Monday 26 September 2016

Rent certainty could offer families much-needed relief

Dr Rory McDonnell

Published 23/09/2015 | 02:30

Without greater certainty, the acute pressures facing many in private rental accommodation will continue. Without more supply, upward pressure on rents will continue.
Without greater certainty, the acute pressures facing many in private rental accommodation will continue. Without more supply, upward pressure on rents will continue.

One in every five Irish households lives in the private rental sector, where rents have been increasing significantly since 2012.

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The sector is under enormous pressure, with the impact being felt by individuals and families.

They live with the fear of rent increases and insecurity of tenure. For some this gives rise to homelessness. Indeed rent increases are now becoming a threat to Ireland's competitiveness and job creation.

The National Economic and Social Council (NESC) proposes action on two fronts: regulation to secure occupancy, and measures to stimulate new supply.

Without greater certainty, the acute pressures facing many in private rental accommodation will continue. Without more supply, upward pressure on rents will continue.

In a number of successful economies including Denmark, France, Germany, Belgium and Sweden, this reality is acknowledged. In these countries there are well-established and balanced forms of rental sector regulation.

In Ireland, NESC has identified strong support across business, community groups, housing bodies, agencies and trade unions for a similar approach

For secure occupancy NESC recommends a disciplined market-sensitive mechanism of rent adjustment to provide greater certainty for tenants and landlords, combined with longer tenancies and limits to the ability of landlords to end a tenancy when a property is sold.

The system proposed is not rent control or a rent freeze, but it allows rents to increase in a moderate fashion.

In Belgium, initial rents are not set, but the rent is adjusted each year in line with the cost of living. In Germany and parts of France, rents are allowed to increase in line with local reference rents, and in Germany this can be no greater than 20pc over three years. In Sweden, rents are related to the standard of the property.

An important advantage of such regulation is that it would make it easier for the State to use Rent Supplement and the Housing Assistance Payment to genuinely support low income tenants in the private sector.

The lack of rent certainty is putting both tenants and the government budget under continued pressure.

NESC also recommends reform of the tax treatment of landlords' rental income, low-cost loans and access to State land on favourable terms with loan guarantees for construction of rental accommodation to increase supply, all of which are common internationally.

The development of a rental sector which offers an attractive alternative in terms of security of occupancy and long-term affordability is urgently needed.

Without this, the pressures now being experienced by so many families and individuals will intensify.

Dr Rory McDonnell is a director of the National Economic and Social Council

Irish Independent

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