The Government is acutely aware of the difficulties in the housing market. As I have said on many occasions, the key problem is a lack of supply. This is why the Government is committed to increasing the supply of all types of homes – social, affordable, rental and owner-occupier.
My department continues to monitor all aspects of the property market, including the number of landlords in the rental sector. Central Statistics Office research on The Rental Sector in Ireland found that the total number of landlords in the market has reduced from approximately 170,000 in 2018 to 157,000 in 2021. The research also found that in 2018, landlords with only one or two tenancies accounted for 84 per cent of all landlords. Therefore, small scale landlords likely make up the majority of landlords who have decided to exit the market in recent years.
The exiting of small landlords from the private rental sector is a consequence of multiple factors. A changing regulatory environment which has been necessary to ensure a fair and effective residential rental sector that balances tenants' rights and landlords' responsibilities has resulted in a challenging compliance framework for some. The recent rise in house prices has also prompted some landlords to sell their rental properties in the absence of negative equity.
This raises concerns about the supply of rental properties. However, as part of the Housing for All action plan update published last November, the Department of Housing, Local Government and Heritage will commission a comprehensive review of the private rental sector. This review will take into account the significant regulatory changes over the past several years and will ensure that our housing system provides an efficient, affordable, safe and secure framework for both landlords and tenants.
The Government's Housing for All strategy also commits to delivering a total of 18,000 cost rental homes over the period to 2030. We continue to monitor how many small-scale landlords remain in the market and the Government will continue to work to increase the supply of public rental accommodation and review the private rental sector so that it works effectively for both landlords and tenants.
After deduction of allowable letting expenses, rental income is subject to tax as part of the total taxable income of the landlord. Individual landlords may be subject to income tax at their marginal rate of tax in addition to which USC and PRSI will also apply.
Corporate landlords are liable to corporation tax at 25%, and a further 20% “close company surcharge” may also apply where the rental profits are held within the company.
Specific tax rules apply to other entities such as REITs and funds.
In relation to mortgage interest relief for landlords, the position is that with effect from 1 January 2019, 100 per cent of the interest may be deducted on mortgages for residential rental properties.
In relation to other costs, deductible expenses include:
- The cost to the landlord of any goods provided or services rendered to a tenant.
- Cost of maintenance, repairs, insurance and management of the property. In the case of properties in managed estates or apartment buildings, this includes the annual management fee.
- The cost of registering a residential tenancy with the RTB.
- Cost of letting, including letting agency fees.
- Wear and tear allowance are available in respect of furniture, fixtures and fittings provided by a landlord. These allowances are granted at the rate of 12.5% per annum over a period of 8 years.
In addition, owners of rental properties are entitled to claim deductions up to €10,000 against rental income from that premises for various expenses incurred prior to it being first let after a six-month period of non-occupancy. These expenses include any rent payable in respect of the premises, general repairs and maintenance (capital expenditure excluded), insurance and management fees, rates, service charges, accountancy fees and certain mortgage protection policy premiums.
In relation to tax measures more generally, our recent history suggests that a cautious approach is warranted.
Decisions regarding tax incentives and reliefs are normally made in the context of the annual Budget and Finance Bill process. Such decisions must have regard to the sound management of the public finances and my Department's Tax Expenditure Guidelines. The guidelines make clear that any policy proposal which involves tax expenditures should only occur in limited circumstances where there are demonstrable market failures, where a tax-based incentive is more efficient than a direct expenditure intervention. Tax reliefs, no matter how worthwhile in themselves, may serve to narrow the tax base and can make general reform of the tax system that much more difficult.
I will continue to work with my colleagues in Government to ensure that any further interventions in the housing market are appropriately calibrated, represent the best use of scarce public resources and boost the supply of housing in both the public and private sectors.
