John Curran (Dublin Mid West, Fianna Fail)
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I ask colleagues to switch their mobile phones off or to flight mode. By virtue of section 17(2)(l) of the Defamation Act 2008, witnesses are protected by absolute privilege in respect of their evidence to this committee. However, if they are directed by the committee to cease giving evidence in relation to a particular matter and they continue to do so they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. The opening statements submitted to the committee will be published on the committee's website after the meeting. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.

I welcome the Irish Property Owners Association, IPOA, represented by Mr. Stephen Faughnan, Mr. Tom O'Brien, Mr. Cathal Lawlor and Ms Margaret McCormick. Their full submission has been circulated to members and will be published on the committee's website afterwards.

I invite Mr. Faughnan to make his opening statement and I will then open the meeting to colleagues for questions.

Mr. Stephen Faughnan:

I thank the committee for the opportunity to make the presentation and wish it well in the difficult task it has been given in a time of turmoil in the housing sector and in regard to homelessness.

The Irish Property Owners Association, IPOA, is the representative body for landlords in the private rented sector. We will give our help to, and co-operate with, the work of the committee. Our written submission outlines our views on the need for change to take place, with the help of the Government and with the co-operation of local authorities and landlords on the ground. It is high time the State extended the hand of friendship to the providers of private rented accommodation. The Government must not forget the importance of maximising home ownership. When a house is purchased, there is a mortgage on it for a period, and when it is paid off, the owner has a roof over his or her head. When people are tenants, they rent all their lives and they may have a dependence on the State in times to come.

I am joined by my colleagues from the IPOA national committee, Tom O'Brien and Cathal Lawlor, and our information officer, Margaret McCormick. The IPOA was formed in 1993 as a non-profit organisation limited by guarantee and it has been at the coalface of legislation, compliance and so on for years. For example, we sat on the private residential tenancies commission in 1999 and participated in its report of 2000, we were on the ad hocboard of the Private Residential Tenancies Board, now the Residential Tenancies Board, and we have served on various elements of the Residential Tenancies Board. We are committed to standards of accommodation and have made submissions to most of the reports published in the sector, as well as educating our members on legislation, compliance, banking difficulties, of which there are many, and disputes.

Landlords are not the most popular sector of society but they are a vital part of the solution and yet they are constantly being levied with legislation compliance far beyond what is necessary, all to the detriment of the supply and cost of rented accommodation. It is notable that we house 700,000 people in quality rented accommodation and while there are some exceptions, the majority of this accommodation is affordable, or has been affordable.

I will give a summary of our recommendations. We require the urgent revision of Central Bank lending rules, which would make the position more accessible for investors coming back into the market or extending their remit in the sector. We recommend real action on excessively high mortgage interest rates, given landlords are paying 4% to 4.5% on mortgages while institutions are borrowing the money at 1% or less. We need action to close that gap in order to give landlords a more realistic return on their investments. We need mortgage interest relief to be restored to 100%, given ours is the only sector in Irish society that has seen reduction in the rate of relief, which is in comparison to the commercial sector and all others, who receive 100% relief. We need that restored because it is not fair that we should be paying tax on a loss, which is the case in many current circumstances. In addition, legitimate expenses need to be allowed fully. Overall, it is a necessity that the law is amended to reflect the fact the buy-to-let sector is a business. We have been looking for this change for a long time and it has not come forward, so it is high time this is addressed.

Consideration should be given to the reintroduction of targeted capital allowance schemes for investment in appropriate, quality housing in areas of high demand. An example of a targeted area in the constituency of some of the Deputies present is the North Circular Road from Hanlon's Corner, as it is known, to Phoenix Park. This is an area with a high density of converted properties of good quality houses and yet 11 of these houses, which could accommodate some 200 people, are boarded up. We want to progress this in conjunction with the local authority, as we have discussed with previous Ministers, but it needs to activated to proceed. The rest of the North Circular Road is less hit in this sense, but it is hit nonetheless, and there are many properties which are not boarded up but which are out of use. A targeted capital allowance scheme in this type of area, not only in Dublin but throughout the country, would be a very important element of our requirement.

We need to reduce and simplify existing legislation in the sector, given that such legislation was brought in on a whim in many cases. Rather than legislating property owners out of business, we need to legislate for them to be in business and to satisfy the demand among tenants for affordable and comfortable accommodation.

Bedsits should be allowed. According to current standards and legislation concerning rented accommodation, bedsits, which are one-bedroom units that do not have bathroom facilities within the unit, are no longer fit for occupation. We demand that this be reversed, certainly for the moment but also for the foreseeable future. Many of the houses on the North Circular Road are closed down because of these regulations. We need to get those back on board, get people housed and get the properties filled and working.

The HAP and rent supplement schemes need to be reviewed. Rent supplement has traditionally been paid directly to the tenant - the person who qualifies for the supplement - with the idea that he or she then pays it to the landlord. This arrangement has fallen through in quite a lot of situations, so we have been constantly demanding that these payments be made directly to the landlord's bank account because if rent is not paid, it causes a great deal of bother and disputes with the RTB. If it is paid directly to the landlord, an awful lot of difficulties in the sector can be overcome.

Income tax exemptions should be granted for long-term letting. We mention in our submission that we have leases in place to deal with long-term renting. When I speak of long-term renting, I refer to multiples of four: four, eight, 12 or 16 years, or beyond, in either furnished or unfurnished accommodation. If the property is unfurnished, tenants will have a 20% to 25% reduction in their rent. They can furnish the property as they like, the same as if they were renting a local authority house, which does not come furnished. We feel that this is a vital appeal. We raised this with Ministers, Deputies and so on, but to no avail. It is a concept that needs to be considered and one in respect of which we would be very supportive.

