Deputy Coveney, is looking forward to the next couple of hours. I assure Deputy Coppinger that I will not speak for an hour or anything like it.
By all means do.
I want to make a few brief points. This rent control proposal reminds me of the final days of the most recent Fianna Fáil Government when a Minister tried to defend that Government's performance by saying that the rate of growth in unemployment was beginning to slow. The Government has said that it intends to slow rent increases, but they have already reached unacceptably high levels. Deputy Paul Murphy made the fair point earlier that a false idea of balance on the part of those who conflate the struggles of tenants and landlords is part of this debate. It is assumed that just as tenants in the private rented sector are struggling, there is a cohort of landlords in this industry who are struggling and need some form of protection as we seek to return rents to some kind of normal levels. The reality is that landlords have been making abnormal profits and yields in recent years.
When Deputy Ó Broin spoke about yields, he suggested that because the limit proposed by the Minister in these amendments is below the current market yields, current trends will continue and rent increases of 4% will ultimately be provided for. While I take the point that there is no guarantee or certainty that every landlord will increase rent by 12%, I remind the House that when we are making legislation or policy, we do not operate in the assumption or hope that everyone will act in good faith. We should be trying to outline an absolute maximum to ensure those who have faced extraordinary, outrageous and unaffordable rent increases in recent years are protected from further increases.
Other Deputies have spoken about the events of the past couple of hours. A great deal of the responsibility for that lies with the Opposition in exile, Fianna Fáil, which has essentially obtained nothing more than a few promises and commitments.
An extra 100,000 properties have been included in the rent certainty areas because of Fianna Fáil.
Fianna Fáil has misjudged its strength, influence and perhaps its resolve.
The truth is not something Sinn Féin is used to.
Deputy Ó Laoghaire, without interruption.
The truth is something that Fianna Fail should get used to.
I will not take lessons from Sinn Féin about the truth.
Things were very cordial before Deputy Darragh O'Brien stepped into the Chamber.
He is a bully boy.
Deputy Ó Broin is not chairing this meeting. I am chairing it. I am giving the speaker to whom I have allotted this slot the protection of the Chair. I invite him to continue and I ask others not to interrupt.
Before the Minister leaves the Chamber, I would like to make a couple of points that would be of interest to him on a local basis. I will not detain him for long. I would like to draw his attention to one of the largest rent increases I have come across in recent weeks. One of my constituents contacted me to express concern about a proposed rent increase from €750 to €1,100. The landlord in this case is essentially and constructively making this person homeless. Even though the tenant in question is an applicant of Cork City Council, the 4% limit proposed by the Minister would not be of benefit to this tenant because the person lives a small number of metres outside the Cork City Council administrative area, which does not accurately represent the Cork city of today.
We are proposing amendment No. 11 to the Government's amendment No. 68 to try to ameliorate the Government proposal by including a number of additional areas. It is important to point out that we are doing this purely on that basis. A number of significant problems arise when particular local authority areas are chosen rather than other such areas. We are trying to ameliorate that, as I have said. It is proposed to use municipal districts or local electoral areas for these purposes. Local electoral areas in this country have never before been as big as they are now. The area I previously represented has a population of approximately 71,000 people. MPs are elected by constituencies with similar populations in parts of Wales and western Scotland. Some counties in this State have just two local electoral areas. The inclusion in larger electoral areas with significant rural areas of sizeable towns where there are substantial rental pressures is putting downward pressure on the averages for the purposes of the review process the Minister is talking about. It is a blunt instrument. It is clear that a rent certainty measure would be preferable.
I say all this to draw attention to the absurdity of the current city council boundaries, which exclude between 30,000 and 40,000 people who are properly living in the city and a similar number of people who are living just outside it. This has had implications for the housing assistance payment, HAP, and for rent supplement. It is now having implications for these rental zones. Areas like Rochestown, Donnybrook, Carrigaline, Grange, Frankfield and Togher, which have seen some of the most significant rent increases, are excluded from the rental zones even though they are part of the city council's area. Consideration is currently being given to a proposal to merge Cork city and county councils. In light of the way we manage housing payments and calculate issues relating to housing such as this, the averages in these urban areas would be dragged down significantly if such a merger were to happen. If the averages in the Cork city area and the metropolitan area were to be dragged down in this way, the reality on the ground would no longer be reflected. That would not be the only implication of such a merger, but it is a real implication nonetheless. The failure to reflect the reality on the ground has already had a significant effect in the areas directly surrounding the area which is currently called "Cork city" but in reality resembles the Cork city of approximately 50 years ago. The 12% increases that many tenants in these areas will face are excessive. They are utterly unsustainable given that many tenants are already paying rents far beyond their capability.
Rent certainty is a much more realistic and fair measure. In light of the suggestion that investment is needed to provide a degree of certainty, and given that the ESRI has made comments about providing certainty, I do not understand why people feel rent certainty is unacceptable. If landlords could be confident that there would not be a dramatic increase or decrease in their income, why would they not have the confidence to invest in and retain their tenancies and properties? Nobody has explained that to me. I do not understand why a system of rent certainty that offers fairness, certainty and security for tenants, who are obviously the key priority, cannot also be said to offer certainty and security to landlords.
I welcome the opportunity to contribute to the Report Stage debate on this Bill. I want to put it on the record, in case there is any misunderstanding, that I did not have sight of the contents of these proposals in advance of their publication last Tuesday. Obviously, I heard media reports, etc., but I saw the housing proposals for the first time on Tuesday afternoon. It is almost six months to the day since the Committee on Housing on Homelessness launched its report on 17 June. That report identified the need for a strategy for the rental sector. The Minister launched his own report, Rebuilding Ireland, approximately a month later. That report also identified the need for a strategy for the rental sector. I welcomed the achievement of that objective when this week's report was published.
The first thing that struck me this week when I reflected on the matter was that it took longer to produce the report on the rental sector than it did to produce the Minister's initial housing report, which was published well inside the first 100 days of this Administration. In my view, the wait from the publication of the Minister's first housing report to the launch of the rental strategy this week was too long. I want to focus on that delay because the task that has been given to Members on all sides of the House this evening is not an easy one. It is not easy precisely because of the time delay in producing the rental strategy. Deputy Coppinger is right when she says it is quite complex to deal with an array of amendments to various sections of the Bill that are being dealt with together.
Those who have listened to many of the contributions would probably say that they are more like Second Stage speeches.
It is unfortunate that the work which needs to be done - I acknowledge that it needs to be done - was not done earlier because many of these amendments could have been teased out on Committee Stage. I know that once the report was published, that was not possible. I know it was not possible because it was obvious that the market would react the moment the Minister published the report and its specific proposals. Such a situation could not continue indefinitely. Therefore, the Minister responded by tabling these amendments and that is why the House is sitting today. We have to deal with this. There has to be certainty in the market. Otherwise, other events will take place with unintended and unforeseen consequences. Most people understand that fact. While there will be disagreements on what to do, there is an understanding that, once the Minister indicated to the market that he was going to do something, it had to be done. Accepting that, it surely follows that this highlights the urgency of adding the other pressure zones. We all know them, whether it is from examining the housing assistance payment rates in the Dublin commuter areas or otherwise. If we acknowledge that we have signalled to the market that we will make an intervention, we cannot let that period drag on. If it is allowed to drag on, there will be unintended consequences in the marketplace. That is one of the reasons Deputy Cowen - who, I understand from Deputy O'Brien, will be in the House later - was so adamant that these other areas in which there have been significant increases are dealt with quickly. It is because the market will not sit idly by. People will respond in different ways. I want to be clear on that.
We are happy to do that.
Like my colleagues, on first reflection I thought the 4% figure was a big improvement on the rate of increases that we are seeing. However, 4% is still quite significant. A person in rented accommodation, where the rent was set a little over a year ago - in 2015 rather than in 2016 - could be due an increase in January 2017. There could be an increase in January 2017, January 2018 and January 2019. In 25 months' time, the rent will have increased by 12.5%. That is the reality of what the Minister is doing. I acknowledge that it does not apply to everyone. It will only apply to certain people whose rents are due for renewal. For some people, however, it will be a 12.5% increase over a 25-month period. For those whose rent was set in 2015, the next renewal will be in January 2017 - with renewals then in January 2018 and January 2019. That is an important point to be reconciled. I do not know if that was what the Minister had intended but that will be the effect for those people.
My next point is the same as Deputy Ó Broin's, although I will make it slightly different. A person whose rent was last set in June 2015 will be due a rent review in January. It will have been 18 months since the last review. The formula in the legislation allows for a 6% increase in January 2017 and a maximum increase of 4% in subsequent years. When I first saw this, I did not realise that it would be more than 4%. It is important to note - and it is important that people realise - that the first increase is dependent on how long it has been since the previous rent review. It sounds a little technical and I would prefer to be dealing with this on Committee Stage. However, I do not think people readily understood those two things. While the headline figure is 4%, for some the first increase could be more than 4%. Further, those who may have a review in January, February or March of next year could potentially face a 12.5% increase over a 25-month period. I am not sure if that is what was intended. The Minister might reflect on that point.
I want to refer to what a 4% increase means, particularly as Deputies spoke about affordability and so forth. Let us consider the case of someone who is paying rent of €1,500 a month. An increase of 4% does not sound like much. It is only an increase of €60 a month, but that amounts to €720 a year. If a person is paying rent of €1,500 a month and is on the top rate of tax, he or she must earn an additional €1,500 to pay the monthly increase of €60. That is what this means. It is quite significant. For argument's sake, if I were the tenant and the Minister the landlord, I would have to earn an additional €1,500 for the landlord to get the €60 monthly increase. Further, some landlords, who might not have mortgages, will pay tax on the increase, so they might be €300 or €400 better off. The landlord might benefit in the amount of €300 or €400, but the tenant must earn €1,500. It is important, therefore, that the tax review the Minister has spoken about takes place as a matter of urgency. In fact, the tax review and the rent measure should have happened at the same time rather than one in before the other. That would have been important.
The Minister mentioned how the figure of 4% was arrived at. Like others, I also did not understand fully how the figure was derived. It is not a rate of return; it is an additional rent increase. The Minister might explain it in further detail. A small word that has been attributed to the Minister has alarmed me. The Minister commented that he did not want to see a spike when the three years are up and the 4% cap is removed. He is concerned about a spike.
A cliff effect.
My concern about that comment is that the other measures the Minister intends to make are not working. The purpose of the three-year period is to bring supply on stream. If supply comes on stream and the Minister's policies are successful, there will not be a spike. That is my real concern. This is a temporary measure but it must be underpinned by the delivery of additional units to the market. They will come in two ways. They will come through the construction of new builds, which is a little slower, and the use of vacant units. We have referred to the issue of vacant units time and again and I am disappointed at the rate of progress that has been made on it. I know that a pilot scheme was funded in the budget and that there was an allocation of €6 million for 150 or so units. However, that particular area needs to be dealt with more aggressively and quickly. This is a housing crisis. It has to be quicker and easier to bring vacant units back into use than it is to build new units.
I am not saying to do one or the other. However, the vacant units need to be returned to use while the building projects are under way. Having read the reports, I am still disappointed that this is something to be initiated. There is a pilot under way but it needs to be more ambitious. I do not see that ambition in terms of the vacant units. I have driven around my area and other parts of Dublin and looked at these units. I have seen houses that banks have moved on and that have been derelict for a year or two. There are different ways of dealing with this issue. I feel passionate about those vacant units. I am not suggesting that every vacant unit in Dublin or throughout the country is suitable for housing. There are 40,000 vacant units in Dublin.
That is a bigger issue.
If 1,000, or 2.5%, of those were brought back into use, everyone in a hostel, hotel or bed and breakfast accommodation tonight could be housed. That would be a significant step to take. I urge the Minister to deal quickly and proactively with that issue.
I ask the Minister to indicate, in as much detail as possible, where and how the 4% was calculated. I also ask him to reflect on the point I made about the 4% increase affecting some people to the tune of 12.5% over a 25-month period. He might also reflect on those who are renting that have a lease that is already 18 months old. Their first increase will be one of 6%. We are dealing with this today because the market was going to respond once the Minister published the report. If it is responding in Dublin and Cork, it will respond in the commuter belt areas and in the other cities that have been identified. The Minister needs to deal with those just as quickly as we are dealing with these areas today.
Deputy Coppinger will be glad to know that her time has come and that she may have as much time as she wishes.
I thank the Chairman. I will take an hour or so.
On 26 February 2014, almost three years ago, I participated in a protest. Nothing surprising there. The protest was in Dublin city and on the placards was written, "RENT CONTROLS NOW." That was almost three years ago and it has been no secret to anyone that we needed rent controls in Dublin and many other locations.
The occasion for that protest was the effective eviction of a woman called Gwen Connell, who had received a 40% rent increase and was made homeless through inability to pay, with her children being dispersed. She was one of the people who brought attention to the rocketing rents, but that was not the first case I ever dealt with. The point is that it has taken the Government and the Labour Party this long to act. We are delighted to see the Labour Party amendments but, when it was in government, it set its face against rent controls or any interference in the market.
What the Minister has introduced is not rent control. I want to pick up where the previous speaker left off because I, too, have a question. Effectively, the two-year lease the former Minister, Deputy Alan Kelly, introduced in the term of the previous Government seems to have been abolished because the Minister, Deputy Coveney, is making provision that annual rent increases will be limited to a maximum of 4%, as he said earlier in his speech. The previous speaker is right that it is not that people who are now due a rent increase will just get a 4% rent increase in January but that they could get an 8% increase. The other point is that people have been saying it is 12% over three years but it is not because the rate is compounded, so it is a lot more than 12%.
Another bit of news is that 90% of nurses in the INMO have just voted for industrial action related to pay. This is the reason - it is one of the many reasons. The Government expects workers to continue with the austere regime while rents and the cost of keeping a roof over their heads have been rocketing.
The Minister originally proposed this would apply to Dublin and Cork only and landlords would be allowed to put up rents by 4%, which is four points ahead of the consumer price index. Inflation is actually below zero, so there is no justification for these rent increases. That Fianna Fáil is accepting 4% speaks volumes about the type of so-called Opposition party it is. It is just another wing of the Government. Fianna Fáil will have a chance tonight because there will definitely be votes put and there is a whole range of amendments on this issue. We will certainly be pressing a vote on the issue of a 0% increase in these rent emergency zones, which is in line with inflation.
