An Alternative Strategy For Affordable Homes

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From top: Housing Minister Simon Coveney; Dr Rory Hearne

A strategy for the rent sector proposed by Housing Minister Simon Coveney which includes rent restrictions in Dublin and Cork city s due to come into effect in the new year.

Rory Hearne writes:

The government’s Strategy for the Rental Sector, while containing the welcome provision of rental restrictions is ultimately flawed because it does not link rent increases to inflation, excludes areas outside Dublin and Cork (particularly the commuter counties), does not provide security of tenure, proposes the sale of public land ‘below market value’ (i.e. give away/privatising a valuable public resource) to global real estate funds to increase ‘supply’, and is based on the failed (and contradictory) market assumptions that increasing rents will lead to further supply and increased supply will lead to affordable rents/house prices.

Firstly, in relation to the Strategy for the Rental Sector, there is no evidence or research provided by the government or the Department of Housing as to how the 4% increase in rents is being justified.

For example, 4% per annum represents 8 times the increase in annual earnings for full-time employees in 2015. It has no justification from price inflation as the (Consumer price index) is running at -0.3%. Within the CPI there is a specific category, Furnishings, Household Equipment & Routine Household Maintenance, which you would think would be a reasonable indicator as to the main on-going cost for landlords. Inflation for that category is running at -4.3%.

Furthermore, the most recent PRTB rent index for Dublin showed in the last quarter that rental growth moderated significantly, and fell to 0.6% and the annual % change for Dublin houses was 3.3% in Quarter 3 of 2016. So the 4% level is above this ‘market’ level. This is why rent increases should be linked to inflation (the CPI) which is running at -0.3%.

Secondly, it excludes areas outside Dublin and Cork from the designated ‘pressure-zones’. But it indicates they could be included at some point next year. All areas across the country have seen significant increases in rents in recent years – so why are they being excluded?

For example rent in Wicklow increased by 9%, Meath 15%, and Kildare 12% last year. Landlords are very likely (as is already reportedly happening today in Dublin) to inform tenants of substantial rent rises immediately in anticipation of being designated a rent pressure zone in these areas across the country in the coming months. This is why the entire country has to be included in the rental restrictions.

Thirdly, the Strategy for the Rental Sector does not sufficiently address the other major aspect of the rental crisis – that is security of tenure. There is no change to the situation whereby landlords can evict tenants if they intend to sell the property or want it for ‘family ‘use’ and there is insufficient protection for tenants being evicted from buy-to-let properties in receivership being sold on to vulture funds.

Without proper tenant security the rental sector is not a secure form of tenancy whereby people can make a long term home as tenants are left living in constant fear and threat of eviction and homelessness.

The rental strategy proposal actually gives landlords a potential incentive for evicting existing tenants.

Properties that are ‘renovated’ or not let for ‘two years’ are exempt from the rental restrictions so a landlord could evict lower paying tenants, engage in renovations (or leave it idle for two years) and then get new tenants in and charge them much higher rents – which gives the landlord a bigger return over the long term.

The Rental Strategy in fact could worsen security of tenure and homelessness through its proposal for a “fast track process…to enable landlords to regain possession quickly where the non-payment of rent constitutes the grounds for termination.”

Finally, the strategy does not address the fundamental issue of the current unaffordability of rents.

Rents are already too high. So rather than facilitating a further increase in rents there needs to be a strategy to reduce rents. An affordable rent is around 20% of your disposable income. Yet tenants are paying 50% and more on their rent and as a result are going without basic necessities in order to cover their housing costs.

An alternative strategy for affordable homes: A ‘New Deal’ for housing

What is needed to provide affordable rental and homes for ownership is a Roosevelt-like ‘New Deal’ for housing. A massive state-led house building and renovation programme that provides 30,000 affordable homes per year.

It could be done through a new affordable housing state authority – like the ESB delivered electricity across Ireland –that would launch a new housing tenure – community affordable housing involving housing for a broad range of income groups from the lowest income to average and above average income workers.

It would use the huge existing land banks – including that of NAMA – to build mixed income affordable community homes for rent and ownership. Crucially though, the land and housing would always be held ‘in trust’ by the state and not sold on the market – owners could sell it back to the trust – housing wold thus be kept affordable.

Local authorities, housing associations and co-operative housing associations could do it directly or through arms-length trusts. It is cost-neutral as the state can borrow at very low interest rates and it would make a return from the range of rents and ownership models. It would also direct some of the 500 million going to private landlords back to the state.

It could purchase and bring it to use the 35,000 vacant homes in wider Dublin area, and the 27,042 buy-to -lets in arrears (and derelict sites and land being hoarded by vulture funds, NAMA and developers.