Regarding the abolition of the proposed deposit protection scheme, work is being carried out at the moment by the RTB on that scheme. We have always argued that there is no need for such a scheme because we currently have, I believe, 324,000 units of accommodation registered with the RTB. Difficulties have arisen in less than 1% of cases administered through the scheme, and that figure has been reducing significantly in the last two years or so. The reason for the reduction is probably the education, training and information given to our landlords, who are getting abreast of this whole situation, so we feel that the deposit protection scheme in its current form should be stopped immediately. We proposed simple alternatives at various committees previously. One alternative would be to have a designated bank account for landlords in which all deposits are lodged. A similar provision is in place for solicitors, accountants, auctioneers, insurance brokers, etc. This would be a simple process once it is governed by the RTB. Another alternative would be to increase the fee for registering with the RTB from €90 to €95, which would create a capital sum for payouts in cases where people are not satisfied and in the context of getting one's money back from the offender, be it a landlord or a tenant. This would bring in €500,000 per year because there are approximately 100,000 or 103,000 registrations per year. That €500,000 would be an ideal way to deal with the matter, rather than the current amount of bureaucracy which has introduced something that is not necessary for tenant or landlord. The problem with the scheme, if and when it is brought in, is that if tenants decide to leave, they will not get their deposits back for months or longer because they will have to apply in conjunction with the owners of their properties for the release of the funds from the board. Tenants want their money back the day they are finished, and they are entitled to it. It is their money. A current account especially for deposits would be a simple way of administering this.

Funding should be put in place by the local authorities for any refurbishment work to be done or we should be allowed to borrow money from credit unions or the like at a very low interest rate.

I could go on about these matters for quite a while but I will leave it to the Chairman and the committee to ask any questions they feel might be relevant to the situation.

John Curran (Dublin Mid West, Fianna Fail)
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I thank Mr. Faughnan. I will take questions from members in a moment.

I want to pick up on a point Mr. Faughnan made, and when he answers the other questions he might refer to this in more detail. He mentioned there are 11 vacant multiple unit properties between Hanlon's Corner and Croke Park on the North Circular Road. Does he have more information as to why they are vacant? We are not talking about sub-standard accommodation, but a change was made in the regulations on bedsits and the committee has probed this with the Department of Social Protection and the RTB. We would like to get to grips with this matter. Have these regulations resulted in properties being taken out of rental accommodation? I do not condone or support inferior accommodation, but to balance this, we are also looking at children sleeping on mattresses or airbeds in grossly inappropriate accommodation, as Deputy O'Dowd stated. Given this, it is somewhat concerning that we are being told there are 11 vacant properties on the North Circular Road. Mr. Faughnan can address this with some of the other questions.

Bernard Durkan (Kildare North, Fine Gael)
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Yesterday, it was reported that 250,000 vacant properties are available throughout the country. To what extent do they represent sales in transit? To what extent do they represent properties which are being refurbished following tenancies or awaiting new tenancies? Is there another reason such a large number of properties throughout the country are vacant? Is the figure just being tossed out as an indicator we do not really have a housing crisis because 250,000 properties are available for tenancies?

With regard to the 4.5% interest rate which must be paid for capital costs for purchasing, how does a first-time house buyer compete with the witnesses in the market? Does a first-time house buyer have any chance, or is he or she priced out of the market? Are there instances where a first-time house buyer and the Irish Property Owners Association compete in the same market at the same time in the same place? If so, what happens?

I hate to repeat myself-----

John Curran (Dublin Mid West, Fianna Fail)
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But you will do so anyway.

Bernard Durkan (Kildare North, Fine Gael)
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The witnesses might see themselves as part of the solution, and the jury is still out on this. I do not see the rental market as part of the solution. In fact, I see it as being part of the problem. I do not blame the Irish Property Owners Association; it is because in lieu of what was previously a reliable system of local authority housing the private rental system was purported to be the future answer, along with the privatisation of the sector. It has not worked. I predicted it would not work at the time. I will not go into the details of it now, but the problem remains. Do the witnesses accept there is now an urgent need for local authorities to become directly involved in the provision of local authority housing through direct building and local authority loans, which were the bedrock of what the first-time house buyer relied on in the past? Public officials such as nurses, gardaí and teachers went there for their loans and many people stayed in the same house for their lifetime or for quite a long time.

There is a difference between responsible and irresponsible landlords. There is a difference between people who are in the market to make a quick buck and those in the market to provide an ongoing long-term service, and I take this point. How do the witnesses respond to situations in which rent increases well in excess of inflation are demanded by some landlords on a fairly regular basis? To what extent do they take advantage of the fact one is only allowed one rent increase every two years? A rent increase in this situation could well be 100%. I have dealt with such situations as, I am sure, has everybody else here. How do the witnesses deal with this? It certainly is not a PR effort which would be of any benefit to the Irish Property Owners Association.

The same would apply in respect of a deposit refund. The responsible property owner is willing to do the right thing. How many situations are the witnesses aware of in which the tenant is not refunded the deposit? The only way the tenant has of getting the deposit is by staying in the property illegally for an extra month to work off the value of the rent.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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I wish to ask, first, about accommodation standards; second, about the "populist left wing agendas" that the delegation highlighted; third, about the number of landlords; and, fourth, about taxes on profits. I will start with the great standards that the IPOA believes its members are maintaining in the private rental sector. Last year, Threshold received 1,836 queries relating to substandard accommodation and raised issues about a lack of adherence to fire safety regulations. Do these relate to the IPOA's members or have the witnesses proof to the contrary? The witnesses are telling us that the IPOA's members join to become familiar with the regulations.

According to the third page of the delegation's submission, the IPOA wants the Government "to ignore populist left wing agendas". Does this mean that it follows an elitist right-wing agenda? The two contrast. The delegation was being political.

The IPOA believes that landlords are a vital part of the solution to the housing crisis. Based on the facts, however, there is an oversized number of landlords. That number is increasing, it is not, as we hear from the IPOA on the radio every day, decreasing. The RTB appeared before the committee a few days ago. Between the first quarter of 2015 and the first quarter of 2016, there was an increase of 15,904 landlords registering properties with them. Only two things can be happening. How does the IPOA explain the discrepancy in the number of landlords who it asserts are exiting because they cannot make a living in the private rental sector and these figures? Either the IPOA's members did not bother to register with the RTB before suddenly doing so or there has been an increase in the number of landlords. We must say that it is the latter. According to the RTB, the number of landlords is between 180,000 and 190,000. That is 4% of the total population and 5% of the adult population. In the Dáil, the figure is much higher. Between 20% and 25% of Deputies are landlords. The IPOA is actually well represented in the Dáil, given these figures. The most recent figure was approximately 20% and probably includes members of this committee, although I do not know which.

