I thank the committee for inviting the RTB to discuss the Residential Tenancies (Greater Security of Tenure and Rent Certainty) Bill 2018 and the Anti-Evictions Bill 2018. I am accompanied by the director of the RTB, Ms Rosalind Carroll, and Ms Caren Gallagher, head of communications and research. The Residential Tenancies Board is the primary body dedicated to regulating the rental sector in Ireland and one of the only bodies that works impartially with landlords and tenants.
Our core functions include replacing the courts for the majority of landlord and tenant disputes through our dispute resolution service. We have a national system of tenancy registration and, increasingly, provide information, research and education.
The overall vision of the Residential Tenancies Board is for a well-functioning rental sector that is fair, accessible and beneficial to all. However, we know that in the current market demand continues to grow at a time of restricted supply and access to accommodation is difficult for many tenants. We also recognise that there are many people in very challenging and uncertain situations as a result of the ongoing supply and affordability issues. Given the number of households that rent in Ireland, and will continue to do so into the future, we will need to continue to adapt the regulatory framework in a way that supports and serves both landlords and tenants in this evolving market.
Both Bills being discussed here today are about trying to improve the current situation in the rental sector. The spirit of both recognises the need to strengthen security of tenure protections to meet the needs of a rental population that will rent homes for much longer periods than previous generations. In terms of both timing and effectiveness, before considering further changes it is important to note the level of regulatory change that has already occurred and the current profile of the sector.
There have been a series of legislative changes introduced over the past number of years including the Residential Tenancies (Amendment) Act in 2015, another in 2016 and another Bill is currently before the Houses. The original regulatory framework established in 2004 has grown and become more complex with each change to the point where most landlords and tenants do not understand their rights and responsibilities. We believe that is the biggest threat to successful implementation of any further regulatory change.
The proposed new powers for the RTB under the Residential Tenancies (Amendment) Bill (No. 2) Bill 2018 will enable us to build on the protections in current legislation and allow us move to more proactive regulation of the sector. However, we cannot rely on regulation alone to solve all the issues. We must also protect existing supply and encourage future investment.
In this context, it is important to consider the current profile of the sector. There are approximately 340,000 tenancies registered with the RTB, of which 307,000 are private rented tenancies. The majority of landlords - just over 70% - own one property, with a further 16% owning two properties. In our organisation we are starting to see evidence that the stock of rental properties is falling despite demand being at an all-time high. Since 2017, the number of private rental tenancies has fallen from 313,000 to just over 307,000 at the end of 2018. That is a significant reduction given the extreme demand pressures in the market at this time.
We cannot afford to risk further loss of stock in the sector as it is the most vulnerable tenants who are affected most by a lack of supply. Given the degree of regulatory change introduced over the course of the past three to four years and what is proposed, there is a careful balance to allow the legislation to bed in and allow the RTB to exercise new regulatory powers, manage the transition properly and ensure that we do not worsen the situation, even with the best of intentions.
The Bills being introduced contain a wide range of measures covering: student accommodation; rent transparency and rent reviews; changes to security of tenure relating to section 34 and Part 4 of the Residential Tenancies Act; rent pressure zones; and deposits. It is our understanding that a number of areas are under consideration as amendments within the context of the Residential Tenancies (Amendment) (No. 2) Bill 2018.
With regard to student accommodation, the RTB came before the committee last November to discuss this issue. We support reform and clarity in this area given the increasing number of student specific accommodation that will be provided over the next number of years. The RTB strongly believes that the vast majority of student accommodation does currently fall within our remit, whatever it is called, and we understand that the Minister is working to include further clarity on student accommodation in the proposed legislation.
In considering rent transparency, the proposed move to annual registration will ensure that landlords provide the RTB with up-to-date details on an annual basis, including correct rent amounts. This will ensure better and smarter regulation and will support rent transparency measures. It is our understanding that the Minister is working to establish if it is legally possible to provide for measures to ensure rent transparency in the sector.
In considering some of the other measures, it is useful to look at the applications for dispute resolution services coming to the RTB which tend to give an important insight into the sector. In terms of the most common types of dispute we see on applications, 27% relate to rent arrears and overholding, 26% relate to invalid notice of termination, and 21% relate to deposit retention. That trend has remained steady in recent years.
In 2017, we tried to drill down into the particular applications coming before us to see if we could give further clarification or information on the types of disputes. We have found that there are a wide range of reasons notices of termination are being served. The most common reason is rent arrears. That is the biggest issue facing the sector. Forty-four per cent of the notices served in 2017 were for rent arrears; 20% were served for the sale of the property; 8% were served because the landlord wished to move a member of their family or extended family into the dwelling; and 8% were served to allow for substantial renovations.
There have been a number of legislative changes to enhance security of tenure in recent years and the RTB supports further strengthening in this area. However, there are legal considerations and at this point, given the data that exists relating to supply in the sector and notices of termination, we need a careful balance and a strong evidence base to support further regulatory change.
In respect of rent pressure zones and the criteria that apply, the RTB has fed into the considerations by the Department. It is important to balance any potential impact on supply, particularly where rents are lower than the cost of provision. The RTB rent index, produced in conjunction with the ESRI, provides data on rental indices across the country down to local electoral area. The quarterly report shows the degree of variation across the country in both growth rates and standardised average rents, which is significant, with some areas having an average rent of €470.
Outside of rent pressure zones, there are rent certainty measures in place whereby landlords can only review the rent once in a 24-month period and cannot set a rent in excess of market rent. There are existing protections for tenants and the RTB believes that with the additional new powers and a more proactive regulatory framework where we can go into a property and assess it, landlords and tenants can be supported on a pathway to compliance. It is important to allow for the new powers to be established and tested.
When considering the range of other measures proposed, the case outcomes and RTB experience are useful to consider, such as the practice and outcomes in respect of deposits. In 2017, 92% of deposits were partially or fully refunded to tenants who took a case to the RTB. We do not see evidence in our data of a trend whereby landlords are seeking deposits of more than one month's rent.
The RTB will soon have more effective powers that will change the nature of how we regulate the sector. Critically, the new civil sanctions regime allows for a proportionate response from a caution all the way up to a sanction of €15,000 for potential breaches of the law. These powers will make the regulatory framework more impactful and effective. However, regulation alone will not resolve the current issues in the sector.
When considering further regulatory measures in the market, equally, there is a need ensure there is quicker and more effective access to justice when something goes wrong in a tenancy. We also need to ensure that we are doing more to promote supply and encourage further investment.
The proposed new powers for the RTB under the Residential Tenancies (Amendment) (No. 2) Bill 2018 are a significant change for the RTB as an organisation and for the rental sector. We hope that many of the measures will address the issues in the sector and that the legislation will enable more effective, proportionate and smarter regulation. We are focused on the successful and smooth implementation of the proposed legislation for both landlords and tenants in what is an extremely complex and bureaucratic regulatory framework. This will take time. The RTB is committed to supporting all those involved in the sector, whether they are landlords or tenants, on pathways to compliance.
Given the wide range of issues in the Bills, we have focused on some elements of both but welcome the opportunity to discuss further with the committee any issues arising. I hope we can assist in that regard.