Dáil Éireann Debate, Wednesday - 20 February 2019
23. Deputy Mick Barry asked the Minister for Housing, Planning and Local Government the steps he will take to counter price setting by institutional landlords (details supplied); and if he will make a statement on the matter. [8671/19]
View answerAn interesting and in some ways extraordinary report from the economics division of the Department of Finance was published in The Irish Times last week. Its authors perceived a threat that corporate landlords would be in a position to set high rents in concentrated urban areas if they become a stronger force within society and the market. Will the Minister comment on that report?
The February 2019 report on institutional investment in the housing market prepared by the economics division of the Department of Finance examines the role of institutional investors and large-scale landlords in the Irish residential property market. The report finds that the combined purchasing activity of property funds, real estate firms and real estate investment trusts accounted for a net 1% of transacted units in 2017. Ownership of rental properties by large-scale landlords, that is, those who own more than 100 rental units, is also low, accounting for 4.6% of the wider market.
The report acknowledges that the purchasing and ownership activity of such firms can be more pronounced at a local level, particularly in the context of the apartment market. In the main, the report acknowledges the activity of such firms as a positive development and points to emerging evidence that they are a driving force behind a significant increase in the supply of new apartments in Dublin. As Minister, I welcome their much-needed delivery of high-quality, high-density and well-located rental units.
The report highlights that there may be a risk that such firms could scale up over time to develop monopolistic or oligopolistic pricing power. However, the report also notes that there is currently a diverse range of landlords and property types in the rental market. In 2017, approximately 310,000 private rented tenancies were registered with the Residential Tenancies Board, RTB, and 86% of landlords owned just one or two rental properties.
In fact, 70% owned just one property. Furthermore, the Department of Finance report focuses exclusively on apartments for analysis and comparators, whereas the market consists of both apartments and houses.
Part 3 of the Residential Tenancies Act prescribes the legal procedures for the setting and review of rents. Section 19 prohibits the setting of a rent above the market rent. Essentially, the amount of the rent payable is agreed between the landlord and tenant, cognisant of local rents for similar dwellings. These provisions are kept under ongoing review by my Department.
The Minister stated 70% of landlords own one or two properties. We know all that but the report refers to a new trend, namely, corporate landlords in urban areas - city-centre areas - becoming a real force and having the power to set rents. The report does not pull its punches in stating what these corporate landlords do. They supply apartments to the premium end of the market, and these are unsuitable for people on average incomes. The report states there is a risk that, should buy-to-rent investment continue at current growth rates, market forces will, over the longer term, create socio-economic polarisation in some urban areas. Reference is also made to the possibility of monopolistic or oligopolistic power in price setting. Having been warned, what measures does the Minister intend to take?
I thank the Deputy for the follow-up question. He talked about a trend; it is not a trend. Some 1% of transactions in 2017 is not a trend. A proportion of 4.6% of the stock is not a trend. The Deputy said 70% of landlords own one or two properties and that everyone knows that. Everyone does not know that because the Deputy is wrong. Some 86% of landlords own one or two properties, while 70% own only one. When the Deputy attacks landlords, as he often does in this House, he should think about the people he is attacking, namely, 86% of our landlords who own only one or two properties, and the 70% who own only one. In most or many cases, they are accidental landlords who did not want or mean to become a landlord but who became one because of what happened in the financial crash or family circumstances. When the Deputy stands up here time and again attacking landlords, he is attacking people who find themselves in circumstances in which they do not want to be.
The Deputy spoke about the trend concerning institutional investors. We need more institutional investors because they increase the supply of apartments. We need tens of thousands of additional apartments, particularly in cities, if we are to meet the current housing challenge and also protect ourselves from other challenges, such as climate change, and also meet the need to promote proper spatial living and compact growth, as referred to in Project Ireland 2040.
The Department of Finance has issued a warning, and it has done so in stark terms. It has raised the risk of the investors developing monopolistic or oligopolistic pricing power in rent setting. It refers to pricing people on both average and low incomes out of the market. I asked the Minister a simple question, concerning what he intends to do about this, and he gave me a lecture about statistics. What does he intend to do about it?
We are talking about Kennedy Wilson taking over Elysian Tower in Cork, vulture funds taking over Leeside Apartments in Cork, the increasing power of Irish Residential Properties REIT in the Dublin area and so on. Does the Minister intend to introduce more aggressive rent control measures? Does he intend to end the tax breaks for the big corporate landlords? Crucially, does he intend to put more money into social housing in the inner-city areas in addition to the suburbs and other areas around the country, which is what is needed?
I thank the Deputy. I did not give him a lecture about statistics; I pointed out where he was wrong and how that lack of knowledge or ignorance is, unfortunately, leading to the statements he is making against landlords in this country, the vast majority of whom-----
Answer the question.
-----own only one property. It is not a case of big institutional landlords coming in and taking the approach the Deputy believes they are taking.
What is he going to do about it?
He is completely mischaracterising our landlord sector. It is doing a lot of damage for renters or others who might invest in becoming a landlord, thus making a rental property available to a young couple, a young person or a person coming to live and work in this country.
The report refers to 1% of transactions in 2017 involving institutional landlords and the stock proportion being 4.6%. It states this is low. A rate of 4.6% is low in any market but, of course, I will keep this under review. We are trying to encourage the building of tens of thousands more homes, including apartments. We are trying to find a better balance in our landlord market so we will not be exposed to people leaving that market, as at present. Institutional investors coming in and making a long-term play in providing apartments over periods of ten, 15, 20 and 25 years is in our interest because those properties will remain as places to rent. That is what we need. We are losing landlords from the market. It is better to have a balance between institutional landlords and the small landlord, who features at present. We do not have that balance yet and are nowhere near it. I will keep this under review until we get closer to the balance we need to see in order to have a properly functioning, mature rental sector.
