GOVERNMENT SHOULD CONSIDER following in Denmark’s footsteps and require owners of vacant residential properties to make them available for rent, according to a new report published today.
The National Economic and Social Council (NESC), which advises the Taoiseach and the Government on strategic policy issues, has stated in its report on the private rental sector that a regulatory intervention used in Denmark to target vacant property “is worth considering for Ireland”.
In Denmark, If an owner moves and does not wish to sell his property, he must rent it out – or at least try to sell it. If a property is empty for more than six weeks, the owner has to report to the municipal authority, which then seeks to provide tenants which the owner has to accept.
The municipality of Amsterdam also set out plans last year to deal with long-term vacancy of homes more efficiently by forcing owners to occupy properties as soon as possible or be subject to a fine of up to €9,000 for not reporting a vacancy.
It also recommended that tax breaks for landlords should be linked to more secure and longer tenancies, as report by The Journal.
If more generous tax treatment of rental income were to be introduced there is a case for linking this to more secure occupancy for tenants, states NESC.
“Those who continue renting into old age would particularly benefit from enhanced long-term security of tenure. Germany provides a possible model of how this can be achieved.
“Landlords in Germany benefit from generous tax treatment, while tenants have a high level of security of tenure,” states the report.
The taxation of rental income in Germany provides an annual allowance (2–2.5 per cent) for depreciation based on the purchase cost of the building (excluding land), which reduces the effective tax rate.
Rental investments in Germany are free from Capital Gains Tax (CGT) if held for at least 10 years. In terms of secure occupancy, sale of the property is not a ground for ending the tenancy in Germany and rental properties are normally sold with tenants remaining in situ.
Another model would be to grant more favourable tax treatment to landlords who are willing to offer longer-term tenancies such as tenancies of 15 years, states NESC.
In a bid to improve rental property standards, the report says it is worth considering the introduction of a National Car Test (NCT)-type system whereby landlords would have to demonstrate compliance with minimum standards.
In their 2020 pre-budget submission, Threshold set out two possible models of how to establish a test for rental property based on the National Car Test (NCT).
One model would require landlords to have the property inspected by a private professional who would issue a certificate when the required minimum standards are met.
The landlord would submit this to the RTB when registering the property and it would be available online for prospective tenants to check.
The certificate would last for four years. The second model is based on local authority inspectors being overseen by a national body in order to ensure consistency of standards.
In this model, the local authority inspector would issue the certificate when the standards are met and this would also be made available online via the RTB. If the standards are not met initially, the inspector would engage with the landlord to bring the property up to standard.
The report states that if the 25% inspection rate target were achieved, then almost all properties would be inspected within four years. NESC states that this would involve a phased introduction of a requirement to have a certificate, with the model using private professionals being introduced on a phased basis.
NESC also sets out suggestions on how unoccupied homes of people availing of the Fair Deal scheme could be brought back into use.
In November 2022, it was announced that the amount of rental income that nursing home residents can retain under the Fair Deal was raised from 20% to 60%.
NESC suggests that the 60% disregard may be increased to a 100% subject to a review after six months, in a bid to increase property supply.
The body also recommends expanding the Repair and Leasing Scheme; providing more professional staff in the public system to advise and support property owners on restoring and bringing vacant properties into use; as well as reviewing the scope for regulatory changes to facilitate renovation of older properties.
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