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'We must protect Generation Rent from the effects of the Covid-19 crisis'

Dr Michael Byrne of UCD welcomes new measures to protect tenants but says they should not be left to pick up the pieces once the virus passes.

Image: Shutterstock/Semmick Photo

THE RECENT INTRODUCTION of new measures to protect tenants will be welcome news for the more than 300,000 households who rent in Ireland.

The new legislation, which came into effect on 27 March, establishes a moratorium on evictions and rent increases. Landlords will not be able to issue notices of termination during the ‘emergency period’, which lasts until 27 June (but can be extended thereafter by Government order).

Any notice of termination issued before the emergency period is ‘paused’. Landlords may not introduce rent increases, although informally negotiated rent reductions are permitted. Tenancies in the private rental sector are, in a sense, frozen in time as tenants, landlords and government scramble to come to terms with Covid-19.

Moreover, the Government has indicated that the Department of Employment and Affairs and Social Protection will use the full flexibility of Rent Supplement to ensure this temporary income support is accessible to eligible renters who have experienced a loss of income.

Much needed measures

These measures are crucial as tenants are the most vulnerable group to losing their home, something to be avoided at all costs in the context of the current pandemic. Moreover, the sectors of employment being hit hardest right now, such as the retail and service sectors, are sectors where private renting tenants are overrepresented. 

The Covid-19 crisis will also have consequences for investors in the private rental sector (PRS), however. Investment in the sector has massively increased over the last number of years.

In 2019, PRS investment was the largest of any segment of real estate investment in Ireland. According to a recent report from Hooke and MacDonald, it accounted for 44% of all transactions in Dublin last year, shooting up from 6% in 2016.

A lot of money has poured into the PRS sector, with a clear focus on capturing the incomes of ‘generation rent’ in the context of a strong economy and employment growth. But that context, and tenants’ incomes, look very different today. In the UK, it has been reported that fewer than half of tenants paid their rent in full and on time in April.

In mid-March, IRES, Ireland’s largest landlord, issued a note to its investors assuring them that “IRES’s financial position and liquidity is strong” and noted that they are “strong believers that the multi-family real estate sector is a highly defensive and counter-cyclical asset class that can bear broader market swings”. The next few months will no doubt put that statement to the test.

Where does this leave the tenant?

Meanwhile, tenants are still expected to pay rent. This raises questions which will have to be confronted eventually. Will those who fall behind on rent payments be protected from eviction after the emergency? Will they be liable for rent arrears?

These issues are particularly acute because the private rental sector has long been plagued by affordability problems. Research published by the Nevin Economic Research Institute in 2018 showed that a single room in shared accommodation within Dublin City Centre cost an average of €632 per month, equal to 42% of the take-home pay of a minimum wage employee working full-time.

Similarly, the cheapest one-bedroom apartment anywhere in Dublin County was €1,060, just under 50% of the median Irish net take-home pay. An ESRI study from 2018 shows that high housing costs, a feature of housing in Ireland more generally, particularly effect private renters. While for the general population, 16% of households had high housing costs, this figure was double for private renters.

Data from the European Union Survey on Income and Living Conditions shows that the housing cost overburden rate (the percentage of people living in households where the total housing costs represent more than 40% of disposable income) is just over 1% for homeowners, but more than 20% for renters. Renters are economically vulnerable and the sector is plagued by affordability issues.

One way of protecting tenants, perhaps the most straightforward, is to introduce legislation to prohibit terminations on the basis of rent arrears accumulated during the emergency period. This would be welcomed by tenants, but it is difficult to see the Department of Housing taking this route as landlords would cry foul and it might be argued that it would create an incentive for tenants to cease paying rent altogether during the crisis period.

A second option would be to make it mandatory for landlords to enter into some kind of repayment plan. If tenants do not agree to a plan with their landlord, or they agree to a plan but then fail to comply, landlords could be given the option of bringing a dispute to the Residential Tenancies Board, which can make a legally binding determination of the amount of money to be repaid. This would provide an avenue for landlords to recoup their losses while keeping tenants in their homes.

Tenants, on the other hand, will be able to make a very legitimate argument that they should not be forced to pay the cost of the crisis. Many landlords have no mortgage attached to their property, and of those that do many will have received a mortgage moratorium from their bank.

How they’re handling it elsewhere

Sinn Fein has already called for rent reductions and rent waivers for tenants whose landlords are availing of mortgage repayment forbearance. In some jurisdictions, such as Washington DC, landlords who avail of mortgage holidays are legally obliged to pass that on to their tenants in the form of a suspension of rents.

Internationally, the tension between landlords and tenants is already heating up. New York Democratic Congresswoman Alexandria Ocasio-Cortez recently joined calls for the suspension of rents and supported a national rent strike organised by tenants activist groups.

The London Renters Union has called for a moratorium on rent payments too and pointed out that while landlords get a three-month free pass on mortgage payments, tenants must keep up with their rent. The British Labour party also called for a full suspension of rents. Tenants Unions in Madrid and Barcelona have also been actively organising rent strikes. 

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As the consequences of the Covid-19 crisis unfold, the tensions between landlords and tenants are likely to increase, in Ireland and internationally. Deciding who bears the brunt of the fall out will be a politically explosive issue in a context where housing, and the crisis in the rental sector, in particular, were already key concerns for voters, and politicians have started to wake up to this fact.

Dr Michael Byrne is a lecturer in the School of Social Policy, Social Work and Social Justice, University College Dublin and Director of the Equality Studies MS.c. Programme.

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