In respect of private residential developments, the issue of restricting property ownership is generally not a matter for the planning authority, as their prime concern is the appropriate design layout and impact on the spatial development of an area.
In relation to developments that specifically apply for permission as long term build to rent developments under the 2018 Sustainable Urban Housing: Design Standards for New Apartments - Guidelines for Local Authorities, it is a requirement that such apartment developments are owned and operated by a single entity and that individual units are not sold or rented separately for a minimum of 15 years. This requirement relates to the need for a clear management structure and shared communal facilities for this particular form of development.
It is important to recognise the positive effects that institutional investment can have in terms of the supply of housing, not least given the scale of housing development envisaged under the National Planning Framework over the period to 2040, particularly apartment developments in the main urban centres. I understand that, increasingly, institutional investment is being directed towards the funding or forward purchase of new residential construction, which is helpful in increasing the supply of new housing.
In this context, a recent report on institutional investment from the Department of Finance notes that it would not be correct to assume that the properties being bought by institutional investors would otherwise have been bought by first time buyers, with the suggestion being made in the report that much of the stock would likely have been purchased by Buy to Let investors with access to equity, either through their household or business wealth. The benefits of institutional investment are more likely to be indirect; to the extent that it brings about extra supply, it should help affordability across the market as a whole.
In addition, there are already supports in place for first time buyers. These include:
- The Help-to-Buy (HTB) incentive provides for a refund of Income Tax and DIRT paid over the previous four tax years, up to a maximum of 5% of the purchase value, capped at €20,000. Up to the end of March 2019, 11,557 HTB claims have been made, of which 11,043 are approved. The estimated total value of approved HTB claims to date is in the order of €161.5 million.
- The Rebuilding Ireland Home Loan scheme allows low-income first time buyers aged between 18 and 70 who cannot secure sufficient mortgage finance from a commercial lender, to access sustainable mortgage finance that is designed to enable them to purchase a new or second-hand property, or undertake a self-build, within a suitable price range at low interest rates. It is subject to certain qualifying criteria and is aimed at improving affordability. Some 1,884 loan applications have been recommended for approval by the Housing Agency’s central credit assessment service and up to the end of March 2019, 720 loans to the value of €127.5m had been drawn down, with an average loan value of €177,073.
The Department of Finance report also points to the benefits of professionalising the private rental sector, realising economies of scale, and a resultant improvement in regulatory and taxation compliance standards.
Historically, the private rented sector in Ireland has been largely made up of small-scale landlords, who will continue to provide the bulk of private rented accommodation. However, a more diverse sector, which includes institutional investors specialised in providing and managing rented residential property on a larger scale, provides additional stability and less exposure to property market risk and volatility. Institutional investors can also help provide the range of tenancy options that households need across their lifecycles. There are approximately 340,000 tenancies registered with the Residential Tenancies Board, of which approximately 310,000 are private rented tenancies. The majority of landlords, just over 70%, own just one property, with a further 16% owning just two properties. Almost 86% of the registered rental housing stock is owned by landlords with less than 10 properties, reflecting the fact that the overall proportion of the rental stock held by institutional investors is relatively low. The fact that institutional investors are entering the rental market, with a clear long-term focus on their investment, provides security for tenants who can be confident that their landlord is committed for the long run.
The Residential Tenancies (Amendment) (No. 2) Bill 2018 includes important changes to the regulatory system which applies to the residential rental sector, such as annual registration of tenancies. Annual registration will provide improved data on the profile of landlords in the market, including institutional landlords, and will be of benefit to my Department in keeping the market under review, ensuring that we facilitate the positive impacts of institutional investment, while addressing any broader issues that may arise.