It would seem the only argument between Fianna Fáil and Fine Gael has been what areas should be included or not included. The Minister said he is asking the Residential Tenancies Board, RTB, to consider including counties Meath, Louth, Kildare and Wicklow, cities like Galway and areas contiguous to Cork city. He spoke about the end of February. We have a real problem but what is the Minister going to do about it? He has alerted landlords in all of those areas that there is a study going on about limiting their rent increases to 4%. What does the Minister think they are going to do in the interim? This has to be answered.
We are just prioritising those areas first. The whole country will be reviewed and some areas will come in at a later stage because it will be a rolling assessment process.
It will be rolling rent increases. That is my point. Somebody has grouped together 15 amendments and it will be difficult to get answers on them all. While the amendments are all on rental, many are on different issues. The Minister has to explain what the Government is going to do.
Amendment No. 1 refers to this measure applying the day after the law goes through. Although the Minister may argue it is illegal to do so, I believe this should be made retrospective. It is not only me who is raising this and it has been raised by housing organisations and those dealing with the homeless. All of this legislation is retrospective because if somebody has, for example, a Part 4 tenancy, that person will now get a six-year tenancy rather than a four-year tenancy. If we can make that retrospective, why can we not make the provision on rent increases retrospective as well? I say this because we all know what is going to happen. It happened with Deputy Alan Kelly's two-year lease measure, whereby many people got massive rent increases in anticipation of that being enacted.
The Minister said we need more evidence about counties Kildare, Meath, Wicklow, Louth, the suburbs of Cork and Limerick city. What more evidence does he need? Does he not read daft.ie? That is all he has to do. We have a number of amendments challenging the timeframes he has put into this Bill. The idea that the Minister would have to wait for six quarters - a year and a half - before he would intervene in the sacred market is complete lunacy. It is obvious there is a trend over two quarters, for example. Even for places like Limerick, which would not have been an area with a huge rent or housing issue in comparison to other areas, when I went looking yesterday, I found there have been increases in many parts of Limerick. The reason is that students cannot afford to go to college in a number of locations and are having to pick different counties, which puts massive pressure on the whole rental market. I have seen people being asked for €3,000 a month in rent in Stillorgan, obviously because it is in close proximity to UCD. That is what families who are trying to get a roof over their head in those areas are competing with. It is incredible the Minister would allow landlords to bring in a 4% potential rent increase on a €3,000 a month property.
As was said, the key question for Fine Gael and Fianna Fáil is not how affordable rent is but how profitable it is. The Minister needs to explain where he came up with what I am calling the Coveney algorithm. In his speech and in the media, he made the point that the figure of 4% has been selected on the basis of careful analysis and research. What careful analysis and research? Can we have a look at it? I assume the Minister has bar charts galore. He also said it was done on the basis of extensive consultation with a range of stakeholders. I doubt any stakeholder who deals with tenants told him a 4% rent increase in Dublin and Cork would be okay at the moment. We all know which stakeholders the Minister listens to. He went on to say:
The figure of 4% is a carefully measured response to the current extreme pressures in the rental market. It will provide certainty for tenants ... that they will not face a rental hike of the order many have seen recently and it will provide certainty for landlords ... that they will continue to see a return on their investment.
That was obviously key.
A few months ago, the Minister and other members of Government said any kind of interference in the market was not a good idea. What has changed? How can we interfere in the market now? I wonder what has brought him to this point. Will he explain it? The only conclusion I can come to-----
Does the Deputy not think we should?
The Minister said he could not but now he can. What seems to be the case is that he can intervene in the rental market as long as he still guarantees profiteering for the landlords.
The Minister included Dublin and Cork, and it is now probably being extended to a few other areas. We challenge his criterion of 7% in a number of our amendments. Where did the arbitrary figure of 7% come from? Why is it that a person's rent has to be going up by 7% and be above the national average? The Minister is saying that everybody in, say, Tipperary or elsewhere, who has not reached that point should have to come to the same amount of suffering as tenants in Dublin and Cork. He is saying we should let them suffer equally and have the same rent increases. We should be knocking this on the head. No rent increases should be allowed.
I will go through some of the amendments quickly. There are a lot of them. The first is the Minister's one about the timeframe. He has to say what he is going to do about this because he is now talking about the end of February so landlords would potentially have two months in all of those locations to put their rents up quickly to avoid coming under the RTB scrutiny and going into one of the rent pressure zones. The Minister said earlier that by the end of February he would come back and report on whether these other locations would go into rent pressure zones. He has indicated a two month gap, meaning that landlords will want to increase rent. In case the Minister thinks I am imagining this there is a tenant in my area whose rent was subject to a 28% review in November. This was done by the vulture fund in Tyrrelstown. The Minister claims to have clipped its wings but he has done nothing of the sort. It is now resorting to rent increases to get people out. The Minister will not backdate this Bill to protect that person but when queried about it the property agent said it had to do it because it would be barred from putting the rents up for two years. These people look very closely at any legislation and decisions made in here. They will consider ways to get the maximum rent before possibly being included in one of the rent pressure zones. That makes it all the more unforgivable that the Minister did not include them in the first place and get this passed quickly. This Bill could have been dealt with in the same way as the banking legislation and done by midnight tonight if the Minister was serious about tackling rent increases.
The Minister says he will oppose our amendment No. 54 but is it crystal clear that if somebody increases the rent by 4% and a new tenant moves in it cannot go up again?
People do not know their rights as we know from dealing with them. Somebody coming to rent a property can be shown a rent but has no proof that it is within the limits. People are so desperate they will not upset the apple cart. We have suggested putting the onus on the landlord rather than the tenant. The landlord should have to produce a certificate from the RTB saying the rent is in order. I do not know why the Minister would not agree that because every day in Dublin West I deal with people who do not know their rights, do not know that the landlord must produce a statutory declaration for the sale of a property or a relative moving in. The Minister needs to put power into people’s hands by putting more pressure on the landlords.
The Minister will reward people who keep property vacant for two years by not putting them under these rent limits. The Minister constantly says, and the Minister for Justice and Equality said it earlier today, that if we go too far in limiting rent increases all of these landlords will exit the sector. That is hogwash. Why would they exit the sector when there are such profits to be made? Countless investment firms have said how great the Irish rental sector is and pity the people of Ireland labouring under it. Where would these people go? If they decide not to let their properties they are not making any money on them. Why does the Minister not consider a vacant house tax on people who in a housing emergency do not put their houses up for occupancy? Had the Minister thought of that? Why not tax them, unless there is a very good reason not to let the property instead of rewarding them by taking them off the market? The Minister could do that to accompany these very meagre rent measures.
In amendment No. 55 we argue for deleting the section saying the limits on rent increases are not retrospective for tenants who have already been notified of a rent increase. It is to cut across the idea of landlords exploiting the loophole and gap, the time lag in enacting the legislation.
I remind all Members this is not Committee Stage. The House is in full session so the Chair cannot allow exchanges back and forth across the floor. I ask Members not to invite exchanges. That applies to all Members.
Deputy Wallace is the next speaker.
I am sorry to see the Minister go.
He might learn something if he stayed.
I will be back.
In 2015 there were 985 residential housing appeals to An Bord Pleanála with 75% of determinations confirming, with or without variation, the decision made by the local authority. In 2015 also 82% of all priority appeals made to An Bord Pleanála were disposed of within their targeted timeline of 18 weeks. I disagree with the Government's decision to bypass the planning section at local authority level and go straight to An Bord Pleanála. I heard the Minister argue on Committee Stage that there would be consultation here, there and everywhere but in fact there is no obligation. We are back to the legal argument between "shall" and "may". There is a lot of may and very little shall in this area.
It is a very strange position to take. I did most of my building in Dublin. I had pre-planning application meetings with planners and I found them very helpful and good. They knew what they wanted in terms of how the city would develop. There are many different aspects to a building and it is more complex in a city centre than elsewhere. I found them to be of very high calibre and they brought a lot that was positive to the industry. God knows the industry had a lot of problems.
I still have contact with a few of them and have spoken to them in recent weeks. They are a bit taken aback at the Government's approach. They do not agree with it, surprisingly. They reckon that there is a false economy regarding time. They find it anti-democratic, and call it a power grab. They say it will add uncertainty. The new process risks judicial reviews. It is a bit of jump into the unknown. Why did the Government not consider increasing staff levels at local planning level or in An Bord Pleanála? The Minister made the point a few days ago that the pre-application times were too flexible in the past. Why not make them statutory? Let us fix a time for them in order to increase the time. The notion of taking the experienced planners, who care about the integrity of the city which they take responsibility for in the development game, out of the equation to the degree the Government is now doing is not a good one. It will not lead to better planning. In fact it will lead to the opposite. It is being done for developments of over 100 units.
It is hardly rocket science that the bigger the unit, the closer the scrutiny needs to be. From my experience, the smaller builder is far less inclined to cheat than the bigger builder. I have many years of experience of that. At this stage, it looks as if the 4% rent inflation rule seems based on the Ireland Strategic Investment Fund, ISIF, required dividend. I find it amusing to see whether Fianna Fáil is happy with that as well. It all seems to be more about yield now than anything else.
Things are being made easier for people to get large development applications run through the mill much quicker and easier. I cannot help thinking that that suits some people more than others. I am reminded of Kennedy Wilson when it was down in Clancy Barracks. I think it built 160 apartments there eventually. It had a bit of a fight on its hands to try to get the local authority to allow it not to have any social units on the developments because it thought they would not be suitable. Sadly, it eventually got its way. There is probably even less arguing to do in the new process.
I wonder if groups likes Hines have been doing some lobbying in this area because their plans out in Cherrywood will certainly enjoy the new measures that the Government is bringing in. I have been looking at Dún Laoghaire-Rathdown, of which Cherrywood is a part. It is stark that right now in Dún Laoghaire-Rathdown, there is enough land zoned for 34,000 units. Does the Government realise that 18,000 of those are serviced and 7,700 are partly serviced? What are we doing and what is the Government going to do? Is it going to make sure that these lands are built on and developed in the short term? No. What it is going to do is spend €100 million servicing Cherrywood. That is what the Government is going to do. I wonder who would like that done quickly? It is not rocket science.
Why does the Government not move on the 34,000 units that are zoned in Dún Laoghaire-Rathdown, do something about them and get those developments off the ground? If the people sitting on those sites do not want to do it, I believe the State should consider introducing compulsory purchase orders. If the people holding the sites cannot afford to do it because they are just regular builders and not large developers, I suggest the State should help them to get on their feet and arrange finance for them. The Government might think that is a mad idea, but I do not. The banks are closed to the regular builder. The developer that the Government is tripping over to please is not depending on our banks. It has different access to money. More often than not, it is not even from this country. It has no problem getting money.
There is an obligation on the State to help the builder who wants to build and who is not looking to make a small fortune out of every unit that it builds, unlike the developer. I make the point that I am not giving out about developers, because they are just an investor. If they do not feel like building, there is no reason why they should. They have got better things to be doing with their money. That is fair enough. That is how they operate. However, there are builders who would like to build and who do not need to make a fortune on every development that they carry out. They need help. The need access to money but they do not have it.
I was speaking to a guy lately who told me that he has stuck his neck out. He has loaned money and it is very expensive. He is paying interest of 14%. He had to pay a 2% set-up fee and if he misses his repayments, his penalty is 4%. That is 20% in total. This Government can borrow money at less than 1%. Am I missing something? Where is the rationale behind the State not engaging in the investment of the supply of housing itself? That does not just mean social housing, but also affordable housing. It is doable and possible to achieve through the local planning process. There would not be local authority workers building them. Builders would be gotten to price the developments as normal. It would be a keen process. Unless a fella is keen, he will not get the job. He would not be looking to make an absolute fortune.
I wonder where the Government is getting its advice from. That is what I would love to know. Is it getting it from the Construction Industry Federation, CIF?
That is an organisation that I described about 15 years ago in the public domain as a glorified golf club. It does not represent the average builder. I would be afraid and fearful that the Government of the day is taking too much advice from it. Is it taking advice from the real estate investment trusts, REITs? Is it taking advice from NAMA, which would like to build 20,000 houses to sell at an average price of €330,000 to people who are not the ones in the most need at the moment? The majority of people in Ireland today who cannot get a house are unable to pay €330,000. Why in God's name would the State allow NAMA to supply housing at €330,000 a unit when local authorities, even in Dublin, say that they can supply local authority housing for €205,000 a unit? It is as low as €160,000 in places like Wexford. Why does the Government want NAMA to get its favourite developers to engage in supplying housing that is going to cost €330,000 each? This is an organisation that has hardly covered itself in glory in the last number of years. In fact, the sooner the commission of investigation commences in this House in the new year, the better.
We have reduced the standard for apartment sizes. We are now reducing planning restrictions. We brought in a first-time buyer's grant. We got the Central Bank to reduce the 20% mortgage deposit rate to 10%. The most obvious outcome of all of that is to enhance site values. What is the great thing about site values? It is that this Government, as with the Governments before it, encourages an owner to sit on a site by not taxing the owner. The owner does not pay tax on it. It is a wonderful idea. It is probably the biggest problem that we have in the supply of housing, and we are continuing with it. Now we are introducing all of these measures that are designed to be appetisers for the developer who might get involved when the price goes high enough.
I would like the Government to deal with the challenge that the architect Mr. Mel Reynolds identified on a building blog. He showed in a graph that, since 1975, the supply of housing in the private market is directly linked to the cost of it. Cost does not go down when the supply goes up. I ask the Government to look at the research he has done on that.
I note that Deputy Fergus O'Dowd is back in the Chamber and I want to pick up on a number of points he made. I completely agree that all landlords are not evil, no more than all builders or developers are evil. I also agree that it is mind-boggling that we have not addressed the big challenge of all of the empty units in the country. It is mind boggling that we have dared not go there. I do not understand it. However, I must pick Deputy O'Dowd up on his assertion that NAMA offered lots of units to local authorities. I have checked with a few authorities with which I would have a link and I assure him that what NAMA offered, more often than not, was problematic. Where were the units, how good were they, were they manageable? NAMA kept the good stuff for the vulture funds and offered the shite to the local authorities and that is the sad truth. I will not hold it against Deputy O'Dowd that we might disagree on this point.
I would like to briefly touch on what is called the endless treadmill of market inflation. The truth is that the market has never been able to provide good, affordable housing. That is the truth. The only way that can actually be made to happen is if we help people who want to buy houses to borrow too much money. That is what we have to do. It is not profitable for developers to build homes for people on low incomes. It is not profitable and it is never going to be profitable for developers or, in many cases, builders to construct homes that are affordable and good for people on low incomes. That is a fact of life. In the middle of the last century, successive Governments realised this. What did they do? Over 50% of housing was supplied through the State sector and those who could afford to do so bought homes from the private sector. That is fine. We will always have private housing and we should encourage it. We will always have developers and builders and we should encourage them but we should start by going back to basics. The local authorities and the State have an incredible amount of land on which to build. The State has access to incredibly cheap money. The State can start to provide social and affordable housing to a huge proportion of the people of Ireland at a very realistic price. That can be done. It is not impossible but, sadly, it does not seem to be where this Government wants to go. I do not understand why that is the case.
