Saturday 18 November 2017

Minister was told to avoid new rent caps

Warning: Simon Coveney Photo: Doug O'Connor
Warning: Simon Coveney Photo: Doug O'Connor
Wayne O'Connor

Wayne O'Connor

The Government has been accused of introducing contradictory policies that will fail to address the housing crisis.

In letters to Housing Minister Simon Coveney, two of the country's biggest residential landlords warned him off introducing rent caps, saying more consideration needed to be given to increasing availability in the private rental sector.

IRES Reit and Kennedy Wilson said rent controls, introduced by the minister last month, which are due to be expanded, will not work.

They urged Mr Coveney to focus on lowering construction costs and encouraging the development of new apartment rental schemes.

Both companies were critical of proposals to introduce rent controls, citing international examples of why they did not work.

Mr Coveney introduced a new rental strategy last month designating areas in Dublin and Cork as rent pressure zones. Landlords can increase rent by only 4pc a year for the next three years in these designated areas.

However, the minister has since faced a clamour for other parts of the country to be included. Now, the scheme will be extended to include a further 20 towns in the coming weeks. Most of the new towns are in Galway, Cork and along Dublin's commuter belt.

Documents released under the Freedom of Information Act show the minister was lobbied by IRES Reit and Kennedy Wilson to row back on introducing the scheme before Christmas.

Both said reducing the cost of building homes would be more productive, something builders have long lobbied for.

"The cost to build apartments for rent in Ireland is too high relative to current rents," says a document sent to the minister by Kennedy Wilson.

"Rent controls don't work as they will dis-incentivise private rental sector companies from building new products and maintaining existing portfolios.

"Government should resist the temptation, even temporarily, to introduce rent controls such as capping or indexing. There is strong evidence that it limits the quantity of new units and quality existing units."

The company also cited research comparing the cost of building in Dublin to construction costs in Manchester. It found Dublin prices were 20pc higher.

Local authority levies paid by builders are lower in the UK where residential construction also incurs no VAT.

"New supply will not be delivered in any meaningful numbers unless Government tackle the Government-generated costs associated with building new apartment rental schemes.

"At the moment we have high design standards, high building regulatory costs, high council levies and high VAT.

"These contradictory policies must be addressed."

IRES Reit claimed the Residential Tenancy Board (RTB) needed further resources to adequately handle complaints and enforce orders on tenants and was critical of rent control measures.

"It would be self-defeating for the Government to announce any form of rent control until further supply is created. It is critical not to drive the needed capital away.

"Rental increases will begin to slow and continue that trend because of affordability in a natural free market way."

Sunday Independent

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