Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I thank Deputies Nash and Doherty for their contributions. I said in my budget speech that for every tenant there has to be a landlord. In recent years we have seen a decline in the number of small investors in the market owning one or two properties. Some 86% of landlords in the market own one or two properties and they have a vital role to play. This section inserts a new section 480C into the Taxes Consolidation Act 1997 to provide income tax relief to individual landlords of residential rental property. The relief will reduce the tax due on residential rental income by up to €600 in 2024, €800 in 2025 and €1,000 in 2026 and 2027. The relief is capped at the individual’s tax liability on rental income from residential property. It will be calculated at the standard 20% rate of tax and will not include a disregard for USC or PRSI purposes. To avail of it, the property must be rented or actively marketed for rent at the end of the year in respect of which the claim is made. Eligibility for relief is dependent on the landlord having tax clearance and complying with their local property tax, LPT, and RTB requirements. Where a property is owned by more than one individual, relief will be apportioned between owners based on the rents returned by each owner. The relief will be clawed back where, within four years of the start of the first year in which relief was claimed, any of the landlords’ residential properties are disposed of or otherwise removed from the rental market. Relief is not available where the property is let to connected parties such as relatives. The rental sector in Ireland is not dominated by large institutional investors. The majority of landlords in Ireland are private individuals, owning one or two rental properties, often with a view to providing an alternative to a pension income in retirement. The purpose of this amendment is to support the continued participation of small scale landlords in the rental market, an objective being progressed through Housing for All, the Government’s housing plan to 2030.

Everybody can agree that we are seeing a change in our rental market. We are seeing a significant reduction in the number of small scale landlords owning one or two properties. The most recent data we have from the RTB on notices of termination show that from quarter 3 of 2022 to quarter 3 of 2023, more than 24,000 notices of termination were received by the RTB. The number of such notices where the reason given was because a landlord was selling the property is 60%. In 60% of cases the landlord is selling the property and leaving the market. In 2017, the number of registered tenancies with the RTB was 313,000, falling in consecutive years. For 2022 the latest figure from the RTB, which now has a system of annual registration, was 246,000. That is a significant reduction over that period. The evidence is clear that small scale landlords are leaving the market. Deputies can offer different views as to why. A number of surveys have been done, some of which have cited different reasons, including taxation. A certain weighting has been attributed to that. It is important that a full clawback is set out in respect of this provision. The costs we have laid out for this measure represent the costs if every rental property currently available in the market remains in the market in four years' time. That is the basis on which the figures have been costed. It is also important not to point to the contributions of those who might directly benefit from this. The Society of Chartered Surveyors Ireland, SCSI, for example, did a residential property market report in their monitor. In January 2023, an SCSI report outlined that its agents believe 40% of sales instructions in quarter 4 of 2022 were from landlords selling investment properties. Eight out of ten SCSI agents believe buy-to-let second-hand rental units being sold now will not be replaced in the rental market in the next two years. Sherry Fitzgerald also conducted a review last year on the Irish residential market. It found that:

The exodus of landlords from the rental market continued unabated in the year, with just 13% of purchases made by investors. Comparatively, 36% of all sales were investors selling their properties, signalling a huge disparity between those entering and exiting the market.

Latest estimations by Sherry FitzGerald suggest that approximately 58,400 properties will have transacted in 2022. Applying the trends seen over the past number of years this suggests that approximately 21,000 of these sales will have been investors exiting the market. I have heard commentary in the recent debate, including tonight, about why this form of income should be treated differently to other forms of income. We have historically, for public policy reasons, made decisions about the treatment of different forms of income. We have rent a room relief. If any Deputy in this committee were renting out rooms in their home they would receive €14,000 tax free - free of income tax, USC and PRSI. That was a public policy decision. We have reliefs in the area of land leasing. I will later propose on Committee Stage to make an adjustment to that. However, it is a decision made on public policy grounds that a substantial amount of annual income would be completely exempt from tax. We have similar provisions around the provision of certain childcare services in the home, for example. Again, on public policy grounds, we have made decisions to provide for different treatment, from a taxation point of view, of that income. We undoubtedly have a problem in our private rental market. We are seeing the departure of a significant number of small scale landlords. I believe taxation is a factor in that regard. This proposal seeks to encourage investment, which is already in the market, to stay in the market. It will also try to address that dramatic imbalance we are currently seeing between the exodus from the market and the very low level of entry into the market, in respect of the provision of private rental accommodation. The very people the Deputies represent will need rental accommodation in many instances. We have to have a rental sector where there is a continued supply of private rental accommodation in the market. This measure can make a contribution towards achieving that goal.