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FACTCHECK

FactCheck: Is the renters' €500 tax credit just worth seven days' rent in Dublin?

The claim was made by a housing charity after the budget was announced.

AN ANNOUNCEMENT BY government that the 2023 budget will include a €500 tax credit for renters was undercut by a press release from the housing charity Threshold, who said that this will amount to just “2.06% of the yearly average rent in Dublin and just 2.89% of the yearly average rent nationally”.

Threshold also tweeted: ”Tax credit for renters of €500 per year is only enough to cover 7 days’ worth of rent in the average Dublin rental property. This does not do nearly enough to stem the tide of challenges private renters are facing.

The broader claims about how much the government is helping renters are outside the scope of this factcheck. Instead we’ll examine just what proportion of rent €500 would cover. 

Threshold’s press release claims were repeated in various places online later yesterday – including in popular tweetsnews publications and a tv report.

Let’s see whether a €500 tax credit is just enough to cover 2.06% (or seven days) of the yearly average rent in Dublin.

What is a Tax Credit?

Tax credits are commonly confused with other reliefs and measures that reduce income tax, such as tax allowances.

Allowances are subtracted from an income before tax is calculated and are therefore worth less than the headline amount.

For example, the Guide Dog Allowance is worth of “€825 at the standard rate”. However, this does not mean that owners of guide dogs will be €825 better off each year. Instead it means they don’t have to pay the standard tax rate of 20% on €825 of their earnings, which means that this allowance would save them just €165.

On the other hand a tax credit, such as the one for renters announced in yesterday’s budget, is applied to income tax after it has been calculated and reduces the total amount paid.

So, in most cases, a tax credit of €500 means that the recipient should pay €500 less in taxes.

However, in cases where a person pays less than €500 in tax a year, they would not be able to claim this full credit. This may affect renters earning less than €19,000 a year.

A 2021 CSO report found that, in 2019, around 35% of tenants had a total gross income below €20,000, with one in ten having an income of €10,000 or less. This suggests that many of these people might not see the full effect of a €500 tax credit. 

What is the average rent?

Threshold told The Journal that the charity calculated its figures from the Residential Tenancies Board (RTB) Rent Index Report, which said that the national average rent paid in new tenancies was €1,460 while the Dublin average rent was €2,015. 

The charity then applied the proposed €500 tax credit to see how many days of the year the average property could be rented for. Threshold said that, for Dublin, this was 7.4 days, or just over 2% of the year.

However, there are problems with using the RTB figures in this way.

The figures supplied in the RTB report only refer to new tenancies registered in the first quarter of 2022. Existing tenancies are not included and are, on average, lower to rent.

More importantly, these RTB figures refer to the rent charged per tenancy, not per tenant. A single tenancy might include multiple renters.

For example, the €2,015 figure refers to the rent paid per new tenancy in Dublin, not the average cost paid per tenant in Dublin.

A couple sharing an apartment would only count as one tenancy, not two, even if they split the rent.

A group of five people renting a house together would count as one tenancy, but each tenant would receive a €500 tax credit under this new measure, possibly contributing €2,500 toward their collective rental costs each year.

The RTB report notes these differences, saying that the national average rent in new tenancies “varied between €1,347 per month for a one-bed apartment, €1,520 per month for a two-bed apartment, and €1,737 per month for an apartment with three or more bedrooms.”

The report also notes that, in the first quarter of 2022, more than 87% of new tenancies were for properties with more than one bedroom. More than 35% of the tenancies listed were for properties with three bedrooms or more.

While data on the number of tenants per tenancy is not supplied in the report, it is unlikely that all properties this size were being rented by one taxpayer where a single renter’s tax credit of €500 would apply.

Threshold clarifies

“In the case of house shares, then yes, an individual tenant will have a greater benefit from the tax credit,” Threshold said in response to inquiries on these points.

Threshold said that their figures would largely apply to “families renting entire homes”.

However, this would be true in cases where the family only had a single unmarried taxpayer; married couples and civil partners will be able to claim together for a €1,000 tax credit.

Threshold also directed The Journal to the Daft.ie Irish Rental Report for Q2 2022, which says that new rents on single rooms were on average €621 a month in west Co Dublin, and €717 in the city centre.  

“The €500 tax credit in the case of a tenant renting a single room estimated at €621 per month in Dublin will equate to 6.7% of the annual rent, or 80% of the monthly rent in that room,” Threshold said.

“However, in the overall cost of rent in the year, the €500 tax credit will not create a large impact in the pockets of a tenant.”

While the Daft.ie report does not take into account existing tenancies, it does focus more on how much individual renters pay in the current rental market than the RTB report, which focuses on rental properties.

Not enough data is available in any of the reports listed to calculate the amount of rent an individual’s €500 tax credit would pay for, when existing tenancies are included.

It is also unclear how many renters will be able to avail of the full €500 value of the tax credit, as a significant minority may not earn enough to pay €500 in tax anyway.

Some other issues involving the tax credit are yet to be sufficiently clarified (see our explainer here). 

Verdict

Threshold claimed that the Government’s €500 annual tax credit for renters is only enough “to cover seven days’ worth of rent in the average Dublin rental property”.

The charity calculated its figures based on the RTB’s Rent Index report, which states that the average rent paid in new tenancies in Dublin was €2,015.

The charity applied the proposed €500 tax credit to see how many days of the year the average property could be rented for and said that, for Dublin, this was 7.4 days.

However, this method is problematic as it only refers to tenancies registered during the first quarter of 2022; existing tenancies – which are, on average, less expensive – are not included.

It also implies that the average Dublin renter has, on their own, a lease on the average Dublin property, a multiple-bedroom house.

However, many people either rent out a room or share a house with at least one other person who contributes toward rental costs, lowering the amount each person pays. Each of these people would be eligible for the €500 credit.

We therefore found Threshold’s claim: MISLEADING.

 As per our verdict guide, this means that the claim “either intentionally or unintentionally misleads readers”.

(Note: Journal Media Ltd has shareholders in common with Daft.ie publisher Distilled Media Group.)

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