A Drafting Error?

From top: Sinn Féin TD Eoin O’Broin; From the Planning and Development (Housing) and Residential Tenancies Bill 2016

Last night.

In the Dáil.

TDs discussed the Planning and Development (Housing) and Residential Tenancies Bill 2016.

You may recall how Minister for Housing Simon Coveney launched his Strategy for the Rental Sector earlier this week, as part of the bill.

The strategy includes designating Dublin and Cork as ‘rent pressure zones’ and capping annual rent increases in these areas at 4 per cent per annum for three years until 2019.

However during the debate in the Dáil last night, Sinn Féin TD Eoin Ó Broin told the Dáil he believed the Government had drafted legislation that would result in an 8 per cent increase for renters in in their first year, as opposed to 4 per cent.

After explaining his concerns, Mr Ó Broin said:

“If it is, we have a serious problem because the Minister is asking us to vote on something here today which will actually lead to double the rate of increase than what the Minister has said. Perhaps it is by design. It is important that the Minister clarifies that point.”

Minister for Housing Simon Coveney requested an amendment to his amendment on the bill after Mr Ó Broin pointed out the error.

The debate on the Bill will continue this morning from 11.30am.

From last night’s debate…

Eoin Ó Broin: “This group of amendments relates to the Government’s strategy for the rental sector launched this week. As we have no other formal opportunity to discuss the strategy, I want to open my comments on these amendments by making some observations on it.”

“Given the fact we were led to believe this was going to be a comprehensive strategy for the fundamental reform of the private rental sector over the next several decades, it is deeply disappointing. There are 26 measures listed in the document, ten of which were previously announced by the Minister. For some of them, it was the fifth time they were announced. Of the other 16 measures announced, the majority of them will not come into effect until the last quarter of next year or they were so ambiguous in the document that it is not clear whether they will have a positive or beneficial effect on the reform of the private rental sector. This is not a long-term strategy.”

“It does little in dealing with real security of tenure or the urgent need to reduce evictions. As far as I can see from the limited amount of detailed information in it, it does little to address the dysfunctional underpinnings of the rental sector. In fact, it seems to be based on the same failed policies of the previous review and strategy for the rental sector going back to before the creation of the Private Residential Tenancies Board and the introduction of the Residential Tenancies Act.”

“While we all have been trying to facilitate the Minister in bringing forward measures to tackle the housing and homelessness crisis and taking him at his word, there is part of me that wonders if it was not a mistake to launch the strategy, as important as it is, in the last week of this Dáil term and to table such substantive amendments when we would not have detailed committee scrutiny but only a few hours in the Chamber. When the Minister spoke on Committee Stage when he gave us first sight of some of the amendments, he said the strategy was being broadly welcomed. When the Minister read the following morning’s newspapers, I am sure he took a different view.”

“Donal McManus, the head of the Irish Council for Social Housing, not somebody known for vocal criticism of the Government’s policy given the membership he represents, wrote in The Irish Times the most devastating critique of the measures contained in these amendments and the overall strategy.”

“His key point was that this strategy and the measures we are debating today were a missed opportunity, in some senses will make matters worse, and will not deal with the kind of issues many of us who went to the stakeholder consultation meeting that the Minister organised hoped it would.”

“Donal McManus is not the only one. The Minister indicated the non-governmental organisations, NGOs, thought the strategy was good. Most of the NGOs said that while it may be a step in the right direction, it has fundamental flaws. Some of the homeless charities have expressed deep concern at the gaps and absences, especially in the rent so-called predictability measure and its potential impact to lead to greater levels of homelessness.

“On the rent predictability issue itself, the only one thing predictable about this measure is that people will face consecutive years of rent increases, both in the rent pressure zones and outside. We had a debate in this Chamber over recent days about whether Fine Gael believes in intervening in the housing market.”

“Of course it does. Like Fianna Fáil, Fine Gael has a long history of direct intervention in the housing market, whether through the use of tax incentives, incentivising private home ownership, incentivising investment in various types of property activity or even, for example, in rent supplements such as RAS and HAP.”

“There is no ideological objection or obstacle to Fianna Fáil and Fine Gael intervening in this market. The issue is who does it intervene for, in whose interests and for what outcome? That is really the nub of the difficulty many of us have with this measure. The Minister also repeated on a number of occasions at the press launch, which I attended, that this measure is a major intervention in the market but, in fact, it is not. Rent supplement is a much more substantial intervention in terms of a price setting mechanism in the private rental sector and is far more significant than this measure.”

“In his comments today and previously, the Minister keeps talking about balance, saying that whatever this Government does, it has to balance the interest of investors and the need to maintain and increase the stock of private rental properties with the needs and interest of tenants. The difficulty is the market, as it currently stands, is so skewed against the tenant that when the Minister talks about balance, what he is really doing is continuing to tip the scales against those who most need this Government’s help at this point in time.”

“I will talk about the details of the proposals, particularly in Government amendments Nos. 55 and 68. I put this question to the Minister the other day. A number of other commentators, some of whom think this is a good measure and others who do not, have asked this same question. I would like to get an answer at some point this evening.”

“When the Minister, Deputy Coveney, was asked at the press launch what was the basis for the figure of 4%, he said repeatedly that it was about the yield or return on the investment of the investor he is hoping to attract to provide greater levels of private rental accommodation.”

