Tuesday, 5 November 2019

Questions (24)

Michael Healy-Rae

Question:

24. Deputy Michael Healy-Rae asked the Minister for Housing, Planning and Local Government if incentives will be put in place to ensure that the private providers of accommodations are encouraged to keep their properties available for letting purposes and not to sell into the private market due to the fact at present no one is purchasing property to go into the business of letting in view of the fact it does not make financial sense to do so; and if he will make a statement on the matter. [45136/19]

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Oral answers (8 contributions) (Question to Housing)

I wish to put on the record what could be perceived as a conflict of interest regarding the issue I am addressing. I raise this issue on behalf not just of constituents, but people up and down the length and breadth of this country. I am referring to people who provide accommodation. That could be student accommodation, property rented to local authorities or rented directly to private individuals as their homes. As far as I am concerned, these people have not been represented here by Opposition spokespersons or by people in the Government. I feel this needs to be highlighted and the importance of these people to the housing sector demonstrated to the Minister.

The strategy for the rental sector, developed under Rebuilding Ireland, was published in December 2016 and outlines a range of measures to develop further a viable and sustainable rental sector. Structured around the four key areas of security, supply, standards and services, the strategy sets out a number of targeted measures and initiatives with the aim of providing better security of tenure, achieving higher accommodation standards and greater rent certainty for tenants, as well as enhancing the supports and services available to landlords to facilitate the development of a more vibrant and sustainable rental sector. The strategy also aims to provide for other models of delivery of housing intended specifically for rental purposes.

In accordance with action 9 of the strategy, a working group on the tax and fiscal treatment of rental accommodation providers was established in 2017. The group was chaired by the Department of Finance and included representatives from the Revenue Commissioners, my Department and the Residential Tenancies Board, RTB. The group’s report was published by the Department of Finance on budget day 2017 and it presented ten policy options for consideration. These were divided into short-term, medium-term and long-term timeframes. Five potential short-term options were identified as measures which could potentially be implemented via budgets 2018 and 2019.

It is a matter for the Department of Finance to lead on the implementation of the group's policy options, in line with any related Government decisions. To date, the following policy options have been implemented. Option 1 concerns the accelerated restoration of full mortgage interest deductibility for landlords of residential properties. With effect from 1 January 2019, mortgage interest on rental units is 100% deductible for all landlords. Option 4 is in respect of introducing deductibility for preletting expenditure for previously vacant properties. Implementation of this policy option was prioritised in budget 2018 to encourage an increase in housing supply by bringing vacant properties back into use. I support any measures that help to maintain and increase the supply of rental properties.

The people on whose behalf I am speaking are taxpayers. They have rental income and pay tax. As the Minister knows, these people collect money in rent, then pay more than 50% in tax, pay their mortgages, if they still have them on their properties, and maintain properties to a proper standard. That is 100% right, of course. I am fearful, however, that many of these people are departing from this activity. We can see the reason for that when we look at the Opposition benches. I refer to the language sometimes used about people who own and rent out property. Even within the Government, these people are spoken about in a derogatory way, as if they are doing something criminal.

Some of these people are accidental property owners. There are also people who have gone out of their way to buy property to rent it out. The Minister is not a foolish man, that is one thing that he is definitely not. He is intelligent enough to know that in today's market, it does not make financial sense for people to purchase property and start to rent it out. As I stated, those people will be giving more than 50% of the rents collected in tax. Then they have to maintain the property, rent it out and face all the associated difficulties and tribulations. Those people are not going to do that in the future. I am fearful that people selling property to get out of that business are selling into the private sector. That property is then no longer available for renting and that is making the crisis worse.

The Deputy will have another opportunity to contribute.

I thank the Ceann Comhairle.

We have to be careful regarding the language we use in this Chamber concerning a whole host of issues. We should not seek to demonise one part of our community. As Deputy Michael Healy-Rae rightly stated, many of the landlords in this country, some 70%, own only one property. Many of them are accidental landlords who did not mean to become landlords, but became such because of what has happened in our recent history.

Some of them may now be at a point where they want to cease being a landlord and are able to do so. This has led to some of the volatility we have seen, with tenants being served notice to quit and the insecurity they experience as a result of needing to find a new place when we do not have enough homes to meet demand.

We have sought to provide incentives for landlords. We have sought to ensure that people invest in rental property because not everyone can go from living in their parents' home to buying a property. Many will need to rent and many will want to rent for a number of years.

I do not disagree with the Deputy's analysis of the high tax treatment of landlords. However, despite the work done by the tax strategy group, we have not been able to go down the route of making changes to the tax treatment of landlords as there are so many other spending demands on the Exchequer and we can only make certain changes year on year. We have introduced other important measures in the areas of mortgage interest relief and the expenditures that can be included by landlords in their engagement with the Revenue Commissioners.

When I talk about a European model in housing, I am referring to having a rental sector where tenants have long-term leases, security and affordable rents and have an understanding that rents cannot jump dramatically every year. We want to move away from the position where people invest in the rental sector based on the capital appreciation of the property and then exit the market ten or 15 years later to one where people invest for a rent roll. That lends itself to a certain type of investor and this approach is beginning to work in the cities. I worry, however, that landlords are exiting the sector outside the cities, resulting in a lack of rental accommodation outside cities and large towns. We must keep a close eye on this.

The Minister's analysis of the situation is spot on and I am very impressed with it. It is perfect but the problem is in trying to provide incentives to landlords outside cities, as the Minister said. With regard to the cities, it does not make sense that a person or the State should subsidise a rent of €2,500 per month. I do not care where people put their heads down at night but I do not believe renting a house for four weeks is worth that money. At the same time, I am speaking for people who own properties and are trying to make them pay. I want the business to be profitable enough for these people to continue in it but I also want people who are paying rents to have security and to be able to afford the rent. I do not like the idea of people renting forever, although I do not mind people renting for a certain period in their lives if they can then get a local authority house or are able, through employment, to get a mortgage and buy their own property.

The Deputy's point about those who are renting and wanting to leave the rental sector to buy a home is well made. Rents are too high in too many parts of the country. People cannot afford their rent and are making sacrifices just to meet the cost. They should not have to make those sacrifices. In addition, they are unable to find the space to save in order to purchase their first home. We have introduced schemes such as the help-to-buy scheme and the Rebuilding Ireland home loan to recognise that people are caught in a rent trap and to help them out of that trap and into home ownership.

We must ensure we have a rental sector that will protect those who will continue to rent and people coming to this country to rent. The sector must also have investment, not only from the State but also from the private sector. Further improvements are required to allow that to happen in a sustainable way. That is why rent controls are so important. I am talking about ensuring that people cannot make super profits off the backs of people who are struggling to find a place to live. At the same time, we must make sure there is an incentive for people to invest, become landlords and provide an important service in cities and towns. This is an area we have to keep an eye on.

We can take some hope from the fact that in the first two quarters of this year, as well as seeing landlords exiting the sector, we also saw new landlords entering the market. I understand there was no net change in the first two quarters but I will have to check that. As landlords exited, new landlords came in to the sector. I hope this points to progress.