When we interfere with matters by facilitating people to buy homes they cannot afford, we are driving up prices and creating an uncontrollable housing market. That is what we seem to have here most of the time - an unregulated and uncontrollable market. I wish people would stop thinking that developers should be supplying them with housing at an affordable price. That is actually very unfair to developers. They have access to money and they seek to make money with that. That is what one does with money. One uses money to make money. That is what developers do and they cannot afford to be losing money on their investments. In fact, some of them are so tied up with shareholders and so forth that they are under enormous pressure to make serious amounts of money. That is no reason for the State to be dependent on them. If developers want to build in this country and are able to sell the units, away with them and good luck to them. If, however, the State is interested in supplying housing to the people of Ireland, then it must engage in the active supply of such housing itself. It cannot be depending on the private sector or the markets to do that job for it because it ends up being too expensive. It actually costs more in the long run.
I do not want to talk all night because the Acting Chairman is starting to doze off.
Never while Deputy Wallace is speaking.
Deputy Curran made the point that the average two-bedroom unit in Dublin city costs €1,500 per month to rent. He said that the 4% increase will amount to €60 per month. He was pointing out that a tenant would have to earn an additional €1,500 per year in order to pay that €60, which means that he or she will have to earn close to €5,000 extra after three years in order to deal with the rent increases that this Government is facilitating. We are creating an upward-only rent structure. It is not that long since we were in here going mad and asking why the State could not do something about the fact that upward-only rents in the commercial sector were driving people out of business. Upward-only rents in the residential sector will drive people out of their homes. That is what will happen.
The Government is not going to solve the housing crisis with the policies it has brought forward in recent months or the past few years. I am sorry but I am convinced that it will not happen. The point about the 4% increase is that it is a bit like what was said in respect of the Central Bank when it reduced the deposit requirement to 10%, namely, that it was great because people, particularly young families, would be able to get loans. The question we must ask is: 10% of what? The prices went up on the night that the Central Bank reduced the deposit requirement from 20% to 10%. The starting figure is too high. The starting figure on the rents is also too high. The whole structure of it is nuts.
I will conclude with some lovely quotes from an interesting individual who has become very wealthy. He originally worked for NAMA and, very interestingly, he gained from the whole process. We will be bringing more information to the Chamber on this in the new year in order to provide greater clarity. Mr. Kevin Nowlan of Hibernia REIT plc had a bit of a go at the Government recently. I thought he was a bit harsh, given that he has done so well out of Government policies and, in particular, his time with NAMA. He was speaking at a real estate stakeholders Brexit summit where he called for an end to the blanket requirement for dual-aspect apartments. Is that not interesting? He does not want dual-aspect apartments. According to a recent article in Irish Independent, Mr. Nowlan also called for the introduction of a wider range of apartment sizes to cater for the differing demands of renters and owner occupiers. The article states:
Laying the blame for the deepening housing crisis on the State, he said: "There's some very simple things that could be done but for some reason our local authorities have a difficulty in understanding the difference between rental stock and apartments that people live in. They're different.
"In Ireland, local authorities think there are only one-bed, two-bed and three-bed apartments and that's it.
"If you go to the UK, you'll see the different asset classes they have in terms of flats. They understand it's about usage, about occupancy levels and what people need those units for.
Citing the example of workers in Dublin's docklands, Mr. Nowlan added, "The majority of people who want to live in our docks are generally younger people who don't spend a lot of time in their apartments.
God help us if they were to sell them on to someone who might want to live in them. The article continues:
"They don't need to be protected by dual aspect and 80 sq m floor areas because they don't spend a lot of time there. We need to understand this and get a little more sophisticated with our residential [planning regulations]."
I would not be able to make that up. He went on to state there was an "amazing, huge amount of demand for rental stock". Government, planners and local authorities have been "unable to engage" with the issue of rent affordability. He further stated:
If you look at London, I can build a two-bed apartment and it has to be 61 sq m; in Dublin, it's around 80 sq. m. In London, I don't pay any VAT on construction; it's zero rated. And in London, the affordability criteria for what people can afford to rent is higher. [Is that not great?] So these are the issues we're dealing with.
Mr. Nowlan said changes need to be made to the dual aspect requirement for apartments and that floor area sizes would need to be made "more consistent". He said the VAT rate on construction would also have to fall to allow for the creation of a stock of "well-managed residential apartment blocks". God knows we have a lot of them, now that the REITs control so many of them. I am sure they are well managed but it is a pity we cannot afford them. He further stated:
The organisations are there to do it now, I-RES is there, we're interested in it and the pension funds, they won't deliver it, but an organisation like Hibernia could deliver them on and sell them on after making a profit.
I believe him. I would say he is dead right.
Deputy Wallace is a hard act to follow, and in deference to the hour I will try to curtail my remarks somewhat, but it gives me no pleasure to say that not only do I believe the legislation before us will not make things better for the families and individuals who are in dire straits tonight in terms of the crisis in the private rental market, and those who have been made homeless, I genuinely believe that what we are looking at here will make the situation worse. That is because, in reality, this Bill is a depressing continuation of the types of housing policies successive Governments have been pursuing for years. Other Deputies dealt very well with the aspect of rent predictability, which is wholly inadequate in terms of the provisions of the legislation, and while it is encouraging to see aspirations outlined in terms of the rental strategy, regulating standards, indefinite tenure and so on, with regard to much of this it is a case of let us wait and see what happens.
The root of this problem is that housing policy over the past 30 years has boiled down to giving the developers whatever they asked for in the hope that they would deign to build a few houses and therefore magically increase supply. It was a case of to hell with the unregulated development and to hell with the fact that, historically, there is only a small link between increasing supply and throwing carrots at developers and lower housing costs. The figures, which are available, dispute the Minister's whole premise that is before us. Between 1991 and 2006, for example, 762,541 housing units were built in Ireland. At the same time, house prices increased between 300% and 400% in different parts of the country. More supply does not mean more affordable housing stock, and more affordable housing stock is what is desperately required by Irish citizens, and everything that has been done proves that point. From at least the time of the Urban Renewal Act 1986, the State has thrown incentives amounting to billions to the private property market for hotels, nursing homes and student accommodation. The section 23 tax relief cost the State well over €1 billion and despite all of these reliefs and incentives, we still have a dysfunctional housing market and periodic crises because there is no link between incentivising developers into the rental market and lower rents. The proof of that is that the highest outlay on the section 23 rent relief was in 2006 and 2007, the two years in which there were peak levels of rents. The problem with the Bill is that it is continuing to further the vested interests who have not come forward with a solution to our housing problem.
I want to deal briefly with the three amendments we have tabled to this section. Amendment No. 56 is about repeal of section 19(2)(b) of the 2004 Act. That is inserted in the unlikely event that our amendment No. 58 on rent control is accepted. It probably will not be accepted and in that instance we will not be pressing amendment No. 56 but I do not understand why the Minister would not accept amendment No. 57, which simply deals with the issue of defining market rent. I raised this issue last year in the debate on the Residential Tenancies (Amendment)(No. 2) Bill 2012. We did not have a proper definition of "market rent" a year ago and we still do not have one now. The legislation as it stands, section 19 of the Residential Tenancies Act, references market rent but it defines it incredibly loosely and that is a huge part of the problem. It is akin to saying the price is whatever somebody wants to charge for it; it is incredibly vague. Whether a landlord is charging the market rent for a property is left to the Residential Tenancies Board to decide after the event. It is ludicrous.
The proof of the uselessness of the current definition, if one could even call it that, is that it has done nothing to stop rents from increasing over 40% in recent years. The 2004 definition refers to market rent being dwellings of a similar size, type and character and situated in a comparable area but none of the aspects of it is defined. Let us look at size first because size does matter. If we look at daft.ie and so on, we will not see any size defined in terms of square feet or square metres in any rental property. Nobody collects data on price per square metre of rental properties in Ireland. Nobody is under any obligation to state the size of the property. Instead, what we have is the number of bedrooms erroneously acting as a sort of proxy for size because in Ireland a two bedroom property can be anything from 40 sq. m. to 100 sq. m. A two bedroom property can be a one bedroom property with a bit of plywood thrown up masquerading it as a two bedroom property because there is no real regulation. There is no enforcement of standards in rental properties and sizes can vary massively.
We need data if we are to regulate the rented sector properly and set prices. That is critically important. I do not understand why we have not adopted models of other jurisdictions like the Mietspiegel arrangement, the rental mirror system which operates in Germany. It is an index of local rents per square metre prepared by local government that serves as a guideline for market rents. It is an official document. It must be referred to in the setting and increasing of rent and it contains information on the age of every property in every city and town, its size, the price range from high to low per square metre of properties of a similar size and so on. It is so granular it will give one the average price of 20 properties in the same street. Why can we not do something like that? It is not that difficult.
Collecting data is an important first step towards regulating renting in Ireland for a better system for landlords and tenants. I am glad the Government is talking about some of these issues but it is not enough and it is not done in a sufficiently defined way. For example, what is a comparable area? Is Sandymount comparable to Clontarf, Ranelagh or Fairview? Who knows who defines these things but what is clear is that the looser we leave it, the more open it is to exploitation and so on, which is regrettable. That is our amendment No. 57, and I do not understand why the Minister would not agree to the definition in our amendment.
Our other amendment to this section is amendment No. 58, which calls for rent control. I will repeat the points about the 4% which were well made by other Deputies. The measures being put forward by the Government will not help. They will make matters worse. The only way to control cost is to control rent and that means proper rent control, not only within tenancies but at the beginning of tenancies also. Let us face it. This might have been a radical proposal four years ago but it is not radical now. It is a basic A, B, C approach in that something has to be done now to stop rents going up further. Our proposal to link increases to the CPI is the only sane way of doing that. Anything else is merely window-dressing, which will make the situation worse.
The last point I want to touch on in regard to this section is what has been missing from much of the discussion about the private rental market in Ireland, namely, the buy-to-let mortgages and the significance of those mortgages for our troubled banks. If one looks at the figures, last month there were 173,956 tenancies registered with the RTB. Two months before that, the Central Bank reported that there were 132,571 buy-to-let mortgages on its books with a value of €24.6 billion. In our policy discussions and strategy about regulating rent, we have heard a great deal about accidental landlords and the Government's concern, in bringing forward measures, that we do not inadvertently penalise these poor people who bought houses during the boom, whose family size perhaps required them to move, who were not able to sell the property and who became reluctant landlords. I know many of these people. They undoubtedly exist. If one looks at the figures I quoted, one can work out that they are not the majority of tenancies. Some 76% of the tenancies in Ireland are overseen by landlords for whom the property was an optional investment and when we talk about being worried about the accidental landlords, we are using that argument to hide the fact the Government is really worried about protecting not only the investment properties but the impact of those on the banks' mortgage balance sheets. Rents are being allowed to sky-rocket so that tenants can pay off the buy-to-let mortgage arrears in which they had no involvement. Looking at this legislation, the Government is more concerned about the banks than it is about tenants. That is verified by the measure in the rental strategy that talks about a fast-track approach to enable landlords to regain possession quickly where non-payment of rent constitutes grounds for termination. That so many buy-to-let mortgages are in arrears of over 90 days to the tune of €6 billion and that a not insubstantial proportion - 11% - are in arrears of 720 days or almost two years shows the banks are slow to initiate repossession even without mortgage payments being made. Some of these measures are more about the banks' balance sheets than concern for tenants and their rights. Mr. Aidan Regan of the school of politics in UCD summed it up accurately. He states:
If NAMA or the banks fire sell housing assets to solve the housing crisis, then all those under performing loans/mortgages will be exposed. The debt dynamics of the banks will be exposed. The government will be exposed. Then the ECB is exposed. It's a house of cards and the only thing holding everything together are rising rental and house prices. Those renting (and those who don't own mortgages) are ultimately picking up the bill for the last crisis, of which they had no part.
Hence, the structural constraint underpinning the housing crisis is a convergence in the incentive structure to maintain sky-high rents and rising house prices.
That, in effect, is what the legislation has to do today.
A solution and a different, more radical approach to deal with this was outlined incredibly effectively by Dr. Michael Byrne of NUIM in the Irish Examiner earlier this year where, instead of the type of measures being brought forward today, he put forward a proper NAMA-type system for buy-to-lets. Basically, it would be an asset management agency that could step in, take the loans away from the banks relieving the mortgages holders of the debt and rent the properties to the existing tenants at a deep discount. Dr. Byrne calculates that would cost €8.8 billion, which could be kept off balance sheet. A debt could be paid off over approximately 25 years of continuous affordable tenancy. It is an elegant, rational approach, manifestly in contrast to the measures before us today.
The amendments we are discussing in an the attempt to get rent control are like putting a sticking plaster on what has been a broken arm for some time; they are not a cure. We are not addressing the scale of the crisis we face.
Without wishing any disrespect to Deputies, many of whom I have listened to, the epicentre of the crisis is probably in Dublin Bay South. It affects every part of the country but the price of rental accommodation in my constituency is sometimes multiples of that elsewhere. It is almost an impossible place, if one is young, to consider living. It is creating a two-tier system. There are some who are working with certain companies who are able to live there because the company pays for it, but for an ordinary person who does not happen to be lucky to work for such an employer, Dublin 2, 4, 6 and 8 are now out of bounds and he or she must ship out and move a long distance away. It is a constituency where if one happens to inherit or have property, one is wealthy and will be wealthy in the future, but if one does not, one is excluded. It is a problem in Louth, Wicklow and Kildare, but it is a particular problem that we see in my constituency. It is exacerbated, as Deputy O'Dowd stated, by the fact that my constituency is where, by and large, Airbnb wants apartments. That has even heightened the crisis, in particular in my constituency.