Fergus O'Dowd (Louth, Fine Gael)
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I have nothing.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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The IPOA is represented in the Dáil at a level five times greater than is the case with the population. In the UK, the number of landlords - 2% of the population - is approximately half that which obtains here. We are expected to believe that it is dreadful if the number of private landlords in Ireland does not increase, but the opposite is the case and we have too many private landlords. Most got sucked in during the boom when they were told that their only way of making money was by investing in property. We now know that many people bought an apartment or a house or two for their old age or in order to profit from others.

The delegation mentioned the Central Bank's rules ruling out private investors. What is so bad about that? People privately investing or speculating on a place to live is horrible and has led to many of our problems. There is nothing good about it. I do not know how anyone could argue that there is anything good about people getting into property as an investment.

The IPOA is seeking the introduction of a raft of tax breaks for landlords to stop them exiting this totally unprofitable sector. On the statement that costs have increased by 24%, can the witnesses provide a breakdown in that regard? Leaving aside the property tax, which every property owner must pay, whether he or she owns one or ten properties, what other costs have increased the costs of IPOA members by one-quarter?

In regard to the reintroduction of the capital allowance scheme, surveys in Britain and Ireland of property related tax breaks indicate that they primarily benefit high earners and wealthy people who use them to reduce their tax liabilities and that that is their only affect. An Indecon survey carried out here in 2006 also reached that conclusion. I would welcome a response from the witnesses to those questions in light of what we are hearing from the IPOA every day on radio about what needs to be done.

The issue of bedsits, which was raised by the Chairman, was raised earlier this morning with Threshold. The figures indicate not that there is less private rental property available but that there is actually more private rental property available than heretofore.

John Curran (Dublin Mid West, Fianna Fail)
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I will also allow questions from Deputy Fergus O'Dowd at this point.

Fergus O'Dowd (Louth, Fine Gael)
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I apologise for being late. I also want to assure my colleague that I am not and never have been a landlord and nor has any member of my family ever been a landlord.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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The Deputy did not have to assure us of that.

Fergus O'Dowd (Louth, Fine Gael)
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To be honest, I have never been a fan of landlords and nor have they been a fan of mine. I stand up for people who are in conflict and are experiencing difficulty in their lives because they have money or jobs. For the record, I have been in public life for 42 years and have been dealing with tenants for that length of time. During the past 12 months, there has been a significant increase in the number of tenants coming to my constituency office who have been told by their landlord that they have to leave a property because it is being sold. To me, that is unusual. It is a pattern that did not exist heretofore. There are many people who because of this practice are ending up on the streets, some of whom are sleeping in cars or in relatively well protected from the weather areas. I accept that in this context we are speaking about a relatively small number of landlords and that the vast majority of landlords are decent and not of that calibre.

Would the IPOA agree to a change in the law to the effect that where a two-year tenancy agreement exists and a property is to be sold that tenancy should be sacrosanct? In other words, linked to any proposal to sell a property would be an agreement that a tenancy would continue. This would at least provide continuity for families for at least two years, provided they pay their rent and conform to all regulations. Would that not make sense for the landlord and the tenant? The problem that arises is that many of these people, because they have very little money, cannot afford to rent anywhere else. They have very little going for them other than their sheer humanity.

Reference was made to children being inappropriately accommodated on air beds in hotels and hostels, possibly in danger. That is wrong. However, that is a matter for Tusla. Would the IPOA agree that the way forward is to secure tenancies such that when a property is being sold a tenancy may continue?

For many years town centres were populated over shops and so on. That type of accommodation no longer exists and for a number of reasons. There are no longer people in our town centres at night. Years ago, they were populated by families.

The Government is proposing to advance a new scheme to populate those areas again. Provided it is possible to meet the fire and building regulations in so far as possible, given the age of some of the properties, would the witness agree that we should be able to devise a scheme to encourage him as a landlord to develop those properties? The development would have to be within the physical shape of the building. In other words, one is not dividing an existing room. The rooms are whatever size they are because the building was built in 1860 or whenever but they might accommodate single people or childless couples. If it was to the witness's advantage to do that and get tenants into the building, it would be an advantage to the State that people would have houses. Perhaps he will give his view on that.

People still tell me that landlords will not accept the HAP. A house is on Daft.ieor elsewhere but landlords will not accept HAP. I believe we could offer a tax incentive to landlords if they would accept HAP and provide a tenancy of X number of years. Landlords should want HAP because they would know they would be paid, so it is to their advantage to develop the property and maintain it. It is also an advantage to the tenant because he or she has security and a decent place in which to live. What are the witnesses' views on that?

John Curran (Dublin Mid West, Fianna Fail)
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Does Mr. Faughnan wish to address those issues first before another series of questions?

Mr. Stephen Faughnan:

My colleague, Mr. Tom O'Brien, will take some of the questions.

Mr. Tom O'Brien:

I will start with Deputy Durkan's questions. There were a number of them. It is difficult to pinpoint what is driving the vacant properties issue. It certainly is a function of the sales that are taking place, whether they are consensual or enforced. There is a mass exit of people leaving the sector despite what Deputy Coppinger says. I accept that the number of tenancies being registered is increasing but the Residential Tenancies Board's numbers show that there is a 25% reduction in the number of landlords since the recession began.

Bernard Durkan (Kildare North, Fine Gael)
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Are they going out of the system permanently or are they just going underground?

Mr. Tom O'Brien:

They are going out of the system permanently. Indeed, independent research by Sherry FitzGerald shows that for every 50 properties out of 100 that are sold-----

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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Sherry FitzGerald? That is just an oxymoron.

Mr. Tom O'Brien:

It shows that for every three investment or buy-to-let properties that are sold only one re-enters the system. One can see that with the amount of buy-to-let sales that are taking place at present. There is a decrease in the housing stock available for buy-to-let. I am sorry if it is not an easy message to accept but that is what is driving the rental increases. It is a decrease of stock where people want to live. In the vast majority of cases, people generally want to live close to amenities and in city centre locations. Unfortunately, because there has been a dearth of building since 2006 or 2007, as opposed to 2008 mentioned by many commentators, we now have a situation where there is very little supply.

