Ms Mary Conway:

I thank the Chair and wish members a good afternoon. I thank the committee for the opportunity to speak to it about some of the challenges facing the rental sector. The IPOA is a national not-for-profit organisation representing landlords from single property owners to multiple property owners. We seek to protect and promote their interests and encourage the supply of good-quality accommodation and professional management through education and training.

The commission's report is alarming for many of our members and fails to recommend any measures that might assist in retaining stock in the sector. It speaks about broadening the tax base but ultimately seeks to place further taxes on the same easy targets.

The exodus of private landlords from the market is well documented. Landlords are leaving the market in their thousands and the rate is increasing significantly each year, to the extent that much of the new supply coming on stream is merely replacing lost stock to little net gain. While the reasons for the exit of landlords from the market are obvious to most people, there has been a very notable unwillingness from Government and Opposition to do anything to address the matter. Given the relatively simple solutions that are required, one can only deduce that populism, which is now so prevalent in public discourse, is preventing correct and sensible decisions from being taken about the rental sector. One might ask to what end. Those the Government and Opposition parties proclaim to protect are losing out through a reduction in the supply of rental accommodation, while property owners lose out through an inequitable taxation code and regulation that sees their rights compromised and makes the simple business of renting a property unworkable.

The tax code is an obvious way of alleviating the pressure on property owners with a view to achieving a key Government priority such as maintaining the availability of rental stock. Many of the proposals contained in the commission's report, especially insofar as capital taxes are concerned, will serve as a serious disincentive to investment in property. Interestingly, the commission disagrees with tax incentives as part of housing policy but fails to condemn the 0% tax regime enjoyed by institutional investors. The disparity in treatment of institutional funds versus their private counterparts is indefensible. The State cannot afford to allow funds with annual rental profits of hundreds of millions of euro to operate on a tax-free basis while their smaller private counterparts pay tax at 53%. There is no other sector of the economy that operates a discriminatory dual taxation regime. An urgent rebalancing of the tax code is required to ensure fairness and allow private property owners to remain in business and continue to supply their much-needed stock, which is worth no less to the sector than that provided by the private equity players.

Our budget submission provided solutions as to how these imbalances can be addressed on a cost-neutral basis for the Exchequer. IPAV and the IPOA worked together with the economist Jim Power to provide some information for our proposal. We felt that a new 25% tax rate on residential rental income, inclusive of USC and PRSI, should be introduced for residential rental profit to encourage small private landlords to remain in the market and to support new investment. We proposed that this be funded through the introduction of a tax rate of 25% for all investment funds operating in the residential rental market. This would bring some much-needed equilibrium to the treatment of landlords. It is entirely inequitable that two different investors that provide an identical product and service can have such a disparity in tax treatment. The private investor is taxed at a marginal rate of up to 53% with capital gains tax, CGT, at 33% while the private equity funds pay 0% tax on rental profit once they exit the market within a defined period. IPAV and the IPOA proposed the introduction of roll-over relief on CGT on the sale of all assets where the proceeds are reinvested in residential property within 12 months to encourage existing and new investors to reinvest in the market. We also called for a reduction in capital acquisitions tax, CAT, on the inheritance of residential investment properties. Families are forced to pay large CAT bills on the inheritance of residential property and this forces the sale of the property. A reduction in the tax charge by reducing the taxable value by 90%, as applies to the inheritance of agricultural property and business assets, should be introduced. This will encourage current property owners to pass assets to the next generation, allow the next generation to remain in the market and encourage other individuals to invest in the market.

The recommendations of the commission’s report are worrying from our organisation’s perspective. The commission seeks to identify where additional tax can be generated and it has concluded that capital taxes is one of the tax heads that provides an opportunity in that context. However, the Power report and the IPOA-IPAV survey have clarified beyond doubt that taxation is a key factor in the exodus of private landlords from the system. If Government accepts the recommendations of the commission, the tax cost of investing in residential property will increase dramatically and this will only add to the existing problem. Therefore, if these recommendations are to be accepted, significant breaks must be encouraged for owners of private rental residential property to recognise the very significant role they play in the provision of housing, and to ensure they are retained.

The Government and the Opposition alike must recognise that private landlords represent 90% of the existing rental stock. Allowing these people to leave the market, or accepting that, is not an option. The Government must take bold measures that will incentivise private landlords to remain in the market and the Opposition must refrain from damaging, populist arguments that are not in the national interest. The solutions required to address the problem are relatively straightforward and, with political will, can be implemented in a timely and equitable manner. We look forward to engaging with members over the course of this debate and beyond.