Rental Strategy privatises much-needed public land

This is what the public land of local authorities should be used for and not, as the Strategy for the Rental Sector outlines, to be sold to private developers and speculators providing ‘build-to-rent. The proposal to sell off local authority lands is the most serious mistake (and indeed tragedy) in the rental strategy and the government’s wider housing plan.

Page 15 of the strategy outlines that, in order to ““Kick-start supply in rent pressure zones” …”Lands held by local authorities in rent pressure zones will be brought to market on a competitive tendering basis, with a view to leveraging the value of the land to deliver the maximum number of units for rental targeting middle income private rental households”. 

This is a shameful use of public land – selling it cheaply for global vulture funds to provide ‘unaffordable’ housing. As the strategy notes through this land subsidy for private developers and financiers “the cost of providing rental units will be permanently reduced by lowering the initial investment and development costs for providers”.

Local authorities are being given immediate instruction, by end January 2017, to “identify a number of sites with the potential for up to 1,000 units of accommodation and will move forward, as soon as possible, to issue calls for proposals from parties interested in developing rental accommodation for middle income households”.  As the report notes “these developments are potentially a major engine of growth of supply for the rental sector by tapping new sources of finance from institutional investors such as pension funds and Real Estate Investment Trusts”.

The ironic thing is the private interests who will get below market land from the state will then not be subject to the 4% restriction rent caps as they will be providing new housing. This is the same approach being used in the land initiative for public land in social housing estates like O Devaney Gardens and St Michaels Estate.This is a new form of Public Private Partnership, but as in the previous housing PPPs, the value of the land will be appropriate in the main by the developers and financiers.

Political Choice and Public Attitudes-time of opportunity

So there is a clear political choice here. To focus, as the government is, on achieving ‘supply’ through global wealth investors, vulture landlords and speculative property finance- or the state to lead in a historic programme of providing affordable homes for rent and ownership. One approach will enshrine unaffordable rental and house prices into the future and associated poverty and financial stress for large sections of our population.

It will increase economic inequality as wealth is transferred from the lower income groups in Ireland (renters, young people, first time buyers) to the top 10% wealth holders (from Ireland and across the world). the other approach can deliver and guarantee the human right to housing for all our citizens.

It is a choice the government, and we as a country, have to make. But it is one where we already know the outcomes for each path.

Dr Rory Hearne is a policy analyst, academc, social justice campaigner. He writes here in a personal capacity. Follow Rory on Twitter: @roryhearne

Rental strategy insufficient for affordable homes (Rory Hearne, Progressive Economy)

Previously: Rory Hearne on Broadsheet.ie

39 thoughts on “An Alternative Strategy For Affordable Homes

  1. Brother Barnabas

    Nothing on thousands of prime apartments in city centre being used contrary to planning regulations as tourist apartments?

    1. ahjayzis

      Heard Coveney on radio about that this morning – I think he’s amended planning regs so they’ll have to apply for a change of use. Basically become a B&B, sounded positive to me.

  2. AlisonT

    The other problem with this policy is that the figures being used are not rent increases but asking rent increases. If they included rents people are paying who are staying put then the figure would be much lower.
    A huge portion of landlords did not put up rents in line with asking prices over the last couple of years. They are now being screwed by the government as they refused to screw their long term tenants. The people who front loaded rent increases and created these horror stories are still doing ok.

    1. Yeah, Ok

      This is a very good point. My landlord recently came round to increase our rent and did so by a very (surprisingly) reasonable amount. We’re paying WELL under “market” rate because we’ve been there quite a while. Our rent is probably around 40% below what they could be getting, even after the increase.
      We were bracing ourselves to get screwed but it didn’t happen, and we’re very grateful for that.

      If the market rate was linked to a database of current rates rather than new asking rents things would come down considerably.

        1. Yeah, Ok

          Rents can only be raised in line with market rate. Market rate is based on advertised asking rents on properties, which are invariably higher than what tenants in situ are paying.

          1. thecitizenatbarneys

            Market rate is not based on advertised rate, it is based on rent being paid for equivalent property. Subtle but very relevant difference.

  3. Junkface

    Also nothing on Banning US Vulture Funds from buying up Irish homes, or at least taxing them massively to stop their interest in the Irish housing market (following Vancouvers lead)

    Also Rents in Dublin and Cork are already WAY higher than they should be. The build quality in many Irish homes is sub standard compared to Europe. The BER certificates are not inpected at all in rental homes, and BER failures should have limitations on how high a rental price they can achieve. Irish tenants are living in some awful amount of cold, damp homes. We need inspections and regulations that are obeyed by dodgy Irish landlords! Why don’t they give accidental landlords a break on Taxes and increase taxes on multiple home owning landlords? Who the hell were FG consulting coming up with this toothless, stupid plan?!! IDIOTS!