I will verge off tangent a little but will do so on the basis that it refers to some of Deputy Coppinger's points as well. On capital allowances schemes, I absolutely disagree that they have not been a success. Consider the number of people currently being accommodated in Dublin city centre in section 23 properties that are now out of the tax net and the allowances are finished and gone. There are thousands of apartments in Cork Street, on the quays, in Dublin 1 and Gardiner Street that are housing people and we are very glad to have that stock at present. If that stock was not there, there would be many more people homeless. Those properties, in the main, are affordable properties. They are not properties that have been acquired by real estate investment trusts, REITs, or properties that are commanding €1,500 to €2,000 per month in rent. They are affordable properties.

I absolutely reject the suggestion that capital allowances in areas of high demand are inappropriate. Of course capital allowances in places such as Carrick-on-Shannon and other places where there is no demand are inappropriate but in circumstances where there is a demand for housing, I believe the allowances schemes, such as even the living over the shop scheme mentioned by Deputy O'Dowd which was very useful and is now discontinued, have a role to play in the housing crisis. At present, we do not have private investors investing in property.

That is borne out by the figures which show that three people are leaving for every person who is coming in. We need to-----

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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If that is the case, why are the numbers going up?

Mr. Tom O'Brien:

I cannot comment on the increase in the number of tenancies being registered other than to say that the Private Residential Tenancies Board has noticed that compliance is increasing. That is going to result in an increase in the number of tenancies. As the committee knows, large blocks of apartments that were acquired by real estate investment trusts have started to become let over the last six months. They are now hitting the market. They were previously half finished or in a state of hold until they were sold. They have now been sold. I suspect that the number of such properties is in the thousands, when account is taken of the large portfolios that have been sold.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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The number is going up. That is my point.

Mr. Tom O'Brien:

Yes, but-----

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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Mr. O'Brien is saying that it is going down.

Mr. Tom O'Brien:

I suppose it is not a case of one size fits all. Consideration must be given to the profile of the properties coming to the market. In the main, blocks of high-end apartments are coming to the market. Such properties are not directed at the people who are looking at affordable accommodation.

John Curran (Dublin Mid West, Fianna Fail)
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I would like to get clarity from the committee's point of view. Is Mr. O'Brien saying, quite clearly, that the number of individual tenancies is increasing but that the number of landlords is decreasing?

Mr. Tom O'Brien:

I am not. I am listening to Deputy Coppinger. She is saying that the number of landlords has increased. I am saying that the residential-----

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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I am saying that the amount of private rented accommodation has increased.

John Curran (Dublin Mid West, Fianna Fail)
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The Deputy is talking about units of accommodation.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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Yes. That is what they are.

Mr. Tom O'Brien:

The Private Residential Tenancies Board's figures show that the number of landlords has decreased from between 210,000 and 212,000 to approximately 170,000 over a period of four years. That is a fact. It is based on the Private Residential Tenancies Board's information. The total rental stock in this country is approximately 365,000 units, the vast majority of which - over 95% - are provided by landlords with one or fewer properties. The market is very fragmented. I do not believe it is possible for the State to provide a single solution to house all of those people. It is just not practically or financially feasible. I do not believe the institutional players have the appetite, capability or wherewithal to provide solutions. They are interested in concentrated blocks where capital appreciation is the primary objective. They will exit when market values recover. I know it is not popular or politically acceptable in certain quarters to say that the market will fall back to relying on the private sector to house people. I am sorry to say that it is just not financially feasible to invest in property at present. Capital repayments on borrowings are being made by people who are unable to deduct all of their interest against rent. Such people also have to pay local property tax, which is not tax deductible even though it is a direct expense of doing business. They also have to contend with increased regulation and the involvement of the Private Residential Tenancies Board. All of these issues are relevant to what is meant to be a passive investment. It is far from passive, however. It is a very hands-on business. There is nothing appealing in terms of return or effort that is encouraging the private sector in its current state.

I suggest that incentivisation needs to be brought in. I know that is not easy for certain people to hear. If we do not have incentivisation, we will not have private investment. I say that on the basis of the way the market is at the moment, even when taking current rents into account. The figures on which we are working are based on fact and have been properly costed by tax accountants. The purchase of property at current prices is not a profitable venture when account is taken of current rents and the legislative tax position. Some form of incentivisation is required. We are suggesting that measures such as Deputy O'Dowd's proposal for living-over-the-shop relief are needed. Urban or capital allowance schemes need to be directed at areas of high demand. They are urgently required in provincial town centres and city centres but not in areas where demand does not exist. I do not believe they have imposed huge costs on the Exchequer in the past. In many cases, the purchasers paid for their allowances upfront. Contrary to a great deal of the political rhetoric we have heard before now, the allowances allowed landlords not to avoid tax but to smooth out their tax bills. They paid upfront. The property prices were inflated by the value of those allowances at the outset. Landlords essentially paid for their allowances upfront.

Unfortunately, there has been significant Government intervention in the market. This has undermined confidence. We have many members. In 2011, we took a central role in a challenge to the abolition of section 23. The Government's interventionist measures have affected investors who have assumed significant debt obligations over a 20-year period. They pay upfront for their allowances and they are threatened with the removal of those allowances in one fell swoop even though they have debt underpinning those allowances and have paid for them upfront. Such measures erode confidence significantly. We are hearing from our members that this lack of confidence is significantly inhibiting investment and will continue to do so.

There has been a great deal of talk about rent control measures.

However, when considering rent increases, one must remember that rents halved in Dublin city centre between 2007 and 2014. One should also remember when reading the figure that rents have increased by 50% that this increase follows a 50% fall, which means they have only recovered by 50% of the peak.

Bernard Durkan (Kildare North, Fine Gael)
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Surely rents in the years leading up to 2007 were based on a property bubble in which property prices were vastly inflated and incomes had to follow to keep pace with the property market. How does Mr. O'Brien respond to that point? If we are harking back to the peak of the boom and hoping to achieve boom time rents, we will go down the same road we went down the first time around.