I listened intently to the Minister and I was happy to read his statement. On the overall approach, he stated that we are making a three-year intervention with the view that afterwards the market will recover to something resembling an equilibrium and that the supply side we put in place will take hold. That is a real sign of the fundamental problem because we do not need to go back to the market-led approach that, as Deputy Wallace stated, we have been applying for the past three or four decades. It is not the right approach. We need to use the opportunity of this crisis to fundamentally change the way we provide housing in our country, particularly in this city. We have to change. We need radical reform, not the idea that, somehow or other, we will have a short-term intervention and go back to market equilibrium. Others have made a similar point. Professor P. J. Drudy, the Trinity College academic, put it well. He stated, "If we see housing as a commodity and rely on the market to meet our needs, then we're finished." Professor Drudy is right as is Deputy Wallace. It requires the State to start building because if we are chasing the tail of the market solving this problem, it will not do it. This is a short-term interventionist measure that will not address the fundamental problem and we will miss this opportunity.
I am disappointed that my party's amendments Nos. 7 and 8 have not been accepted because I think they would work. It was an attempt to achieve a slightly more holistic view that we should not be doing this with merely these limited measures. We should have been advancing the vacant site levy ahead of schedule and we should be changing the derelict site taxation laws. We should be introducing the likes of, as Deputy O'Dowd stated, a tax on vacant properties at the same time as rent controls. If we are serious, it might provide a holistic solution to the problem.
The Minister quoted the ESRI's recommendation that we must do this because one must incentivise the market, but the ESRI said, and I read in the newspapers today, that one also needs to introduce site value taxation. It cannot be all carrot and no stick.
There is no stick to push the supply side and deal with the developers who are sitting on vacant sites and not developing, such as the 38,000 planning permissions in Dún Laoghaire that have been mentioned. One of the reasons for the lack of confidence in these measures is that none of those other measures is included.
I can give another example, and all of this is connected. A Programme for a Partnership Government states, "... the new Government will introduce a new model of affordable rental by working with housing associations and local authorities to develop a 'cost rental' option for low-income families...". That is absolutely right. The Strategy for the Rental Sector published this week states that to progress the concept the Government will set up an expert group involving the RTB, the Housing Agency, NESC, the local authorities and the Irish Council for Social Housing to develop a cost rental model for the rental sector, addressing issues such as funding mechanisms. We know what that interdepartmental working group means. It is "Yes, Minister" talk for not now. It will report in the fourth quarter of 2017. Eight or nine months have already passed and a great deal of work has been done. We have been talking about this cost rental model for some time. It should be in this Bill. The Government should say it will do it, that it knows it will get the funding and that it will have to change the entire rental model. It is not just the private rental sector model that must change, the public rental sector model must also change. The mechanism has been outlined and the Government says it wants to do it, but now it is saying it will take another year to do another study before it will even think about it. The opportunity is lost. That will be a year in which we should be ramping up and building. If we are not doing that, we will miss this chance.
Members of the Irish Fiscal Advisory Council appeared before the budget advisory committee a few days ago. It was quite worrying to hear them say that it appears we are returning to the same conditions that created the housing and economic crisis we had seven or eight years ago. I believe they are right. Part of returning to those conditions is this obsession with market led development in housing, the pump priming we carry out, the tax breaks we still provide in the Finance Act and all the changes to the Central Bank rules. Bending over backwards to try to return to that market led housing model is creating the conditions, as the Fiscal Advisory Council said, that will create the same problem.
I listened to Deputy Ó Broin speak on the 4% proposal and how people will pay it. My concern is that it will require a 4% pay increase for everybody. The first thing a person will say, rightly, is that they will have to have a 4% pay increase. How else will they afford to pay that rent increase? Again, that is a return to the bubble conditions. That is the reason we have tabled amendment No. 64. The clever and smart economic strategy is to say "No" and restrict the rental increases to the consumer price index, CPI, which currently is low or zero. It is the way to keep inflation low and prevent us going down the route of losing our competitiveness and creating an inflationary environment, which is what is being done with this provision in terms of thinking that market prices should go up another 4% per year. It is an inflationary measure that will damage our economic model, as well as costing the people who have to pay it dearly. That is the reason we, along with other parties in the House, came to the conclusion that it should be linked to the CPI. It will prevent the bubble conditions building up again and try to keep the economy strong, instead of pump priming the wage increases that will naturally follow.
In terms of the measures in other areas, and I will not labour the point as other Members have spoken on this, we examined the site value proposal. In doing that we did some work with Ronan Lyons on examining how we would introduce it. It was very easy. He already had the models in place whereby one could look at local district property prices and rental levels. A range of different data can be modelled. It is not difficult with modelling on computers to get that type of data. I could not agree more with Deputy Daly. Her amendment No. 57 is absolutely sensible in terms of providing more data. I can see no objection to that as an example of how we could and should be using data quickly. It is available. It should not have required a three month lead-up consultation period in this process. This type of approach will now be rushed through, but it should have been done in advance. I cannot believe that the data is not available on a range of different sites where we could have done it, so we would not create this anomaly where certain areas are going to see rental pressure above the 4% in the next two months in advance of any other measure being put in place. It would have been better just to have set the whole country within the measure, but if are not going to do that we at least should have put in place a mechanism, before the measures were published, to view which areas would benefit. Bray is not that different from Shankill in terms of rental prices, and it would not be difficult to foresee that Carrigaline would run into difficulty compared to Blackpool or somewhere else in central Cork.
I will conclude, as many Members have spoken and a number of Members are due to speak. I wish to make two points. I attended a recent conference held by chartered surveyors. People at the conference were speaking about a new model of build-to-rent. Hines and other developers are doing it. Are they the right people to be building in Cherrywood? I certainly would not weaken any of the standards. The lowering of standards by the previous Minister with responsibility for housing was a disgraceful decision because we all pay for that in the long run. However, what I was hearing about this new model of build-to-rent is that the developers expect people to stay in the units for a long time. It is long tenure and secure rents. It is not the type of model we have at present in which the tenants do not have any rights and are moving on all of the time. I do not believe that the measures we and other parties have put forward in terms of introducing rent controls, giving longer security of tenure and giving rights to tenants would not have stopped the way the building industry is going on the build-to-rent private market as well as us also proceeding massively with a cost rental State developed social housing rental model, which would include a variety of different tenants. We are not doing that. I cannot understand why the Minister has missed this opportunity to make the big change.
The Department officials must step up here. They appear to be obsessed. Why have they lost confidence in the ability of the State? There is an obsession with the market doing it, particularly at this time after our economy was in crisis. I believe it was Keynes who said during the 1930s that it was necessary to stabilise an economy first before one reforms it. We did the stabilisation part, but we are not doing the reform. That is what I see in these amendments. It is a partial, piecemeal plaster on a broken arm. We need more than that.
Shortly before the end of the term of the previous Fine Gael and Labour Party Government, a meeting of the Cabinet was called. It was the last meeting of that Cabinet. It was reported afterwards that the Taoiseach, Deputy Enda Kenny, told the members of the Cabinet that history would be kind to them and that their legacy would be seen as them having taken the reins when the troika was running the country and finishing their term in office with the troika gone and the reins back in the hands of the Irish Government. I disagree. The legacy of the Taoiseach and the Fine Gael Party over the two Governments will be one of having overseen a massive level of social inequality and the widening of that social inequality on its watch. The situation that pertains vis-à-vis landlords, tenants and the accumulation of rental profits is as good an example of that as any.
When I spoke during Leaders' Questions in the Dáil last week I remarked on the fact that the Central Statistics Office has come up with statistics that indicate rental profit - not rental income but clear rental profit - increased in the period from 2010 to 2015 from €1.6 billion to €2.7 billion. In other words, over a five-year period there was an increase in clear rental profit of more than €1 billion. When we talk of billions of euro, people's heads start to spin and they find it difficult to grasp precisely what we are talking about. If we were to break that figure down into a week-by-week figure, it means that over that five-year period there was an increase in clear rental profit of €20 million per week, not only on the odd week but every week on average. That is a transfer of wealth from people who have no property to people who, in the majority of cases, are at the very least comfortable or wealthy.
If we think about it, rent is dead money. People never get it back. At the end of the week tenants handed over €20 million extra and at the end of the year they handed over €1 billion extra but at the end of it all they owned no more property than they had at the start. The landlords still owned the property and still controlled the wealth. It is a massive transfer of wealth from ordinary people upwards to people who have more money and wealth and some of them have a great deal of it.
Those were the figures from 2010 to 2015. The CSO has left out of the equation what happened in 2015 to 2016. I represent Cork North-Central. In the Cork city area, rents have increased by nearly 15% more since then year on year. That brings us to this point where we have a proposal before the House, initiated by Fine Gael but now signed up to by Fianna Fáil, that those landlords, having accumulated those fabulous profits, would be limited to increases over the next three years that are four full percentages points above the rate of inflation. The leader of the Labour Party made the point in a debate last week that it was eight times the consumer price index, but it is much more than that because the consumer price index is currently minus 0.1% and the proposal is for a 4% increase or, compound, a 12.5% increase over the three-year period.
I will briefly comment on what Fianna Fáil signed up to today. Its spokespersons spoke in this House during the past few days and made contributions on radio, television and in the newspapers posing as the champions for the tenants. They said the rent cap increase is 2% or 6% over the three-year period. They were supporting a rent increase cap of 6% over a three-year period yesterday and now today, 24 hours later, they are signing up to a 12% increase. By any standards, that is a betrayal of ordinary people and of tenants.
The word "market" has been bandied about during this debate. It has been said that the rental market will tolerate this and the market will not tolerate that, that we have to respect the logic of the market and that we need to intervene in the market but not too much. When we think about a market it conjures up an image of having a lie-in on a Saturday morning and strolling down the cobblestoned street of one's town where people have their stalls set out or their goods and produce displayed in a pram. One buys a few apples and oranges, exchanges a few pleasantries and then takes a stroll down the town, having visited the market. It is a wonderful place to spend some time in and then to move on. However, the reality of the capitalist housing market in this country is very different. It is quite an ugly reality. On the one hand, €1 billion extra in clear profit is being secured year on year and on the other hand, more than 6,500, including young children and, families, are homeless this Christmas. Those two things are completely connected. That is the reality of the capitalist market. There are a few other ugly realities that tenants may have to contend with over the next weeks and months. We read, for example, in the Irish Independent today about strategies being devised by landlords to try and maintain their profits and-----
-----circumvent - thank you, Richard - the rental price caps. What kind of measures are being spoken of there? Landlords are planning to make tenants pay for the property tax where previously they were not asked to pay it, to pay for car parking spaces, and we know they are not cheap, where previously they did not have to pay for them, and to pay key money at the start of a rental arrangement where previously they were not asked to pay key money.
The other spectre that raises itself in the capitalist market is the prospect of landlords who are concerned that the rental caps will apply to their city in seven weeks' time at the end of January, 11 weeks' time at the end of February or 15 weeks' time at the end of March and who will use the intervening period ruthlessly to jack up the rents and screw more money out of the poor tenant. It is a weakness of the proposal that has been signed up to by Fine Gael and Fianna Fáil that they have not made provision for stopping that by saying that this measure is coming into place tonight.
We have tabled an amendment we intend to press later in which we have set the potential for rent increases at 0%. The Ministers argue against that and state that while it is well intentioned, it will not work because it does not grapple with the realities of the market and that there will be a lesser supply of housing if bold measures in defence of tenants of that kind are implemented. That argument needs to be further examined. Are the Minsters arguing that there will be a flight of capital and that landlords will be queueing up at the airport to leave the country and take their houses with them?
The houses will still be there. What if the landlords say they will not allow their houses to stay on the market? I do not see why they should say that because there are still big profits be made. If the landlords, however, remove their houses from the market, why can we not implement a strong and aggressive vacant house tax to provide them with an incentive to put the properties on to the rental market?
The key point that should be made in response to this is that there needs to be a huge increase in the supply of affordable homes and social housing provided by the State. One can increase the supply all one wants to at the top end of the market. It will have little or no effect on the rent rates around the country. It is when one applies the extra supply of housing through affordable homes and social housing at the bottom and middle end of the market, in areas where the surge of demand is, that one brings downward pressure to bear on rent rates. Fine Gael and Fianna Fáil will not do that, however, because they have set their face against those practical common-sense proposals being made from the left and others in the House. They are wedded to an ideology which points in a different direction. It is primarily the ideology of landlordism, which is not a surprise, given the number of landlords who fill the Fine Gael and Fianna Fáil benches. It is also the ideology of support for the capitalist market which is their god. They worship at the altar of the market. The iron logic of the market is that one has to feed the gods through increased rents. If that means more people becoming homeless, more people hanging on by their fingernails and more people spending nearly half their wages every week on rental accommodation to put a roof over their heads, so be it. That is the policy from the benches across the House and on the Fianna Fáil benches to my left.
This rental strategy is the product of the new coalition Government of Fine Gael, Fianna Fáil and the Independent Alliance. It is a charade and pretence which is deeply flawed. It does nothing for families facing eviction or renters, in particular those currently paying extortionate rents. We should stop adding to the crisis. It is about time the Government and the Dáil accepted and declared we have a housing emergency. The Minister, Deputy Simon Coveney, has accepted we have an emergency. He has repeated this several times publicly but he refuses to formally declare a housing emergency in the Dáil. The Minister and the Government were quick to declare a financial emergency when they wanted to continue cutting pay and pensions in the public service when they renewed the FEMPI legislation on 30 June last.
Any Member or public representative will say there is an absolute emergency in housing. Up to 6,400 people are homeless, 2,400 of them children, forced to live in temporary accommodation, hotels, guest houses, bed and breakfasts and even tents. Up to 100,000 people are on local authority housing waiting lists, as well as 50,000 mortgages in arrears for more than two years. Every day, four families lose their homes. Up to 14,500 tenants are in buy-to-let properties where the mortgages for those properties are in arrears of more than two years. Those tenants, unfortunately, whether they know it or not, are facing eviction. Today, 117 families faced eviction courts. Twenty-seven of these were in my own town, Clonmel, 24 in Tralee and 63 in Dublin. These are decent, ordinary families who simply cannot make ends meet and now, through no fault of their own, face eviction.
Many of them are facing eviction by the banks we own, particularly Allied Irish Banks. The Minister could instruct these banks owned by the State to stop these evictions. The State is the owner of Allied Irish Banks and it can simply, by instruction from the Minister, stop its evictions. Only last month, Allied Irish Banks told an Oireachtas committee it had 2,879 repossession cases before the courts. Of this figure, 767 were granted. Only today, the Master of the High Court, Edmund Honohan, clearly shocked by the fact that half of the 98 cases before him were from Allied Irish Banks, asked if the Minister for Finance knew about these repossessions. He does know about them because I have told him about them here on numerous occasions. The Minister has the wherewithal to stop those evictions. It is an absolute shame and disgrace that he does not. He is acting in our name and in the name of the people when he allows Allied Irish Banks evict people from their homes.
