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"Don't blame landlords for the current housing crisis"

IPOA Chair Stephen Faughnan argues that landlords are being priced out of the rental market.

Stephen Faughnan

MINISTER OF STATE John Halligan has incited hatred by telling TheJournal.ie that he would “jail the bastards”, referring to landlords.

These comments are despicable, filthy and foul mouthed and do not represent the crucial role played by the providers of good quality affordable accommodation to over 700,000 people.

It is outrageous for a member of the government to publicly denigrate a body of people who are crucial to solving the housing situation. 

Lack of supply

Rental property is part of the solution to the supply of affordable accommodation, together with home ownership, and social housing provided by the local authorities and housing associations.

The current difficulty is the shortage of all accommodation.  The state has not built social housing in recent years and people who have a need and should be housed in this accommodation are being forced into the private rental sector.

The law of supply and demand sets rents.

If there are an adequate number of properties in the market, rent remains relatively stable.  When there was an oversupply of accommodation, rent decreased and the current undersupply of property inevitably means that rents have increased.

Source: Eamon Farrell/RollingNews.ie

Decreasing returns for investors

To increase the supply of property, we need investors who can make a sustainable return from investing in rental property.

The current unfair tax treatment has caused investors to pay tax in a loss making situation which is resulting in investors leaving the market, reducing the amount of accommodation available for rent.

Mortgage interest relief against rental income was reduced for the private rental sector from 100% to 75%. The effect of this was not only on investors going forward, but on investors already in the market whose investment was predicated on the basis that interest paid to the bank on a rental property was a legitimate business expense.

The response of government appeared to blame landlords for the housing crash and punitive measures were put in place to punish the sector, including refusing to accept legitimate expenses against rental income, the reduction in interest allowable, punitive penalties for the Non-Principal Private Residence Charge and the withdrawal of relief on borrowings for refurbishment work.

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40,000 (RTB Figures) landlords have left the sector since 2012 and more intend to leave.  For every two rental properties sold only one is coming back into the sector.

The cost for a landlord to provide private rental accommodation has increased by between 20% and 24%, mainly due to unfair costs imposed by the government as outlined above, but also including Local Property Tax , and unrealistic standards, particularly in regard to older stock which is not as easy to convert due to planning restrictions, for example, bedsits.

Landlords part of the solution

Long-term letting is a desirable goal for landlords, but the intervention of Government on a constant basis erodes the confidence in letting long-term.  Persistent intervention and changes in legislation make the finances of a long term letting insecure.

Every rental requires two parties; a landlord and a tenant.  If landlords are taxed out of the sector, tenants will become homeless.  Landlords are part of the solution.

The tax treatment of the sector needs to be reviewed as a matter of urgency to protect the existing supply of rental property and help keep people in homes.

Stephen Faughnan is the Chairman of the Irish Property Owners’ Association

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About the author:

Stephen Faughnan

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