On the rate of rent increases, do members of the Irish Property Owners Association discriminate between social welfare supported tenants and other tenants? Questions were also asked on refunding deposits.

Mr. Tom O'Brien:

Rental expenses, as a percentage of income, have not changed since 1993-94 and the Deputy may check the figures. He referred to affordability and rents. Rents are a supply and demand issue and they halved as a result of the circumstances that applied in 2007 when there was too much supply.

Bernard Durkan (Kildare North, Fine Gael)
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Incomes have declined dramatically since then.

Mr. Tom O'Brien:

I do not agree.

John Curran (Dublin Mid West, Fianna Fail)
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Deputy Durkan and Mr. O'Brien are not required to agree. The committee will reach a decision afterwards on the issue.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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I sought clarification on the figures, which are extremely important. According to the Private Residential Tenancies Board, both the number of tenancies and the number of landlords have increased. I will provide Mr. O'Brien with the figures because he indicated the number of landlords had not increased. Between the first quarter of 2015 and the first quarter of 2016, the number of landlords increased by 16,000 and currently stands at 172,000.

Mr. Tom O'Brien:

As of this morning, the PRTB has confirmed, in writing, that the number of landlords registered in 2012 was 212,306, while the number of landlords registered in 2015 was 170,282. Those figures come directly from the PRTB.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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What I see is that higher rents are bringing landlords back into the marketplace.

John Curran (Dublin Mid West, Fianna Fail)
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The committee will need clarification on this matter. I ask Mr. O'Brien to circulate the document from the PRTB after the meeting when members will examine the figures.

Mr. Tom O'Brien:

I accept the point made about rents. They must be affordable for providers of accommodation as well as for those who are living in accommodation. There is no investment proposition, in terms of entering a market, that is based on froth. Everybody wants rents to be affordable. Unfortunately, however, investors in the property market look at the prices properties command and these must provide for an element of return. If people are proposing that people should enter a market and trade at a loss, they are arguing for philanthropy rather than what takes place in the real world. Whether in Ireland, the United Kingdom or other countries, private sector investment will not occur where there is no return. We have demonstrated, through the figures, that property investment currently requires substantial subsidisation from the investor's wages and is not self-financing. I am afraid supply is driving rent increases. Until that issue is addressed through investment by the State and private sectors and the provision of accommodation by the latter, the current homelessness and housing shortage problems will continue.

To return to Deputy Coppinger's contribution, I am not sure of the relevance of her point that 4% of the population and 20% of Members of the Oireachtas are landlords. These are irrelevant and erroneous statistics.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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They are highly relevant.

Mr. Tom O'Brien:

I am sorry but I do not agree. Decisions in the property and private rental market in 2012 were palatable in many quarters at the time but some of the tax measures were introduced when landlords could at least afford them. Landlords were the most unfortunate section of society after developers at that time.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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I am in tears.

Mr. Tom O'Brien:

The tax measures and additional charges introduced at the time were all anti-investment and anti-property. Those decisions are bearing fruit in a housing shortage. Many of our members will be slow to return to the private rental market because it is not possible to do so financially on a number of fronts. Tax is one reason, while access to finance remains a problem. Significant deposits are needed to fund buy-to-let property and investments are not self-financing.

They are among the issues that need to be addressed. In particular, the tax code needs to be addressed as a matter of urgency. That is not something we prepared for today. We have met Department of Finance officials on a number of occasions and laboured the point about the tax code and the treatment of private investors relative to our peers in the commercial sector in which rent is 100% deductible. If we were to rent a shop, there would be 100% deductibility, whereas when we rent a residential property, the figure is 75%. This results in a situation where one could pay tax on losses as a landlord, which is unprecedented.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I apologise in advance as I will have to leave to go to the Chamber at 3.10 p.m. for questions to the Minister with responsibility for housing. I will, therefore, ask to be excused.

I wish to make a couple of comments and ask two specific questions. I live in a property in the private rental sector. It is where I want to live and I have a very good landlord. A stable housing system needs a well regulated private rental market of a good size. I am neither against landlords nor the private rental market as long as it is done in the right way. My concern is that we do not have either. We do not have a stable and a properly regulated private rental market, notwithstanding some of the delegates' criticisms of the regulations in place. The specific purpose of the committee is not to look at what will happen in long term from the point of view of the private rental sector; that is something most of us agree that we need to do and we will return to the issue. The purpose of the committee is specifically to look at interventions the Government needs to make now to try to tackle the sharpest end of the housing crisis. My two questions arise in that context.

The delegates have said the vast majority of landlords have a single property or two properties and are what are called accidental or part-time landlords. One of the difficulties with this is, even with the best will in the world, because they see it as a passive investment, they do not have the time or wherewithal to invest in running it as a business or as an active investment. Often even good landlords do not know the law, or what the changes to it are, and this has an impact on the nature of the private rental market. The biggest problem is that this means they are risk averse and think very much of short-term calculations. Given that we know that having such a large number of landlords with a single property makes them risk averse, do the delegates think we can have a stable private rental sector in the short to medium term, or do we need as a longer term objective to start disincentivising these investors from being in that market because they are in the wrong place and should be elsewhere? If so, do the delegates have ideas or proposals for how that could be achieved in a way that would cause least disruption to the people who live in properties in that sector?

The second question is on the need for rent certainty, not rent control. I have a strong view that in the long run rent certainty is good both for the landlord and tenant because it creates stability in the market and that, therefore, one does not have dramatic crashes in rental income when things go bad or dramatic spirals in rent. The Irish Property Owners Association and other landlord representative organisations are steadfastly against this. In the context of our current deliberations, rent certainty would be of huge benefit in stopping people at risk of homelessness because of spiralling rents, many of whom are working and not in receipt of State support from becoming homeless. Is the Irish Property Owners Association open to having a conversation with the Government on the need for rent certainty in exchange for sensible reform of the tax treatment of landlords? When I use the word "reform", I do not mean tax breaks but treating landlords as professional businesses and taxing them in the same way as other professional businesses. If the Irish Property Owners Association continues to set its face against rent certainty, it will not have an open conversations with any of us on what their demands are, whereas if it was to indicate a willingness to contemplate rent certainty, there would be a conversation to be had which could be very good for tenants because it could help to find a way to control rents in a manageable form in line with inflation and at the same time help to professionalise the sector which even the association accepts is needed and would be beneficial for both the landlord and the tenant.