The declaration of a housing emergency is necessary if we are to put the right to a family home above the rights of private property. It would allow us have a rent freeze, rent certainty, security of tenure and to stop evictions, both from mortgaged and buy-to-let properties. Landlords have had a bonanza over the past five years as rents have gone through the roof. Deputy Mick Barry gave us figures earlier, showing how many rents are extortionate. This rental strategy is a landlord's charter. Against the background of significant unaffordable rent increases for ordinary families over the past five years, this rental strategy, a point which Fianna Fáil should remember, will now increase rents again way above the consumer price index. It will mean families who are already struggling will find it almost impossible to make ends meet. If this strategy goes through, one can be absolutely certain that, in the next ten weeks, landlords, in areas where the strategy does not apply, will take the opportunity to increase their rents significantly. We saw this before when the former Minister, Deputy Alan Kelly, introduced his so-called “rent certainty” terms. Immediately, there were significant increases in rents. We will see the same again after this rental strategy is introduced.
Landlords in every town across the country and in my constituency in places like Clonmel, Thurles, Nenagh, Roscrea, Carrick-on-Suir and Tipperary town will avail of that window of opportunity. There will be huge increases in rent in every urban area as a result of the vacuum that will be created by the passing of these amendments and this strategy.
It is absolutely necessary to declare a housing emergency. In the absence of such a declaration, this pro-landlord rental strategy will face legal and constitutional challenges that are likely to succeed.
The housing issue has been the single biggest failure of the previous Government and this one. There is no indication that matters will get better any time soon. We have a situation where thousands of families have been failed by Government and are living in the most appalling conditions. They are living in conditions in which children should ever have to grow up. They are in emergency accommodation, cramped hotel bedrooms, hostels and sleeping either on couches or floors in their grandmothers' homes. What is happening will have an impact on children for decades to come. This Government must take responsibility for this because there was ample warning that it was coming down the tracks. We needed action to be taken but, unfortunately, the previous Government and this one have utterly failed in that regard.
I accept fully that for a large part of the previous Government's term there was not a whole lot of money to spare. When things started to ease up a little bit, however, there was still a clear mindset, particularly within Fine Gael, that housing had to be left to the market. We know that housing is an absolutely critical public service. The most basic need we have is to have some place we can call home, put down roots and feel some sense of security. Thousands of families have been denied that sense of security in recent years as a result of the inaction of the Government. As things improved financially and economically, there was still no indication that Fine Gael got the seriousness of this issue and was examining ways to address it. Funding has been available for quite some time from the European Investment Bank, EIB, but there was no move to draw down any of it. Three or four years ago, there was €500 million available. What we have seen in the meantime is enterprising organisations such as DCU drawing down substantial money for students. In recent times, the Royal College of Surgeons drew down substantial funds from the EIB. For some reason, the Government cannot draw down the housing funds that are available from the EIB.
The other glaring area in respect of which action needed to be taken was that relating to the 220,000 vacant units that exist throughout this country. We have spoken about this matter before. Umpteen people have raised it in recent years. Why does the Minister refuse to take action to bring on stream those vacant units that are out there, that are lying idle, that we all saw when we were going around canvassing in the election earlier this year? There are plenty of steps that the Minister could have taken to make those available but he refused to interfere because he sees the provision of housing as the responsibility of the market.
In Denmark, one cannot leave a property vacant for more than six months. There are fiscal measures used to bring those properties on stream. I was speaking to the Danish ambassador recently and he said that when he moved here, he had to ensure his apartment at home was let. That is the standard in many Nordic countries. One cannot leave a property vacant for more than a minimum period. Why are we not doing something like that? Why is the Minister turning a blind eye to this matter? There are lots of instruments-----
I am not turning a blind eye to it.
Then why has the Minister not done it?
The Minister has done nothing about it.
We spent €200 million this year buying 1,000 properties.
I am not talking about buying.
It is about taxing empty homes.
The Minister misses the point. I am not talking about him buying those properties. I am talking about him putting responsibility on the owners of vacant properties to bring them back into use. I am not talking about buying them but, rather, bringing them into use and if they do not have a use for them, they put them on the market. If they cannot let them, then they should be put on the market. The Minister must force the issue. He must not stand idly over a situation where there are vast numbers of housing units that could be made available to people who are in dire need of them. The Minister is not prepared to take action on that front. I brought this matter to the Minister's attention some time ago, just after he was appointed and spoke to various spokespersons from the parties. I talked to him about the issue of the fair deal scheme. The way in which that scheme works militates against those properties belonging to older people being brought into use. That could be changed at the stroke of a pen to allow-----
It is in the rental strategy.
-----those properties to be brought back into use.
It is in the rental strategy. Has the Deputy read it?
It has not happened until now.
The Minister will have an opportunity to respond later.
Why has the Minister taken so long to change the rules in that regard? Why are all of these very good properties lying-----
Why did Deputy Shortall not fix it when she was in the Department of Health?
-----idle because of the inability of the Minister to take a broad holistic view to tackling the housing issue? There was a proposal put to the Minister, with which Deputy Ellis and I are very familiar, on the question of the financial contribution scheme. It is an excellent scheme that has been used widely in north-west Dublin over the years in respect, for example, of cases where there is one person or an elderly couple living in a three-bedroom or four-bedroom house which they can no longer manage. We operated the financial contribution scheme very successfully for years whereby we offered people the opportunity to move into new senior citizen units and, in exchange, they sold their houses to the council. That was an extremely successful, popular and sustainable scheme because it meant that older people got good quality, secure, insulated, safe accommodation and, in return, the council got three-bedroom and four bedroom houses, not all together in new estates but pepper-potted around former council estates. It made for a very sustainable housing policy and yet the Minister refused to fund that scheme. That is what we should be doing. It is a much more creative and sustainable approach to providing housing, particularly in the Dublin area. There has been utter failure in this regard. Government housing policy, as displayed in both the budget and by the Minister in this legislation, can only be described as insane. We have a major problem with housing affordability and this is causing huge pressure for families. It is also putting massive pressure on wages and contributing to our lack of competitiveness. It is causing significant economic problems in this country.
The Minister's response to the lack of affordability of housing has been twofold. The first aspect of that response came in the budget when his colleague, the Minister for Finance, took steps to specifically increase the cost of housing. By his own admission, he introduced the first-time buyer's grant in order to increase the cost of housing. The measures the Minister, Deputy Coveney, is introducing in this legislation are designed to increase the cost of rent. The country has a major problem with the lack of affordability in housing, whether in house purchases or house renting.
What the Government is doing will increase the cost of houses and rent, yet the Minister is making out that it will improve the situation and increase supply. There is no logic to it. It is an insane policy.
I listened very carefully to what the Minister said on "Morning Ireland" this morning. I wonder if his colleagues in Fianna Fáil did the same. He did not make a whole lot of sense. Earlier, a comment was made that we had not seen the co-sponsor of the Bill, Deputy Barry Cowen, since the debate started.
I was here before you.
He has been there for the past hour.
He has arrived. I missed you. I am looking forward to hearing from you. I am glad you have joined us, finally.
Through the Chair.
I find it impossible to understand how, after all the racket that was made and all the posing and shadow boxing that went on during the past few days, you can have the courage to come here tonight. You must feel very ashamed of the carry on that has happened during the past few days and the withering climb down you have had to engage in to come along here this evening.
Please address the Chair.
Far from it. You have had huge success at that yourself.
I listened very carefully to what the Minister said on "Morning Ireland". When he was asked to defend the figure of 4%, he said it was evidence based and that everything he was doing was evidence based. Saying it is evidence based does not make it evidence based. When the Minister was asked to point to the evidence, it was very thin on the ground. He said the evidence was taken from the investments the Ireland Strategic Investment Fund, ISIF, makes. ISIF has set a target of a reasonable rate of return of 4%.
ISIF does not have a lot to do with housing. A 4% rate of return would be fair enough if we were starting off in a normal market situation. However, we are not starting in a normal market situation. This is not a 4% rate of return but a 4% increase on existing returns which, on average, have already increased by 45% nationally since the market bottomed out in 2011. If the Minister thinks a 4% annual return is a reasonable rate of return, it means we should not face any rent increases for another five years. People who have invested in property have already had a 45% rate of return during the past five years and it should do them fine for the next five years. This does not provide any evidence of the basis for the Minister's 4% figure. When the Minister was pressed slightly on "Morning Ireland", he diverted to something else. We are still awaiting the evidence. Maybe the Minister can provide it to us during this debate. Where is the evidence to support the figure of 4%, or was it plucked out of the air?
The Minister said he did not want landlords to be run out of the market and to withdraw their properties. He talked about landlords who were in negative equity. While there is no denying that some landlords are in negative equity, they are a small proportion of the market. Even bearing this in mind, what possible justification is there for making hard-pressed tenants pay for the bailout of a small number of landlords who maybe made investments that were not the smartest? What justification is there for making tenants pay for this bailout? Will the Minister explain it to us?
Let us get real about it and get a sense of proportion. While a certain sector of landlords are in financial difficulty or negative equity, we must bear in mind the very significant number of other landlords. I refer to institutional landlords, vulture funds and real estate investment trusts, REITs, sectors which dominate the Irish rental market. It is worth bearing in mind what some of those organisations have said about the Irish rental market. A few months ago, David Ehrlich, chief executive of the IRES REIT described the Irish rental market as "a great market". He said, "We’ve never seen rental increases like this in any jurisdiction that we’re aware of". He went on to say, "I truly feel badly for the Irish people". If the Minister would take his head out of his phone and pay us the courtesy of listening to us-----
I am listening.
I ask the Minister to justify the fact that people are saying they have never seen returns like they can get from the Irish rental market and they feel badly for the Irish people. How can the Minister possibly justify giving those people a 4% year on year increase in rent for the next three years? Has the Minister any defence whatsoever for it? The IRES REIT owns almost 2,500 apartments in the Dublin area alone, and the Minister is adding to the company's bonanza by the insane policy he is pursuing in the legislation.
Other speakers have referred to the formula the Minister has used. Will the Minister confirm that people emerging from rent certainty will face an 8% increase in their rent?
They will not.
My reading of the formula the Minister is using and the definition of "t" in it seems to confirm it.
I will clarify it. They will not.
I look forward to that, given that it is not clear in the amendments. After a certain amount of weak handed pressure from his colleagues in Fianna Fáil, the Minister has said he will consider the extension of the rent pressure zones in the next couple of months.
It was always going to be extended, but we are going to fast track some areas.
Given that the Minister keeps talking about it being evidence based, I must ask why he has not used the evidence to select the areas. There is a significant problem in all of Dublin and there are issues in Cork. Why did the Minister not use the evidence available regarding the rent hikes we have seen during the past year?
For example, the rate of rent inflation during the past 12 months has been 15.8% in Meath, 13.4% in Kildare, 10.6% in Wicklow, and 15.2% in Louth. I can pull this evidence from the Internet in two minutes. Why can the Minister and his Department not get their hands on the evidence, given that he claims the Bill is evidence based?
Why has he not included these areas in his proposals?
Why is it now that he-----
Have you even read the strategy?
I will not allow exchanges across the floor. Members should desist from this or should not invite exchanges. This is the last time I will say this.
One must ask why the Minister has not used this evidence. It is available to everybody else. If he is to bring in some kind of rent restrictions, why has he not extended them to all those areas so badly affected by rent inflation? He clearly did not use the evidence in designating the areas. There is a clear argument for extending these restrictions across the country. However, he is now giving notice to landlords in those areas where there are massive levels of inflation to get a move on and get their rent increases in before the deadline he proposes, which will be sometime in February. This is a bonanza for certain landlords in certain areas. The Minister has utterly failed these counties and he should move immediately to include them in any kind of restrictions.
He should have moved this country to controlled rents a long time ago. The last Government should have done so. Rather than linking rents to the CPI, which is the natural thing to do, given the bonanza landlords have seen in recent years, all he is doing is opting for rent predictability, which is about predictability of profits and gains for landlords. This is wholly inadequate. It is another Fine Gael failure to address the dire housing situation that we have seen develop rapidly over recent years under Fine Gael's watch. Most dismaying of all is that the Minister's colleagues in Fianna Fáil should consider this somehow fit to sign up to and acceptable. Do they really think this to be the case? For goodness sake. "All talk and no action" describes Fianna Fáil in this arrangement.
I never thought I would find myself agreeing with Deputy Micheál Martin about anything but I agree with him that it is freezing in here.
I wish to quote from Article 43 of the Constitution of this country.
1 1° The State acknowledges that man [not woman], in virtue of his [not her] rational being, has the natural right, antecedent to positive law, to the private ownership of external goods.
2° The State accordingly guarantees to pass no law attempting to abolish the right of private ownership or the general right to transfer, bequeath, and inherit property.
2 1° The State recognises, however, that the exercise of the rights mentioned in the foregoing provisions of this Article ought, in civil society, to be regulated by the principles of social justice.
2° The State, accordingly, may as occasion requires delimit by law the exercise of the said rights with a view to reconciling their exercise with the exigencies of the common good.
This article has been thrown at all of us, whether during our time working on local authorities or as Members of this House, as a reason the State could not introduce rent controls, that rent controls were repugnant to the Constitution and that one would leave oneself liable to constitutional challenge that the State could not afford.
Like everybody else, I woke up on Monday morning and heard the great announcement that the Minister, Deputy Simon Coveney, was to introduce a form of rent control. I note that Mr. Coveney, or Minister Coveney - I got told off yesterday for not being polite - said in The Journal in October that capping rents will not fix the problem. A headline in the Irish Examiner in November read "Simon Coveney rejects rent controls". Today, the ERSI said it is not particularly enthusiastic about the matter. I also note that the Minister has quoted the ERSI ad nauseam at us in making the argument that landlords might exit the market if we introduce further rent controls.
This is not an exchange, but I ask the Minister to refer back to me and tell me from where he got this sudden wonderful enlightenment. Why, after the past five years of soaring rents in this country, when it was suggested and argued many times that we need rent controls, were they not implemented before? Why now, all of a sudden, in December 2016? This is a genuine question. I would like him to tell me how all of a sudden we can do it when he has allowed tens of thousands of families to be made homeless. They have had to leave this State and emigrate. Some of them have even been driven to the point of taking their own lives because of the desperation of not being able to afford a home for their families over the past four years. This is a terrible legacy for any Government or party to have on its hands. I argue very strongly that it is a legacy of the previous Government, the current Government and, previously, Fianna Fáil when it wound down the building and provision of social housing and allowed market rule to drive up the cost of rent and housing in this State.