“When the particular question of where the 4% came from, he talked about the benchmark investment yield of 4% that the strategic investment fund operates. The difficulty is that this is not what is in this amendment. What is in the amendment is an annual rent increase of 4%, which over three years would probably add another one percentage point yield to the 6% or 7% yields that investors can currently get at market prices and market rents. I do not understand.”

“Perhaps I do not read these things properly or perhaps I am not smart enough but at some point the Minister should explain to us the interaction between the investment yield and the rental increases in a specific way, not in the very ambiguous and contradictory way he did on an RTE radio over the past day or two.”

“The Minister is right that the 12.5% would be the impact over three years for those worst affected by these measures. Nobody in our party has claimed everybody in the private rental sector will be hit by 12.5%. Even if it is only 10% of the 300,000 tenancies, it is bad for those people and therefore it is wrong. It is wrong even if it is 20%.”

“Perhaps the Minister has figures in terms of how many rental tenancies are up for review next year, the year after and the year after that. If he has that information, he should share it with us so at least we know how many people would be affected. For those worst affected by these measures, it will be 12.5% in the affected areas.”

“A number of people made a point which I will repeat. The families we are talking about do not have the money the Minister is now giving landlords free rein to charge them. The total cost for an average family in Dublin over the three years, if they are hit with the full 12.5%, is €4,500. That is the total cost of increased rent over three years. Where will they get it? There will not be wage inflation of that amount. There will not be reductions in the cost of living of that amount. There will not be tax cuts for low or middle income workers to that amount. Where will they get the €4,500? For people in Cork, the figure is about €3,200. That is based on current average rents in the affected areas according to the RTB.”

“One of the points that has not been debated enough today is with regard to the other areas. The Minister said he wants a rational and evidence-based way of determining whether other areas outside the four local authority areas in Dublin and Cork city are included. The national rental average is one of his benchmarks. There is nothing rational about that. The national rent averages are simply too high. We have had three or four years of dramatic rent inflation. If the starting point for including other areas is the national average of the rental index, that is simply too high.”

“I agree with previous Deputies who said one of the consequences of setting that bar so high is that many areas where people are struggling with rent increases will not be included after they are assessed by the RTA and therefore will not benefit from this. That includes many of the areas that Fianna Fáil has made such a huff and puff about over the past number of days. Equally, 7% rent inflation in four of the last six quarters sets the bar so high that areas that fall slightly short of that but which should be included in any rent relief measure will not get any benefit.”

“I listened to the Minister very carefully and perhaps I misunderstood his comment at the end of his initial intervention. He seemed to suggest that the reason these other areas could not be included now is that we do not have quarter four data from the RTB rent index and therefore we have to wait for that data to process it and assess it over the last six quarters.

Simon Coveney: “We are also moving to local electoral areas…”

Acting Chairman Eugene Murphy: “Okay. That is…”

Ó Broin: “No, I am interested to hear the Minister.”

Coveney: “…which is the key change.”

Murphy: “Deputy Ó Broin without interruption.”

Ó Broin: “I am quite happy to have the additional information.”

Coveney: “I will come back to it.”

Ó Broin: “Anybody who uses the quarterly RTB index knows it has sub local authority areas. That information is already available up to quarter three. There is no reason that those areas could not be included now on the basis of those sub local authority areas. I also suspect, and the Minister can correct me later if I am wrong, that the RTB has the raw data and all it would require is a sufficient number of staff over a short period of time to provide it. I would be very surprised but I will stand corrected if that is not the case. Even with the sub local authority data that they have published, it would have been a better basis than the one that has been provided. There is no guarantee, and I say this with the greatest of respect to the Deputies from Fianna Fáil, that any of the other areas outside the four Dublin local authorities and Cork city are guaranteed access to this, in my view, poorly designed measure depending on those assessments.”

“I want to raise a technical question, and I do so in all sincerity. I am not a mathematician and I always find mathematical equations difficult to understand.”

“The end of the equation the Government has included in amendment No. 55 refers to “t/12”, where “t” is the number of months between when the rent was originally set and when the new rent is set under these measures. In the first year of these three years, “t” would be 24 because it would be two years from the period the last rent was set to the end of the two-year review. If my calculations are right, and again I could be wrong, what that actually means is that in the first year when this equation is used as the basis of the rent review, it would be an 8% increase, not a 4% increase. That could be a drafting error.

“If it is, we have a serious problem because the Minister is asking us to vote on something here today which will actually lead to double the rate of increase than what the Minister has said. Perhaps it is by design. It is important that the Minister clarifies that point.”

“In terms of Sinn Féin’s two amendments, amendment No. 1 to amendment No. 55 and amendment No. 11 to amendment No. 68, I will not rehearse the argument we have had here repeatedly. The first is to link rent reviews to the consumer price index [CPI]. Deputy Jan O’Sullivan has a very helpful amendment to my amendment to amendment No. 55. While I do not expect that Fianna Fáil and Fine Gael will support it, I am ever the optimist, so I am more than happy to accept Deputy O’Sullivan’s amendment to mine. I have tried to provide a better proposition in terms of including areas, not just other major urban areas, but also local electoral areas, to ensure they benefit.”

Transcript via Oireachtas.ie

Pic: Gavan Reilly

Previously: An Alternative Strategy For Affordable Homes

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