Mary Butler (Waterford, Fianna Fail)
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I thank the representatives of Irish Property Owners Association for appearing before the committee and for their submission. As Deputy Eoin Ó Broin stated, we have been here for the past four or five weeks.

We have been tasked with trying to come up with solutions to the housing and homelessness crisis. We must, therefore, put our questions to every group that comes before us because we must make our recommendations to the Dáil by 17 June. As I was travelling to Dublin this morning, I was listening to reports on housing all the way. We are at crisis point.

The IPOA was established in 1993 to represent property owners in the private rental sector. Obviously, landlords must make a profit or they will not stay in the business otherwise. Profit is what drives our economy. There is a perception, which I believe is the reality, that landlords do not want HAP tenants. The issue of HAP arises constantly at this committee's meetings. As we all know, the supply of local authority housing is practically non-existent. It has slowed to a snail's pace and the only hope people have is to get private rented accommodation. Many prospective tenants are on a HAP scheme because they are on a local authority waiting list. When they go to view houses, however, the moment they mention HAP, the landlord does not want to know them. This is an issue that needs to be addressed. Also, it should be mentioned that while other allowances were not paid to landlords, HAP is paid directly to landlords.

The IPOA representatives stated that improvements made to a property cannot be claimed as an expense unless and until the property is sold. Is that a disincentive to landlords in regard to doing up their properties and keeping them in a reasonable state of repair? If there is no provision for them to claim back money spent, there is no incentive to maintain property. We hear constantly about people who are living in sub-standard accommodation, with poor insulation and wiring and so on.

Mr. Faughnan said the cost of unfurnished rental accommodation is up to 25% less than that relating to furnished accommodation. Is that correct? Will he speak further on that because it might make a big difference for people who trying to rent, given that many of them have their own furniture? I welcome the comments regarding bedsits. Many of the organisations I have spoken to feel there is merit in reconsidering bedsits, as there are many single people seeking accommodation.

Brendan Ryan (Dublin Fingal, Labour)
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In regard to the 12 recommendations put to us by the IPOA, particularly those seeking an incentive for IPOA members to become involved in this area, has the organisation any figures in respect of the number of units that would be delivered over the next year or so if these proposals were implemented? Such figures would be useful as we consider solutions to deal with the immediate crisis. What would be delivered in one or two years? The provision of these incentives would involve a cost to the Exchequer and to justify that, we would need some indication of the return. Has the IPOA run any numbers on that?

My second question relates to the recommendation to abolish the proposed deposit protection scheme. I have had spurious indications from landlords as to why they hold onto deposits. Can the IPOA justify its position? Why would it want to abolish a system that would be fair to both sides in the context of deposit retention?

Mick Wallace (Wexford, Independent)
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I apologise for being late and perhaps some of the points I will raise have already been addressed. Has the IPOA expressed opposition to the proposal that apartments should be sold with tenants in place, as would happen in most of Europe? If the situation here was different and if it was difficult to rent a residential unit, it would be of benefit to have a tenant in place if a person was buying a property from a landlord.

The delegates probably do not need me to tell them that a commercial unit is worth more with the tenant in place than if it is empty. An empty unit is problematic, while an occupied unit with a regular tenant paying his or her way is a bonus. The tenant adds value to the sale.

Obviously, I was a landlord and let a lot of properties. I can remember at time when I was getting crazy money to rent properties and when I was getting terrible money to do so. Now, although we are back to crazy money again, if I was back in the game of being a landlord, I would much rather have consistency and regulation. Being up and down and having boom and bust are actually not good for business and nobody benefits from it.

I am listening to the delegates highlight some of the challenges in being a landlord today. I understand where they are coming from in some of their points, but we have a dysfunctional market in Ireland. However, it need not be that way. Do they not think that if we were to regulate and change it in such a way that there would be rent certainty for the tenant, it would bring certainty for the landlord also? They are telling us that life is not good for the landlord. Life is not good for the tenant either. It has not been good for either of them because of the ups and downs in the past few years. Should we not change the status quoand do things differently? Do the delegates not think introducing regulation to control rents - rent certainty to a degree - would actually be better for their industry in the long term? It might not seem as attractive in the short term, but surely all business investors are interested in having stable, long-term certainty. That is why people buy bonds, sometimes at 0%. People will buy German bonds before they will buy anyone else's; there is bugger all return on them, but no one will lose any money. Do the delegates not think more regulation and evenness in how the industry operates would be in the interests of landlords too?

Maureen O'Sullivan (Dublin Central, Independent)
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What percentage of the 170,000 or so landlords registered are members of the Irish Property Owners Association? I suspect there is a considerable number of landlords who are not registered with anybody. I do not want to demonize all landlords because I know that they have ended up with tenants from hell. Unfortunately, however, I have come across too many landlords who are big into their rights but not their obligations and who provide substandard and inferior accommodation. The North Circular Road which I know very well was mentioned. There are two issues, one of which is vacant properties, some of which have been vacant for a very long time. There is a call for a tax after they have been left idle for a certain period. The situation is replicated in so many other communities in the constituency of Dublin Central that I represent.

The other issue on the North Circular Road is the appalling standard of rented accommodation provided. It has ruined what should be a beautiful road. It should be like Griffith Avenue, but the private rented accommodation provided has made it very difficult for residents and communities to achieve this. In certain places along the road every second house is rented and it is easy to tell which houses are rented from the look of them. That leads me to the need for a code of conduct or protocols for landlords to ensure they observe their obligations while enjoying their rights.

We have talked about rent increases. This morning the rent for one man in one room in Dublin central went from €480 to €860 without any change to the accommodation. I do not know how any landlord could stand over such an increase, regardless of what the market is like.

John Curran (Dublin Mid West, Fianna Fail)
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Before the delegates reply, to summarise, their presentation dealt with tax exemptions for long-term lettings.