I argue further that so far, all of the media attention and political focus on the Bill, which the Minister introduced some time ago minus the rent controls, has been on his introduction of some form of rent control. I argue that this masks and distracts from one of the biggest attacks in the history of the State on the democratic planning process. Never in the history of the State have we seen such a monumental attack on the planning process, the transparency of that process and the participation of locally elected councillors in it. This is all being railroaded in the Bill with which we will deal all night and possibly most of the day tomorrow.
The Minister has done this in a very shoddy way. It undermines the validity of introducing any form of rent control, but specifically the form of rent control he proposes to introduce. This side of the House has made eloquent and intelligent arguments covering a range of issues. I was just saying to Deputy Boyd Barrett that I recognise that we, the left in this House, probably drive the Minister and Fianna Fáil and Fine Gael mad because we are articulate, intelligent and have alternatives to the market while they are forced to sit here and listen to them. If we were not here, they would have matters sewn up and signed off and they would all be gone home or off to party. However, that we are here in strength and challenge them with real, sensible alternatives to the market madness to which they adhere and which they keep telling us is the only game in town must drive them mad altogether.
I read an article last weekend which I think was published on Saturday in The New York Times. I would recommend it to anyone. Its title was "Wall Street Is Europe's Landlord". It set out to show how the biggest players in Wall Street - Goldman Sachs, Cerberus, Lone Star and Hibernia - have bought up 80% of the distressed properties in Europe, quite a chunk of which are in Ireland. American investment funds have bought up €233 billion worth of property. Not only that, they have entered not only this State, but also Spain, where they have been given tax breaks and a series of loopholes and scams that allow them to enhance their profits even further. We have repeatedly argued that the taxes which we have allowed them to avoid, had they been collected could have helped to build the stock of social housing so badly needed in this country.
To look at who is involved in the market in this country, I-RES REIT now owns 2,500 apartments, and Green REIT has dividends of up to 188% and a net profit of €145 million in this country. Now we find that Kennedy Wilson is buying up a huge range of apartments across the city. We also find, interestingly, that the other measures in the Bill, to which we will come tomorrow, have thrown the whole nine yards open for the developers to do lán abhaile what they like with planning, building and development. It will see them get land for free and services supplied for free.
Some interesting characters are getting in on the act. He who shall not be named - did someone say Denis O'Brien? - is involved in a major development that is being proposed in Dublin 8. It is clear that we are opening it up for the rich to get richer at the expense of the vast majority of ordinary people in this country, who are really suffering.
It is interesting to sit here and watch the behaviour of the Deputies on the other side of the House. It just so happens that two Ministers are called Simon. I wonder whether the two Simons ever talk to each other.
Simon and Garfunkel.
While one Simon is creating a situation where people will still not be able to afford to pay their rent, the other Simon is trying to deal with a trolley crisis that saw 540 patients lying on trolleys last weekend.
The reason they are lying on trolleys is the same reason 90% of nurses voted today to go on strike. Nurses are emigrating because they cannot afford to live in this city or in Cork, Galway or Limerick. We have lost 5,500 fully trained nurses in the last few years because they cannot afford to live here and do not want to work in the extremely stressful conditions they are exposed to in this country's hospitals. Hundreds of beds are lying empty and cannot be filled. Patients are on trolleys. Hospitals are understaffed because, as Deputy Shortall said, professional workers cannot afford to live here. Many of them have emigrated or have moved to other parts of this country where they can afford to live if they are lucky. The two Simons need to talk to each other because they are creating another crisis as they try to solve this one. If they do not talk to each other, the dots will not be joined and neither problem will be resolved.
Before the Minister developed this Bill to lessen the planning regulations and take a softly-softly approach to this country's developers and builders, the Government had approximately 60 meetings with vulture funds regarding the sale of NAMA properties. It is no secret that the Government is strongly lobbied by developers. I suggest it needs to be strongly lobbied by the hundreds of thousands of people who lobbied the Government and this House on the question of water charges and forced it into a major compromise and U-turn on that issue. We need to force the Government to do the same on the question of rents, evictions and homelessness.
One of our amendments to this Bill proposes that the Residential Tenancies Board, Members of this House and local authorities should have a say over the proposal to identify rent pressure zones. The criteria for deciding what areas will be deemed to be rent pressure zones should not be confined to the cost of rent. According to our amendment, factors like wage levels, homelessness and affordability should also be taken into consideration when decisions on rent pressure zones are being made.
We need to sort out this crisis. That does not involve passing what the Fianna Fáil-Fine Gael Government is proposing. I do not see why the two parties are not in coalition. They are going on with a kind of drama all the time even though they actually agree with each other and represent the same class of people in this country. This Government is doing the same things that were done before, which led this country into an economic crash, a property crash and a disastrous situation. We bailed out the same developers and builders, including Mr. McNamara, who are now re-emerging as main players on the market. Deputy Shortall argued earlier that "Government policy can only be described as insane". The definition of insanity is doing the same thing over and again but expecting a different result. To paraphrase the Marx brothers, we need a sanity clause in this House.
An amended list of amendments has been circulated in response to an issue that was raised by Deputy Ó Broin.
It was also raised by Deputy Curran.
The only difference in the new list is that it contains a new proposed amendment No. 3a to amendment No. 55. With the indulgence of the House, the Minister might use his two minutes now to explain this amendment. I think that might be helpful.
Is this a new amendment?
The Minister will explain it.
A number of Deputies have raised the calculation formula that is being used to set the 4% maximum limit on rent increases within rent pressure zones. Deputy Ó Broin raised it initially and Deputy Curran raised it subsequently. Deputy Shortall and one or two other Deputies raised the issue as well and asked for clarification on it. An understandable interpretation of the calculation, as it was previously written in an amendment in my name, was that a definition that provides for a maximum increase of 4% annually since a tenant's last rent review creates the potential for a rent increase of higher than 4% to be specified the first time the rent of a tenant in a rent pressure zone who has not had a rent review for two years is reviewed. It has been suggested that if an increase of 4% per annum is permissible, an 8% increase could be imposed on a person who has not had a rent review for two years. That, of course, was never the intention. I am anxious to correct this drafting error. I have asked the Ceann Comhairle for his indulgence to amend my amendment, which I am allowed to do. We can deal with the amended amendment formally when we reach it tomorrow. I wanted to explain it now because it deals with an issue that has been raised by a number of Deputies. I thank the Opposition for its help in raising this error and giving me an early opportunity to correct it.
Can we amend the Minister's amended amendment?
No. I am making this change for the purposes of ensuring there is no confusion. I have said consistently that I am keen to ensure people in Dublin who are facing rent reviews in January and February will not have to contend with increases of 15% or 20%. Under this legislation, it will not be possible for their rent reviews to result in increases of more than 4%. That was always the intention and it is still the intention. The maximum annual rent increase they will face thereafter will also be 4%, as long as the rent pressure zone designation remains intact. This amendment to our amendment deals with and clarifies the issue.
I thank the Minister for the clarification.
I have a question.
I have to revert to the list. The Minister has used his two minutes. Other Deputies who have spoken will have an opportunity to make a further two-minute intervention.
On a point of order-----
What is the point of order?
It is highly unusual for a Minister to submit an amendment to an amendment on such a substantial issue.
We have only just seen the new amendment. Given the scale of the error in the original amendment, I suggest we need to revert to Committee Stage immediately to discuss this amendment to ascertain whether it actually does what we are being told it does. I am reading it now and I am still finding it difficult to see the difference between the new amendment and the original amendment. I am making a formal proposal on the basis of the scale of this issue. If we had not spotted this issue and raised it on the floor of the House this evening, those who will be facing a 4% rent increase in January would have been facing an 8% increase. It is not a question of our interpretation of this. This is a mathematical calculation that would have provided for an 8% rent increase next year.
I am formally proposing that we recommit to Committee Stage so that we have sufficient time to discuss the contents of what we have just been given. I should also mention that following discussions with my colleague, Deputy Pearse Doherty, I am also concerned about another aspect of the amendment. We need sufficient time to discuss this now or in the morning. We are not talking about a comma or something of a typographical nature. We are talking about something much more serious.
Can I add to that?
I had indicated as well.
I support Deputy Ó Broin's proposal and commend him on pointing out the error. I disagree with the Minister's suggestion that this was a "drafting error". I believe it and its consequences were intended.
The Deputy should not start playing politics.
The Government was found out because of the scrutiny of this legislation by Deputy Ó Broin.
I put it to the Government and the party which claims to lead the Opposition that this is what real Opposition parties do. They scrutinise legislation instead of throwing power puffs across the floor in respect of issues that are not as substantial as those found by Deputy Ó Broin.
In my time in this Chamber and in the Seanad I have never seen a Minister come in with such a substantial amendment to his own amendment, one that he only tabled on Report Stage. The idea that Report Stage would continue as normal without returning to committee and dealing with this in detail is suspect. I support the proposal from Deputy Ó Broin and I commend him on his scrutiny of the Bill.
Deputy Ó Broin has recommended that we consider the recommittal now or in the morning. A number of Deputies have been waiting all evening. I respectfully suggest that we continue and consider the recommittal in the morning.
We need to discuss the amendment now.
Yes, but Deputy Ó Broin recommended the proposal.
Can I raise a point of order?
A number of Members have been here all evening. There will be an opportunity to vote on it and to discuss the recommittal in the morning. With respect to all the Deputies who are waiting, it is not going to change matters whether we do it tonight or tomorrow morning. I respectfully suggest we consider it tomorrow morning.
Can we hear other proposals as well, a Leas-Cheann Comhairle?
Do they relate to the recommittal?
They relate to the issue that the Minister has brought before us. There is no way he can propose that we do not discuss this for hours. The Minister has now brought forward the proposal. We should be able to question him on it now. I have a question. In fairness, the Deputy to my left raised it too.
Sorry. I have been here a long time. Deputy Curran raised it first. I also raised it because I asked whether the Alan Kelly two-year lease arrangement no longer exists in Dublin and Cork.
Based on the proposal on the table, people could have a rent increase every year. Therefore, it no longer exists. It relates to the formula the Minister has changed just now. We cannot divorce this discussion from the broader question. We must have a discussion on it now.
Moreover, I want an answer to the Alan Kelly question.
I have no wish to be awkward or to delay this legislation any more than it has been delayed already. However, the scale or significance of what is being proposed materially affects what everyone else is going to say for the rest of the debate tonight and tomorrow. Therefore, we absolutely have to recommit the amendment to committee now. Members must be given a full explanation of the difference between this amendment and the original one. We have to be satisfied that the error, mistake or whatever it was in the original amendment is not carried over.
I understand this amendment has just been drafted. Obviously, it was done under extraordinary pressure. I am concerned that the proposal could contain other errors. That is why the right thing to do from the point of view of the Government and those of us in the Opposition is to recommit the amendment to committee and scrutinise it properly before we return to Report Stage.
I find myself in agreement with colleagues. I take in good faith what the Minister has said to the effect that his intention was that the initial increase could be no more than 4%. However, the manner in which it was drafted did not provide for that. I offered the example that over an 18-month period an increase could be as much as 6%. The Minister has now brought back a further amendment. Some of us have been here for quite some time today. As it is fundamental to what the Government is trying to do, the amendment needs to be scrutinised now in order that we can leave the House with absolute clarity on the matter. Obviously, the Leas-Cheann Comhairle has to deal with it. It was identified as a proper piece of work. The Minister has brought forward a potential solution which should be examined now. At least we could complete this piece of work tonight, if nothing else.
Before I call on Deputy Pringle, I must ask the Minister if he intends to move that the Bill be recommitted in respect of amendment No. 3a to amendment No. 55 and that we discuss it now.
Yes. I am happy to do that. I wish to clarify that when this issue was raised, we moved on it straight away.
Minister, you need to move the recommittal.
Is there a timeline for the recommittal?
It is a debate on amendment No. 3a to amendment No. 55.
I can recommit it to committee, if that is helpful. We can provide any clarity that people want. I move that the Bill be recommitted in respect of amendment No. 3a to amendment No. 55.
Is that agreed?
Can I ask a question about whether it is two-year or one-year leases in Dublin right now?
I call the Minister on amendment No. 3a.
First, I will address the question of two years versus one year. As Deputy Coppinger knows, my predecessor introduced legislation to the effect that rent reviews could only happen once every 24 months. That is still the position. For those who have had a rent review, there will be no rent review for a further 24 months after that review. I will explain how it applies in the case of rent pressure zones. When a tenant's rent review is up in the context of the 24-month rent freeze, at that point, the 4% ceiling or maximum of 4% will apply in a rent pressure zone. Thereafter, it will be a maximum of 4% annually while the designation remains intact. That is the position we have outlined.
I will explain the wording in our amendment. We are removing the t/12 element in the amendment. Essentially, this is the 4% per year element. This caused a problem. It will be fine after the first review because it then would be 4% per year thereafter. However, it is somewhat different in respect of the first review of rent within a rent pressure zone. Let us suppose someone did not have a review for two years. If we are applying a ceiling on the basis of 4% per year, then the calculation would have been 8%. That was pointed out by several people. That was never the intention or policy decision, despite the fact that Deputy Doherty is trying to create that impression. I would be surprised if his colleague, Deputy Ó Broin, accepted that interpretation of events.
I have been clear on this every time I have explained it, given interviews on it or spoken about what we are trying to do, whether in Cabinet, the House or in the media. The whole point is to be able to assure renters throughout Dublin and Cork city that when they face the next rent review, provided they are in a rent pressure zone, they will not have a rent increase of more than 4%. Thereafter, the tenant will not have a rent increase of more than 4% per year. We are introducing an amendment which simply deletes the t/12 element of the calculation to ensure that there is not an unintended consequence in respect of the way the formula was put together in our amendment.
There is no mystery here. This was a drafting error that was not delivering on the intent or what we were looking for. We are correcting it. I am informing the House as early as I can. As I have said, I am happy to recommit to Committee Stage in order that we can have toing and froing such that everyone understands the intention of Government. Other parties and individuals may wish to do other things, and that is fine. However, I want to be clear about what we are planning to do. We want to ensure that the amendment is corrected to ensure this aim.
Deputy Pringle, do you wish to speak on amendment No. 3a? I am referring to amendment No. 3a, not other amendments. You can speak specifically on amendment No. 3a.
I had not intended to come in on amendment No. 3a, but since I have been called, I will.
Deputy Pringle, this applies not only to you but to everyone. The debate now is specifically on the formula.
I am only going to speak to amendment No. 3a. I have been waiting to speak on the other matter but I will deal with that when we go back on Report Stage.