    1. Kieran NYC

      “The build quality in many Irish homes is sub standard compared to Europe. The BER certificates are not inpected at all in rental homes, and BER failures should have limitations on how high a rental price they can achieve. Irish tenants are living in some awful amount of cold, damp homes. We need inspections and regulations that are obeyed by dodgy Irish landlords!”

      Agree with all of this

    2. paul g

      rents need to be higher in this country as landlords take on much greater risk , there are zero consequences for delinquent tenants in this country , zero !

      this is something you will never hear in the media , its all very well pointing to the likes of germany etc but deadbeat tenants are not allowed remain in situ in that country years after having stopped paying rent , the law is biased in favour of the tenant , beit the ( awful ) PRTB or the official courts themselves , its the same reason banks have to charge higher interest rates here on mortgages , you cannot repossess a home in this country so banks are effectively making unsecure loans on dwellings

      1. Junkface

        There are zero inspections of dodgy properties. Freezing in the winter. I know of loads of cases were landlords refused to give back tenants their security deposits. They were usually foreign workers who were broke too. They never even attempted to get it back, because they knew they were powerless.
        Don’t give me this “poor landlords have no protection” rubbish. Lanlords have all the power! They’re in Government for Christs sake!

        1. paul g

          have you any idea how long it takes to evict a tenant who either wont pay rent or is trashing the place ? , if they have enough brass neck , they can brazen it out for a year minimum , how is that in anyway reflective of a situation where ” landlords have all the power ”

          whatever that means in the first place ?

      2. Cian

        If you want to you can head over to the RTB website (formerly PRTB) and you can look through all the determinations made for the last 5 years and get a feel for whose ‘side’ the law is on and what some landlords and some tenants need to put up with.

        Hint: the laws are reasonably neutral and there are both dickish landlords and dickish tenants. The only pity is that we can’t put the dickish tenants into the dickish landlord’s properties.

        1. paul g

          the PRTB is incredibly biased in favour of tenants , the landlord is forced to do all the running , the PRTB,s reccomendations carry no real power and if a delinquent – overholding tenant decides to remain on , the landlord still have to pursue matters through the official courts , the PRTB is good for two things

          collecting fees for doing nothing from landlords and providing quasi legal immunity to delinquent tenants

  4. rotide

    aaaaarrrghhhhh, I can’t take it anymore.

    For a website obssesed with typos, I keep expecting someone to notice the byline at the bottom of every single one of Rory’s articles, but noone has.

  5. 15p

    ok we’re guna stop spiralling rent increases .. by only allowing small increases, regularily
    .. thats whats happeing right? am i misunderstanding it? why not freeze rent increases? its not like landlords
    are guna get shafted, we already know rent is highest ever, so just freeze it

    1. paul g

      why are changes always made on the landlords size , how about some balance , how about making is psosible to evict a delinquent tenant without loosing an entire years income from a property ?

      so much misinformation out there when it comes to the reality of letting property in this country , tenants in this country have incredible protection ( far more than in most european countries ) yet the received wisdom is exactly the opposite

      lack of supply is another matter entirely , i myself believe a use it or loose it approach should be apply to those who hoard land in busy urban areas , that or tax them hell out of them for leaving sites idle

      1. ahjayzis

        You’re being silly.

        Landlord A having a nightmare tenant so I, a good tenant, must pay a 30% increase to Landlord B – why?

        By that logic I should demand a 30% rent decrease because someone I met in a pub one night lived in a crap rental property, though mine is fine.

        Campaign for better landlord rights, but don’t dress crass profiteering up a some sort of insurance scheme. If you think renting properties is a business then that is a business risk, like any sale to any customer – some won’t pay. Choose wisely.

        1. paul g

          people like you want all responsibilities to rest with the landlord and none with the tenant

          the current level of posturing on this issue is purely political , its the easiest thing in the world to pander to an anti landlord sentiment , tenants have incredible protection in this country , as have those who chose not to pay their mortgages

          this has consequences , beit in terms of higher interest rates or higher rents , a landlord will charge higher rent as he eventually expects to run into a delinquent tenant who will not pay and will overhold for a year or two with immunity

          policy choices have consequences

          1. ahjayzis

            Overcharging me on the basis I *might* be a bastard isn’t placing a responsibility on my shoulders, it’s price gouging. Imagine a builder adding a 30% levy to your quote on the basis other customers have refused to pay – would you be happy? Would you do business with them? Try running a coffee shop on that basis.