A number of Deputies addressed that issue, particularly around rent regulation and rent certainty, as well as the other side of the issue. In cases of long-term lettings, one of the problems the committee has found is that when a property goes on the market, it is sold vacant, whereas if it is a commercial property, it tends to be sold with a sitting tenant. What are the witnesses' views on that? If a property is sold with a five-year tenancy, ten-year tenancy or whatever, it should be sold with the tenancy being allowed to continue to its natural conclusion. The sale of these properties is causing huge problems because, invariably, the properties are being sold vacant. That is a summary of some of those issues.

Mr. Cathal Lawlor:

I wish to address the question the Chairman raised in regard to long-term lettings. As an organisation, we have made presentations to Government and to Ministers on providing a tax incentive. I know the words "tax incentive" are dirty words for some but in order for people to change their habits, we must encourage and incentivise them to do so. Within that context, the Department of Finance introduced a tax relief on the long-term leasing of land in a review of the agricultural sector. The reason for that was that farmers who were letting land were invariably doing so on a one-year lease for fear that giving a longer lease would give the tenant some rights. On a general and casual basis across the length and breadth of Ireland, farmers had let their land on a one-year lease. In order to overcome that, the Department of Finance introduced a tax incentive to provide tax relief on rental income where a lease of land is entered into for a period in excess of five years.

As part of our previous submissions, we argued that a similar incentive should be brought in regarding residential property to encourage landlords to enter into long-term leases to give tenants the security of tenure they require. I believe that fits in with many of the points that have been raised by Deputies Eoin Ó Broin and Mick Wallace and some other Deputies. Even if a long-term lease was in place, disposal of the property would be subjected to that lease on the basis that it covered off over a period. In terms of giving the security of tenure a tenant requires and avoiding peaks and troughs in how the residency or tenancy is managed, it would help a lot.

With regard to some of the other points made by Deputies, there tends to be a feeling - whether it is right or wrong - that to invest in property is a very bad thing to do. Fundamentally, that might be right. I do not agree with it but I can see how somebody might have that view. What has happened is that the State has invited the private rental sector to provide rental accommodation. That has happened and that is just the way it is. We have to deal with the reality of the situation we are in. There is no point inviting people to provide property and then beating them up when they do. That is not going to achieve the end game.

From the landlords' point of view, we feel that the taxation treatment that has been applied since 2009, in particular, has been an impediment. This answers Deputy Coppinger's question around how it is that costs have increased. DKM Consultants, which is independent of the IPOA, found that costs have increased by 24%. One of the reasons for the increase is that we are not entitled to claim tax expenses in respect of 25% of the interest that we incur. In some circumstances, that can result in landlords getting taxed on losses. When there is a situation where anybody is getting taxed on losses, he or she is clearly not going to invest. Arguments around whether or not there are more or fewer landlords, or more or fewer units, in the market are futile because, fundamentally, fewer landlords are going to invest in a sector in which they are disincetivised from investing. It would be preferable for a landlord to invest in a commercial property where they are not disincentivised from investing. From our point of view, we argue that we must stop disincentivising landlords from investing and look at ways of incentivising them to invest. That might involve incentivising them to invest and provide properties that would be suitable to solving the homelessness crisis we have at present. If that was done in the context of long-term leasing, it might not be a bad way for the committee to start thinking.

John Curran (Dublin Mid West, Fianna Fail)
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Does one of the witnesses wish to conclude?

Fergus O'Dowd (Louth, Fine Gael)
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A question I asked was slightly but not completely answered by Mr. Lawlor. There is the question of incentive relating to HAP, which I do not think we would disagree on. To return to the question on landlords, the problem is not in selling the property. However, if an occupied property is sold, it should be legally certain that the tenancy continues at least until the end of the lease.

Would the witnesses agree with that? It is a critical point.

Mr. Tom O'Brien:

I am similar to Deputy Wallace in that I have been renting properties since the early 1990s and I have also seen two or three cycles. Until two years ago, tenure was not an issue. Tenants would move on after 18 months to two years even when one wanted them to stay. Long-term letting did not prevail in the market. Rents were also pretty steady until there was a jump in the late 1990s. They steadied again until 2004 when, again, they jumped. The undermining symptom is supply and that is the root cause of the problem. There has to be more supply. The State cannot solve this by itself, practically, financially or in the context of the time available, nor can the institutional players solve it, as they are not interested in the end of the market most affected by the homelessness crisis, which probably came about with private tenants squeezing lower tenants out of the market because they can afford the higher rents. They are now renting units previously inhabited by the people who are now having difficulties. It will take time to resolve this but politicians have to create the climate and the environment to facilitate more supply.

Deputy Ryan asked about deposit protection. There might be cases where there is an issue with deposit refunds but our membership does not see that issue. Our members are, by and large, absolutely compliant and au faitwith the laws and regulations. One has to bear in mind the levels and incidence of deposit disputes. Some 800 disputes arose last year, in the context of some 100,000 tenancies. The UK has a deposit protection scheme in place which is a huge burden on the Exchequer. Given that finances are limited for everybody on this side of the table and on the other side, in the form of the State, I would caution against introducing a regime and a structure for processing deposits that will be hugely onerous on the Exchequer for cases which amount to less than 1% of all tenancies.

According to the PRTB's figures, almost three times the number of disputes before it relate to rent arrears. People do not want to hear that but that is what is consuming the PRTB's time. As Mr. Faughnan outlined, when a tenant leaves on a Friday, he or she wants the deposit back because he or she is moving into somewhere else on a Saturday. He or she wants to have the deposit in his or her hand when going on to the next property. If we introduce a deposit protection scheme, it takes 28 days, as it does in the UK, and the level of landlord claims against deposits in that system is much higher than they are here. When it is dealt with by an administrative body, independent of the tenant and landlord, it is much easier for the landlord to make a claim. Introducing such a framework invites more problems when there are deposit disputes, although it is not an issue for our members as they are compliant. The Government-appointed body, which commissioned an investigation into deposit protection infrastructure, warned against it.

Brendan Ryan (Dublin Fingal, Labour)
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Mr. O'Brien believes it is more a question of the burden on the State rather than a problem for his members.