The Minister referred to an unintended consequence and a drafting error. Are we seriously to believe that no one in the Department actually did the calculation before the amendment was proposed? Is that the case? If so, that is the only way there could be an unintended consequence. The only way is if no one actually did the calculation and worked it out. The Department is charged with calculating many things but it seems no one there carried out the calculation or saw what was happening.
For somebody whose two year rent review is in June next year and whose rent had been set at €1,400 a month two years previously, based on that calculation, there would be an 8% increase and then a 4% increase per year after that.
It beggars belief and calls into question the nature of all the amendments that have been put before us. What was outlined earlier in the day suggests all of this should have been recommitted and scrutinised in committee rather than being put into the House on Report Stage in the dying of the Dáil before Christmas in order to be debated. I, for one, cannot accept that nobody within the Department did that calculation in order to verify it before it was put before the House.
I have two technical questions. From my reading of the amendment, it resolves the problem of the 24 months in the first rent review. However, what is not clear from what the Minister has proposed is, following the first review under the terms of this legislation, if it is passed, which would have been after a two year period, what is to prohibit a landlord from conducting another rent review after six or eight months. There is no prohibition in this amendment. The two year rent review that applies outside of the rent pressure zones clearly applies there but no longer applies in Dublin city and county and Cork city, so what is to prevent that in this amendment? I may come back with further questions depending on the answer.
I want to echo Deputy Pringle's point. I am seriously struggling to work out what has changed from the original amendment in terms of the wording. What has emerged from this is that what the Minister tells us in an amendment turns out not to be what is actually in the amendment. How can we have any confidence that what he tell us is in the amendment to the amendment is actually what is in it?
On that basis, the Deputy would never believe me again.
The Minister has acknowledged-----
Come on. We are fixing an issue as early as we can.
The first mistake, which the Minister has acknowledged, arises from the fact this was not properly scrutinised in the way it should have been in the first place. How can we have any confidence now that all of these substantial amendments, not just the amendment to the amendment but a whole series of other amendments, are in fact what the Minister says they are? I do not mean to suggest the Minister is trying to pull the wool over our eyes, although he could be, but he could have made a whole series of other errors. How can we have any confidence now that what we are dealing with, and the notes the Minister is getting from the Department, are accurate representations of the amendments we are dealing with, given that such a serious mistake has emerged?
Second, on Deputy Coppinger's point, will the Minister explain Deputy Alan Kelly's measure? If I understand what the Minister said, the 24 month moratorium on further increases continues to apply until that 24 month period is up, but once it is up, at that point, Deputy Alan Kelly's two year moratorium disappears and there is no two year moratorium from that point onwards. That point onwards could be January 2017.
It could be next month. It has not been clearly explained and the full implications of that need to be considered. It means we have gone from a situation where it was only every two years that rent could be put up to a situation where, in the very areas that rent pressure is most serious, it can now be done every year from the point at which the previous moratorium ends. That is very serious and we need time to consider what it means. On the one hand, we are being told a greater level of control is being brought in but on the other we are losing an element of rent control and making tenants potentially more vulnerable to more frequent increases. Therefore, what we gain on the swings, we lose on the roundabouts in terms of so-called rent certainty.
I do not fully agree with the Minister when he says it was a drafting error or a technical error. It was there for a reason. The t/12 part is the restriction that gives the Minister the 4% per annum. When that is removed, the frequency of the increase is not defined in this Bill, as far as I can see.
It is. I can show the Deputy where it is.
It looks as if it is undefined. The other concern I have is that the old system caused the problem in that the first increase could be more than 4% because it was a two year period. Now, the Minister has changed it so it is annual, which will ensure that a landlord will definitely, at the end of 12 months, put the rent up because if he waits 16 months, he is still restricted to the 4%. Therefore, the Minister is actually insisting on a 12 monthly review. Not all landlords do that at the moment but they will not want to wait because, once the 12 month period is gone, the rate of increase is capped at 4%. While that may be an unintended consequence, I would like an explanation of where in the legislation it is controlled so it can only be once a year.
The Government amendment we are debating gives us some clarity as to the first year but the point Members have been making is that we do not know what is going to happen for the next two years. This is making it up as we go along, quite frankly.
I was looking back over the Minister's contribution. It was five hours ago that he told us:
In those areas, annual rent increases will be limited to a maximum amount of 4%. An area will be designated as a rent pressure zone for a period of three years and the provisions limiting rent increases will apply both at the start of a tenancy and at each rent review.
The Minister said that in good faith and, obviously, that is what he intended. However, we now have no idea what that means because we do not know what is to happen in regard to the new formula. Deputy Curran made a good point that it will mean that, at the end of every year, the landlord will feel he has to put up the rent.
Can I answer that point?
We have two more speakers and I will then call the Minister.
Most of us have been in the House since the Minister spoke and we have now been given something that is entirely unclear. This is not any way to make very important legislation. Tomorrow morning we could well discover that there is an unintended consequence of this amendment to an amendment to an amendment.
It is not clear to me at all. No period is defined whatsoever. In addition, can the Minister imagine a tenant going to the landlord and saying: "Now, listen here. Under R x 1 + 000.4..."?
They will not have to do that.
This is incredible. I asked the Minister about this in the introduction because he said "annual" rent increases, whereas my understanding was that we lived under a system of two year rent increases. The Minister changed that. It was not just a formula. The Minister used words. It is on the first page of his speech, so I do not think it was a drafting error. However, when it was questioned and he realised people could be getting an 8% increase, he knew that would go out in the media, so he quickly got it changed. In fairness, that is what happened.
My point is that if the Minister is working on this overnight and bringing it to a committee tomorrow, we need it to be very clear in words, not formulas, exactly what is the situation in regard to how often a rent can be increased and what it can be increased by. It is unbelievable.
I want to quote the Minister's earlier remarks which show it could not have been a mistake in the Department. The second paragraph of his speech states:
Under the system I am proposing, areas where rents are high and rising quickly will be identified and designated by the Minister as rent pressure zones. In those areas, annual rent increases...
That is what I questioned the Minister on, and Deputy Curran then straight away raised the possibility of an 8% increase - he is obviously a bit better at maths than I am.
The question of Deputy Kelly's two-year rent review has been bubbling all week. I do not know how somebody suddenly redrafted this but this is absolutely shambolic. Landlords are not going to respect some little formula. It has to be written out in a proper statute. This has to be scrapped.
Usually on Committee Stage, the Minister takes time to go through the amendment and explain it in detail. If the Minister wants me to take him at his word, I am baffled by the suggestion that this was a drafting error or an unintended consequence. Can he explain why he or his officials went to the bother of putting t/12 into the original amendment he proposed? It is not a dot somewhere or a loose word. It is a mathematical formula that is there for a reason. One can see some of the logic for it being there but that is why I believe that there are unintended consequences - they may be intended consequences - as a result of the new amendment the Minister has put forward. The latter is a lot simpler. There are no longer two definitions in respect of current tenancies for new tenants.
The new amendment allows us a new formula which is basically R x (1+0.04), which is the 4% increase where R is the amount of rent last set under the tenancy for the dwelling. What happens when a tenancy ends and a new person takes up a tenancy? This formula would, therefore, allow that person to apply a 4% increase. It could encourage landlords to put people out of their tenancies and take new people in. The previous amendment would have dealt with that, even though it was flawed. Why did the Minister deem it fit to propose an amendment which included the t/12 formula, which is far more complex than what we have before us, if he wants us to take him at his word that this was a drafting error and not an intended consequence on the part of the Government? The members of the Government all signed off on this amendment but no one spotted the problem. That speaks volumes for the Government.
Deputy Pearse Doherty has put the question I was going to address. Alongside that, and because the Government Chief Whip is here, this is no way to deal with legislation. This is turning into an absolute farce. We were due to finish at 10 p.m. and resume tomorrow. We yet have to deal with Committee Stage and go back to Report Stage. In the context of such an important Bill, to push this up to the end before Christmas is the wrong way to deal with legislation because there is too much at stake in terms of what we are debating. The Government will expect us to come back here tomorrow at 2 p.m. and to continue this debate until the Bill is passed. I honestly think the Minister should withdraw the Bill and reconsider the whole package because it is not good enough that we would be here doing this at length and then discovering an amendment to an amendment. God knows what else we have missed in the course of the debate. The Bill is not getting the proper scrutiny.
That is why we have agreed to recommit the Bill in respect of the amendments in order that we might discuss and scrutinise this issue. My intentions were clear. There was a mistake in drafting. It was pointed out, it is being corrected and I am answering any questions that people may have. That is the way we legislate in this House.
It is not. That is misleading. The Minister is pushing this legislation right up to the wire and it will be forced through without time to deal with it.
All the groups and parties in this House want to conclude this legislation before the end of the year so that we can get designations in place to restrict rent increases. That is what this is all about. It would be very foolish to announce a policy intention and not to follow through where it is obvious that we can follow through by bringing legislation forward. We signalled that with all parties at least a month ago as the legislation has been moving forward, starting in the Seanad and then moving into this House. We said we would take the opportunity on Report Stage to introduce amendments that might be linked to the rental strategy when it was launched. That was always the position. Everybody understood it except people who are coming into the debate now.
Why did it take all day?
We are fixing something. If the Deputy reads his own amendment, he will see that he made the same mistake.
That does not excuse it.
If he reads the amendment that Deputies Coppinger, Barry and Paul Murphy introduced, he will discover that they also included the t/12 formula. There has been a genuine effort in my view-----
We put two zeros in.
I, as Minister, take responsibility for it and I am correcting it. We have recommitted the Bill in order to debate the matter. I am answering the Deputies' questions. We are going to fix it, return to Report Stage and try to get the job done. I am happy to hear what people have to say and to answer their questions. In response to the very genuine question regarding if we take out the formulation "x t/12" - in other words, the annual requirement linked to the 4% - how will we ensure that landlords do not have rent reviews more often than every 12 months, I am in a position to state that this is catered for.
In my amendment No. 68, there is a reference in this regard. The amendment states:
Application of section 20 (frequency with which rent reviews may occur) to rent pressure zones
24C. (1) Where a tenancy commenced before the relevant date (within the meaning of section 19(7)) and the area in which the tenancy is situated is in a rent pressure zone (within the meaning of that section), then—
(a) the first rent review after the relevant date shall be carried out in accordance with section 20,
Section 20 is what the previous Minister, Deputy Kelly, introduced, namely, the 24-month rent freezes aimed at trying to bring some certainty to tenants. Amendment No. 68 continues:
(b) any subsequent rent review shall be carried out as if subsections (4) to (6) of section 20 had not been enacted.
In other words, it reverts to not more than an annual rent review. That has been in place since 2004.
The two-year moratorium disappears.
Yes, once the rent pressure zone is enacted the 24-month rule continues to apply until the rent review at the end of that period. Thereafter it is an annual rent review at no more than 4% until the three-year period ends. This is a temporary intervention. It says that nothing changes with the current review and that when the review is up there can be no more than 4% of an increase. Thereafter, during the three years of the designation of rent pressure zones, there cannot be more than a 4% increase and it cannot be within 12 months because the former Minister's amendment does not apply.
That is exactly how I have explained it repeatedly and that is how it is carried forward in the legislation.
I have a few subsequent questions. With regard to section 24C(1)(b), when the Minister refers to the provision in the previous section 20, which is the 24-month rent review, as having not been enacted, he is now referring to something that is no longer on the statute. It is something that has been amended as a result of Deputy Alan Kelly's legislation. Can the Minister confirm that this protection, as he is saying, is not actually on legal statute? If it is not, this is a genuine question, what legal basis does it have?
My second question repeats Deputy Pearse Doherty's question. In the original provision the Minister is now amending, there was a protection for a new tenancy. If I understood it right, its purpose was that if a tenant moves into a new tenancy for the first time after the enactment of this Bill, the landlord would have to work from the basis of what was the rent of the previous tenant. That is now being removed. That was a protection in section 19(4)(a)(ii). That protection is now gone. Can the Minister answer those two specific questions?
Just to be clear on the Deputy's first question, having the t/12 in the amendment was simply in order to state the 4% per year rule. It was not determining whether or not somebody could have a rent review within a year or two years. Whether the two year freeze applied or whether it was an annual review is dealt with separately in section 24C. It is legally sound and has been confirmed to me as such.
By a lawyer.
By the legal team in my Department. That is the answer to the Deputy's question. I am not a legal draftsperson but I am told that that deals comprehensively with that issue. I am told that if the two year freeze does not apply, then what preceded it automatically applies, which is that there has be at least 12 months before there can be a rent review.
Is that previous 12 month provision still on the Statute Book?
Yes it is. That is my understanding. The Deputy will have to repeat the second question because I will have to check the section that he is talking about.
The second question is this. In the original amendment No. 55, there were two options for t. It proposed to amend section 19 of the original Act of 2004 with an option for t under the proposed subsection (4)(a)(i), "the date that the current rent came into effect under the tenancy for the dwelling", which was to ensure the two year period. Section 19 of the original Act was to be amended with a second option for t under subsection (4)(a)(ii), "where paragraph (a) does not apply but the dwelling was previously let, other than in circumstances to which subsection (5) applies, the date rent became payable under a tenancy for the dwelling as last so let". My understanding of that is that after the enactment of this Bill, if I move into a new tenancy, it prevents the landlord from jacking up the rent before the 4% is applied. The landlord would have to revert back to the rent of the previous tenant at that property. The difficulty is that in the Minister's new amendment, he has removed that additional protection in those very specific set of circumstances. That is what I understand.
Why have I removed that?
That is the question. Why has the Minister removed it?
Because it is not in the Minister's amendment. His new amendment has deleted the formula for R x all the way down to paragraph (b) under this section.
Give me a second to check that. I do not think that is the case.
While the Minister considers that, I call Deputy Doherty. Is it on a similar point?
It is on a similar point. As the night is going on, this is becoming a wee bit more unwieldy. I will put it to the Minister in the fairest way possible. I understand that we are working under a bit of pressure, but the Minister's previous answer shows to me that he does not understand what the formula is. The t/12 is not the 4%. The 0.04 is the 4%. That is the part of the formula that gives the 4%.
The t/12 means that it is annual.
No. A figure of 1 would mean annual. t/12 means that it can vary. For example, if it was 3/12, it would be a quarter of 4% and so on. The reason I say that is because the Minister still has not answered why t/12 was there. Even though t/12 was flawed, when we look at other parts of it, it did provide protections, which Deputy Ó Broin and I pointed out earlier on in cases of a tenancy changing. What the Minister has done now is allowed an automatic 4% increase in rent when a new tenant takes up a tenancy in an apartment or a house. It is completely and utterly flawed.