            The incredible protection you suggest hasn’t protected them from doubling of rents and being flung out onto the street almost on a whim. Have you seen the standard of many rental properties in Ireland? They’re not even inspected. Irish landlords, as a group, have been overprotected and mollycoddled – you pretend you run a business yet undergo none of the quality control or regulation of a car wash or dog walking company.

            Look to other countries to see why the rest of your comment is laughably stupid, we’re not re-inventing the wheel here.

  6. Junkface

    Looks like the whole plan has fallen apart now because FF want it lowered to 2% per annum. Can Irish politicians actually do anything right? Really, useless shower of cants!

    Go back to the drawing board. Consult with qualified Economists and European Building planners, preferably Scandinavians or Germans. Do something useful for the tax payers money you plops. And BAN VULTURE FUNDS in Housing!!

  7. Truth in the News

    In the 1880’s the issue of Landlord’ism was confronted in relation to tenant rights, we need to deal with
    another form of property ownership, if we could expend 600 odd million installing water meters, there is
    no reason that we can not create a state authority to build houses and house those that have none.
    The reason that nothing is done is that vast windfalls can be made with whats called “property development”
    in particular on the eastern part of Ireland with the combined collusion of Speculators, Politicans, Auctioneers
    Legal Profession, Financial Organisations, Newspapers and trotting along behind in a revenue grab the
    The Revenue Commissioners
    The is also the need for the intervention of Co-operative housing with the setting up of entities to educate
    train and encourage people to do it for themselves, this would control labour costs too, the Government
    could exempt VAT and other Taxes to get it going.
    What could be done when the country hadn’t a bob, can be accomplished again, look at the Housing
    Programmes started in the 30’s by local authorities, all that is done now, is local authorities purchasing
    houses, which acts a floor to prop prices up, resting on this, is the doctrine to keep property continually
    rising , which will in turn prop up the Revenue, NAMA and Banks and fleece those who want a roof over
    their heads.

  8. ahjayzis

    The mask really slips when Coveney talks about how uncomfortable he is ‘interfering with the market’

    He says the 4% is about ‘balancing’ the rights of tenants not to be squeezed til they squeak, and landlord to make a profit – balance! Surely ‘balance’ would be to realise that the landlords have had it all their own way for about a thousand years and now it’s time to turn the tables even just for a bit?

    Everything they do is designed to keep housing as a commodity – “starter homes”, starter because obviously their value will only ever rise and you can move up the ladder – the exact same atttitude that destroyed our economy and ruined lives not even a decade ago.

    1. Junkface

      +1
      Great point! We need to look at housing as something people live in, make their home. Not an asset that can be rented out to higher and higher levels every year, it can only go up, up, UP!!! Wahoo WE’RE RICH!!!

      This is the Irish mentality that needs to change

      1. ahjayzis

        My cousin and his wife bought a crap 2-bed flat of a “starter home” in a crap, rough area during the boom. It’s still worth half what they paid. They now can’t have a second child – they’re trapped there. And this is what Coveney wants to return to.

        1. paul g

          i cant afford a second child despite owning my own home which is a five bed bungalow in rural ireland

          welcome to life , you spend what you can afford , its not the goverments job to ensure you can afford ten kids , only travellers have that luxury

          1. ahjayzis

            Lower your curmudgeon settings there, Paul babes, and try reading it again.

            If still no luck understanding it, good man for trying. Head out and throw stones at kids or something.

  9. thecitizenatbarneys

    “Properties that are ‘renovated’ or not let for ‘two years’ are exempt from the rental restrictions so a landlord could evict lower paying tenants, engage in renovations (or leave it idle for two years) and then get new tenants in and charge them much higher rents – which gives the landlord a bigger return over the long term.”

    The only thing this paragraph exposes is the author’s remoteness from reality. You were on here about 8 weeks ago and made it clear you had never read the legislation governing landlords and tenants. This time you have added any sense of commercial understanding to the list of CV absences.

    A two year void period, plus the cost of renovations, to up the rent 10%? Mortgage supplier would obviously agree to suspend payments during the period this masterplan takes place too?
    Did you get your economic knowledge from the Always Sunny in Philadelphia episode where the gang solved the gas crisis by hoarding jerry cans of petrol in the bar?

  10. paul g

    i see limerick has been added to the list , limerick is cheaper than any commuter belt town in meath , kildare or wicklow and at least 30% cheaper than galway , no way should it be lumped in

      1. paul g

        o dea gets most of his vote from moyross and southill so i doubt the private market changes will make much difference to either landlord or tenant in this regard

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