Mr. Cathal Lawlor:

It is that there is an easier way to solve the problem. We would suggest that the PRTB charge be increased by €5 to cover deposits that are erroneously kept by landlords. It is a simpler solution to the problem than creating a new agency, which will inevitably bring with it a body of work.

Mary Butler (Waterford, Fianna Fail)
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My questions on HAP were not answered.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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A lot of questions have not been answered. Can the witnesses send us the information if there is not the time to answer them now? The question on increased costs has not been answered nor has the question on how many properties currently being held would be released if owners got the tax break they are seeking.

Mr. Tom O'Brien:

The DKM report was a Government-commissioned report and we can make it available. The analysis being looked for by the Deputy is within that. What was the second question?

The representatives asked for a tax break to be reintroduced. How many additional rental properties would such a measure provide?

Mr. Tom O'Brien:

Additional properties-----

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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We need to work that out because we have to calculate whether it would be better not to have such a tax break and make the investment in social housing instead.

Mr. Tom O'Brien:

All we can work from is our prior experience. I am at odds with the Deputy as to the effectiveness of those schemes but they were hugely successful in the inner city.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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For whom?

Mr. Tom O'Brien:

The tenants who are now living in those properties. Thousands of people are housed along the quays and in the inner city in quality apartments. I accept that some of the earlier schemes were smaller apartments but under the later schemes in, for example, Cork Street 1,000 sq ft two-bedroomed quality apartments were built and they are at a level that is affordable for the average person.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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Mr. O'Brien said that earlier. I am talking about additional properties that are being held back now that would be released by the association's members and others if we gave them a tax break.

Mr. Tom O'Brien:

Our schemes will not assist----

John Curran (Dublin Mid West, Fianna Fail)
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I ask the representatives to supply the additional information we seek by means of correspondence as I am conscious other witnesses are due before the committee. One of the representatives might respond briefly to Deputy Mary Butler's question regarding the housing assistance payment scheme, HAP-----

Bernard Durkan (Kildare North, Fine Gael)
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-----and rent support.

John Curran (Dublin Mid West, Fianna Fail)
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-----and then we will conclude this section.

Ms Margaret McCormick:

One third of all tenancies are covered under the HAP scheme and the rent supplement scheme and, therefore, a great number of people are in receipt of those payments. There are big issues around the HAP scheme and the rent supplement scheme. First, it is not market rent. HAP is paid in arrears rather than in advance and that can cause huge difficulties because the market takes rent in advance. There is no communication between those administering the HAP scheme and a landlord. If the payments stop a landlord gets no details of that, so there is a communications issue there. A person cannot give a landlord confirmation that they are in receipt of HAP, rather they say that they will apply for it. Those issues with the scheme are difficult and fraught. The system is not fit for purpose.

Rent supplement is paid directly to the tenant unless a tenant gives consent for it to be paid to a landlord. If it is not paid onward, difficulties arise for the person living in the accommodation because they will go into arrears and the money is used to cover different expenses. The Government subsidies are not fit for purpose.

John Curran (Dublin Mid West, Fianna Fail)
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We have had officials from the Department of Social Protection and representatives of Threshold in before the committee this morning and we discussed with them the issue around the State payments, whether it be the rental accommodation scheme, RAS or HAP. We asked the officials from the Department of Social Protection to submit in writing recommendations they believe would be an improvement to give people who are dependent on those supports an equal opportunity. I ask the representatives to do likewise. We are trying to ensure people who are dependent on State supports, whether it be RAS, rent supplement or the HAP scheme, on presenting at a property will have an equal opportunity. The witnesses have given a number of reasons they do not have an equal opportunity. I ask that they submit those in writing. We want to put those together with the recommendations that will come from the Department of Social Protection to make something meaningful happen.

Ms Margaret McCormick:

Absolutely. It is the system that is at fault here, not the individual. Market rent is the key issue. If somebody is not able to pay the market rent, it is very difficult for them to source accommodation on the open market.

Mary Butler (Waterford, Fianna Fail)
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Does Ms McCormick accept that landlords do not want to communicate with a tenant regarding HAP? They seem to walk away from engaging with it; they do not even try to facilitate people. That perception we get from people is that the landlords do not want to engage with a person who would be in receipt of HAP.

Ms Margaret McCormick:

No. Our members would be aware that under the equal status legislation they must treat everybody equally. We know that nearly 70,000 people are in receipt of some sort of subsidy. The problem is the market rent and a landlord needs a tenant to be in a position straight off to pay the market rent. The HAP and the rent supplement do not cover the market rent in many cases and that is a huge difficulty as is the fact there is no confirmation initially that a person has an entitlement to such a payment.

Once we let somebody into a property, if he or she does not pay any rent after that, we have to follow procedures and we can be months with no income and a person residing in a property. That causes significant difficulties. The system, including HAP and rent supplement, needs to work with the market system. It needs to be paid in advance in full, and directly to the landlord.

John Curran (Dublin Mid West, Fianna Fail)
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I ask Ms McCormick to put a note in writing to that effect to the committee on those specific issues because it has arisen this morning. We are about to conclude. Would Mr. Faughnan like to sum up?

Mr. Stephen Faughnan:

On a point the Chairman raised about long-term letting and selling property in vacant possession, the trend has changed significantly in that regard. Pre-1963 properties are now selling with tenants in situ. In the past three-to-six months, that has taken off quite successfully.

As we have mentioned previously, the long-term leasing is a great idea, but the costs involved, that are being pushed down to the private rental sector, are making it prohibitive. We have energy conservation coming down the road and that will cost a great deal. It would be good if we had some sort of certainty from Government where we would enter into a long-term arrangement in which we would have control on costs to a certain extent.

I thank the committee for its time and I thank the members for their questions. I hope we have been of help to the committee. If, as I stated at the outset, there are matters on which the committee wishes to have clarification, more information or any backup, we would be pleased to provide it.

John Curran (Dublin Mid West, Fianna Fail)
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I thank Mr. Faughnan and his colleagues for their attendance today. Their submission, as I said, will be on the committee's website. On the additional information which they stated they would furnish, not meaning to rush them, they might furnish it to us sooner rather than later because the committee will be reporting in a short number of weeks' time.