It will also encourage landlords to have a quick roll-over in terms of tenants. In some cases, that will be where people move on themselves and in other cases, it may be where there has been encouragement from the landlord to do so. We have not got the time to deal with this in detail. Deputy Ó Broin has spoken about the issue of what is preventing a landlord in the second year from having a review after six months. There could be a 4% increase in the first year and then, six months into the second year, it goes up another 4%. That could happen because the t/12 is now gone. That was the protection in that area. The Minister points to section 24C. The point I would make on section 24C-----
There cannot be a rent review more than once a year.
Under section 24C?
Under the law.
That is the original law.
That is the law.
That is under section 20.
I will let the Minister in in a minute. Deputy Doherty.
The point I am asking the Minister-----
Will I just outline-----
That is the point I am making to the Minister.
Could Deputy Doherty-----
If I can put the question, then the Minister will have the chance to answer it. In amendment No. 68, under the proposed section 24C, it states "where a tenancy commenced before the relevant date". The relevant date under section 19(7) is the date on which section 32 of this Bill will come into effect, which is a date in the future. What about tenancies that have already commenced? This section 24C is for tenancies that are going to commence after this Bill comes into operation. From my interpretation of it, the core part of what section 24C does is maintain the provision of Deputy Alan Kelly in place until the two years are up, at which point it no longer applies.
And then it reverts back.
I ask the question because section 24C is about tenancies that have commenced before the relevant date, which is the tenancies that have already started. What about other tenancies that will start after this enactment, which section 24C does not cover? What prevents landlords from reviewing the rent of such tenancies every six months, three months or whatever? The Minister's formula, therefore, would allow them to have a 4% increase on that period of time. That would mean that if it was every six months, it would mean an 8% increase annually.
My point is a little bit technical, but I will not delay the Minister. The Minister's amendment in subsection (4) seeks to delete all words from and including “and the equation” down to and including paragraph (b). Should that read paragraph (a)? Would that resolve the problem?
First, section 20 in 2004 provided for annual rent reviews. Section 20 was then amended by the former Minister, Deputy Alan Kelly, in 2015 by inserting subsections (4) and (6), which provided for 24-month reviewing. The amendment provides that after the initial 24-month review, in a rent pressure zone, the reviews will be on an annual basis. That is the position in terms of the legal interpretation of what is there.
R, as it is called, is the last rent under a tenancy. Rent cannot increase by more than 4% above the last rate set, including a rate set for a previous tenant. That protection is still there.
Where is that protection?
That is the legal interpretation that I am getting.
Where is it?
Let me finish. The Act has always allowed a landlord to increase rent when a new tenant is agreed. New tenancies on or after the enactment of a rent pressure zone will be reviewed annually and will increase by no more than 4%.
That genuinely does not answer the question.
I think it does.
Hopefully we are making progress.
We are not.
If Deputies have other questions, they have the opportunity to ask them.
I am trying to be helpful in order that we can move on. Let us say a landlord rented an apartment to me, I moved out and six months later the apartment was rented to Deputy Ó Broin.
Under this provision, the landlord would be allowed to increase the rent by 4% on what I was paying six months ago but under the original amendment, that would not have happened. Under the original amendment, it would only be possible to increase the rent by 2% because the t in t/12, referred to in the Minister's amendment, was calculated as the length of time between when I took out a lease and Deputy Ó Broin took out a lease, which was six months. Therefore, t/12 meant that the rent could only increase by 2%. The point I am making - the Minister can correct me if I am wrong because, as I have said, we are only looking at his amendments now - is that what he is now providing for is that where a tenancy changes hands within six months the landlord can increase the rent by 4%.
I would say that is unintended because the amendment that the Minister published this morning and put forward would mean that the increase would be 2%. How come the Cabinet has changed its mind and decided that now, in the aforementioned circumstances, it wants to allow landlords to double the rent increases? That is what the t/12 aspect in the equation set out in the Minister's amendment is about. It is the protection we were talking about. It ensures that landlords do not try to encourage people to move out or even to push them out. That protection is there. There will be a natural flow of people leaving homes and apartments in terms of short stays and therefore the Minister does not have a 4% cap in this legislation. That is a serious flaw in the legislation and this is what we get when we rush legislation. The Cabinet has changed its mind and between 12 p.m. and 8 p.m. in that it has decided that in these circumstances, the Government will allow landlords to double the amount by which they can increase rent.
I do not accept that interpretation. The protection is in the words "the rent last set" in amendment No. 3A. What we are trying to do here is keep tenants in their properties and to ensure that when they are facing rent reviews they can predict the maximum that may be possible in terms of a rental increase. We are providing for that. There was an unintended consequence which we are correcting whereby if a person in a rent pressure zone had been in a tenancy for the last two years and was due a rent review, there was a danger that the interpretation meant that a landlord could look for an 8% increase because it was 4% per year. We have changed that because of the issues that were raised. We are correcting it in a way that is consistent with what happens when one needs to correct a drafting error on Report Stage. We have reverted back to Committee Stage to talk through that issue. I think I have provided clarity in relation to that. I do not think there is -----
Is Deputy Pearse Doherty right? That is the question.
What Deputy Pearse Doherty is saying is correct in the scenario where there is a change in tenancy. In theory, though, a landlord could always ask a tenant to leave after six months and then increase the rent for a new tenant. That position has not changed under this amendment, except that now the rent increase will be limited to 4%
It will not be.
The Minister's original intention -----
It was limited by time.
The rent increase will be limited to 4% but it is not limited on an annual basis. A rent review cannot take place more than once a year but if there is a change in tenancy, it can. What we are trying to do here is to protect people who are in tenancies and to make sure that they do not face rent hikes to get them out, which is the whole point of a rent pressure zone.
This is worse than I thought. Let me make another point. Let us say I am a current tenant and I get a rent review on 1 January and the rent is increased by 4% so me and my family decide to vacate the premises on 1 February. Under the Minister's formula, the landlord can increase the rent by another 4% one month later. It is ridiculous. The Minister has said that he is trying to protect existing tenants in terms of the fact that the rent can only be reviewed once a year. What about the thousands of tenants who will be seeking accommodation? That happens every day of the week, in terms of the roll-over of stock.
This is a major faux pas in terms of this amendment. The Minister needs to do the right thing here. There is no point going into the late hours of the night on this. The Minister needs to withdraw this amendment, go away and think about it. We understand that this was done under pressure but the unintended consequences of this are serious. There is no doubt that this will incentivise landlords to push out their tenants because by doing that, under the Minister's formula which was signed off by Fianna Fáil, they are allowed to increase the rent by 4% every time there is a new tenant. It is ridiculous and does not make any sense. I do not believe that was the Minister's intention on this issue but Deputy Ó Broin has identified a major flaw in the amendment. The efforts to correct it were rushed and I know we are up against it, in terms of Committee and Report Stages but this cannot go through the way it is. It makes no sense that the Minister would allow this to go through.
In fairness, it was Deputy Curran who first spotted it. What has been revealed here is that there is now an incentive for displacement, for tenants to be displaced by their landlords. I asked a question earlier and the Minister of State at the Department of Housing, Planning, Community and Local Government, Deputy Damien English, nodded his head. I asked if the rent increase limits carry on at the location or address and the Minister of State nodded but they do not. The limits move and shift with a tenant so it is in the landlord's economic interest to evict a tenant, get a new tenant and increase the rent by 4%.
This must be redrafted and discussed in the morning on Committee Stage. This amendment never even reached a committee and this is the folly. The Minister could have put these amendments to the Select Committee on Housing, Planning, Community and Local Government on Tuesday night last.
We are in committee now.
Sorry, but Deputy Regina Doherty is not a member of that committee.
We are in committee.
The aforementioned committee had a meeting that went on until 11.30 p.m. the other night. The amendments were in the Minister's back pocket. He could have brought them to the committee but he chose to leave them until Report Stage. Here we are, it is 9.50 p.m. and the debate is scheduled to finish at 10 p.m. Tomorrow the Dáil is due to rise for the Christmas break. We have a dilemma because if we do not sign off on this, landlords will be rubbing their hands, figuring out how to increase rents before the law is sorted out in the new year. Are we going to be here until midnight tomorrow? It is a sham. The Government has made such a cock-up, it is unbelievable. This is the folly of doing nothing for years on rent and leaving it to the last day of the Dáil session. This is disgusting for tenants in this country.
Can I respond to some of the issues raised?
Two more Deputies have indicated that they wish to speak. Does Deputy Catherine Connolly wish to make a point in the same vein?
Okay, Deputy Connolly is next, followed by Deputy Jan O'Sullivan and then I will allow the Minister to respond before 10 p.m. Hopefully we can make some progress.
We will not make any progress.
Briefly, there is a way out of this and the vacuum that has been created. The Minister could accept the relevant amendment and use the Consumer Price Index, CPI. That would remove any difficulty, now that he is in this mess. I do not know if the Minister knows the German-Czech writer Franz Kafka but he should read his work. In fact, his writing would be more easy to interpret than the Minister's formulas. To get back to the point, if the Minister uses the CPI, that will get him out of this mess. That is the simplest thing to do. At this point, that is what should be done and that is what I am proposing.
A total rent freeze would be the simplest thing.
Yes, that would be even easier.
I agree with what Deputy Connolly has just said. A number of Deputies have put that idea forward consistently. It is the simplest solution. It avoids all of these various pressure zones, the dividing line between a pressure zone and a non-pressure zone and so forth. It is a very simple way of dealing with a very difficult problem for people.
I wish to make a specific proposal now. At this stage it would be absolutely farcical for us to come to a conclusion on Committee Stage, considering the errors in the Bill that have been pointed out, not to mention the errors made in trying to correct the original errors. We are not due to resume the debate on this Bill until 2 p.m. tomorrow. Realistically, there is no way we are going to be able to deal with this legislation adequately, on behalf of the people out there who are in tenancies, if we wait until 2 p.m. tomorrow. Given the fact that the Chief Whip is in the House, I ask that we make arrangements to deal with this early in the morning rather than waiting until 2 p.m. Many Deputies have been in the Chamber for a long time and we want to get this sorted but we are now even more confused than we were an hour ago.
I suggest that we meet to discuss the Bill at 10 a.m. tomorrow.
There might be a proposal later which would deal with that.
To be helpful, there are multiple protections in place to ensure that people cannot simply be evicted out of their properties. Those protections remain today. On the basis of what Deputy Pearse Doherty said, if a landlord can evict somebody easily, bring someone else in and use that as an excuse to increase the rent, that is what would be happening on a regular basis. By designating rent pressure zones and imposing the limit of 4%, we are trying to ensure that there will not be the capacity, when someone changes tenancies, to significantly increase rent. The whole point of what we are trying to do is to not incentivise removing people from tenancies in order to bring in other tenants and thereby jack up the rent.
We are also implementing a series of measures to try to ensure that we extend tenancies from four to six years or if it is an unfurnished property, to look at ten-year tenancies. We are actually moving towards what I believe most Members, including myself, would like to get to in time whereby there would be indefinite tenancies in the future. We are taking a step towards that but it is wrong to try to foster the impression that all of a sudden we are creating this huge incentive to get rid of tenants and take in the next person so that we can increase rent by 4%. The whole point of this measure is to try to stabilise the rental market in order to ensure that the tenancies people are on currently and the protections introduced by Deputy Kelly, as Minister, in terms of a two-year rent freeze before there is another review, will remain intact in pressure zones until the next review comes up. When the review comes up, thereafter the rent increases can only be 4% and the rules whereby the rent can only be increased once a year will apply. That is the position. If there is a change of tenancy, a landlord would have to have a good reason for that and it cannot be because he or she wants to get somebody out in order to jack up the rent.
They never said that.
The law does not allow that. If there is a change of tenancy and if a new tenancy applies, the maximum amount that can apply in terms of any rent review in that context must first be consistent with the local market rent and, second, regardless of that, the maximum increase that can happen is 4%.
My impression is that officials in the Department have been put under enormous political pressure to deliver a piece of legislation according to a political time schedule. One of the consequences of that political pressure is the mess we are now discussing. That is the most evident thing here. What I am saying is in no way intended as a criticism of any of the officials involved in the drafting of this Bill. They probably spent far more time trying to grapple with these difficulties than those of us who spent nine hours doing so at the select committee meeting the other day and for hours today.
Deputy Jan O'Sullivan's proposal is eminently sensible and I appeal to the Minister to take his amendment and consider very carefully the propositions many of us have put to him. My understanding is that the schedule for tomorrow has already changed and we are due to resume this debate at 12 noon. We should deal with the issue when the Minister has fully considered it overnight and when the rest of us have fresh heads, so to speak. It can be dealt with properly at that point. I am not trying to delay this debate. I do not want to be forced to take a decision at 10 o'clock at night on something that could have profound consequences for many people and then regret that decision afterwards, so I fully support Deputy Jan O'Sullivan's proposal.
I am not trying to put one over on anybody here. Most of the Deputies who have been working with me on this legislation to date would accept that. We are trying to get this right to ensure that when we do designate areas, hopefully next week, in Dublin and Cork and when other areas of the country get designated in the new year, which I believe they will, we have in law what we intend to do from a Government perspective, which is to provide as much certainty as possible in law, restrict any rent increases within rent pressure zones to a maximum of 4% and ensure that the current tenancies people are on are not changed in terms of the next rent review.
If it is helpful to the House, we will examine the wording prior to tomorrow morning in order to ensure that it will do what we want it to do. We introduced the amendment this evening when the issue was raised by Opposition spokespersons. I am happy to look at it again overnight to make sure it is right given the issues Members have raised. I have no issue with that but I hope we can work together to ensure that it is right. Whether one agrees with the extent we are going to, be it 4%, the CPI or whatever, that is a separate issue.
In terms of the intention I have outlined that we want to achieve, we will happily look at it in the context of what Members have said and confirm it in the morning. We are due to conclude proceedings in three minutes.
What are the time proposals?
My understanding is that the time proposal tomorrow is that we will be dealing with this again at 12.30 p.m.-----
There will be an announcement shortly.
-----until we finish it, which hopefully will be early tomorrow evening-----
This Bill will not be finished tomorrow.
-----so that staff members can go home. However, that will be up to the House, not me, to decide.
I proposed that we would meet at 10 a.m.
We will soon be out of time. We will deal with that matter in a moment. I call on the Government Chief Whip, the Minister of State, Deputy Regina Doherty, to make an announcement.