Simon Coveney (Cork South Central, Fine Gael) | Oireachtas source

I thank Deputies Bríd Smith, Boyd Barrett and Gino Kenny for bringing forward the Bill and providing us with another opportunity to discuss the development of the rental sector, which is an absolute priority for me and for the Government. As Deputies will be aware, I have tabled an amendment to the motion. Unfortunately, I will be unable to support the legislation as is.

While I acknowledge the Bill’s relevance in the context of the current market conditions in the residential rental sector, the Deputies will appreciate that the proposal once again raises issues that have been addressed in the passage of recent legislation and in the Government's strategy for the rental sector, which was launched on 13 December 2016. The strategy contains 29 actions, aimed at achieving improvements in security, standards, services and supply in the residential rental sector. The Planning and Development (Housing) and Residential Tenancies Act 2016, which was signed by the President on 23 December put many of these actions into effect, including the rent predictability measure, which established the system of RPZs. Families remain under pressure in the rental sector but anyone who thinks there are overnight solutions is wrong. The positive impacts of our strategy are being felt and rental inflation is moderating. Supply indicators are all moving in the right direction as well but I acknowledge not fast enough. It would be premature to revisit the decisions of the House on the new rental legislation after much consideration in a few short months.

In addition, the measures in the Bill risk undermining stability and confidence in the rental sector and negatively impacting on existing and future supply of rental accommodation.

We all know that strong economic performance and demographic trends mean that demand in the rental sector is high and is likely to remain strong into the future. The sector has doubled in size over the course of the last 20 years. Population growth, economic recovery and challenges in the home ownership market are all driving increased demand for rented housing at present. The changing nature of work also contributes to the growth in demand in the rental sector. Firms increasingly need more mobile workforces, and changing location and employer has become a more common feature in most people's careers. There is an increasing need and a growing demand for the more flexible housing solutions that only the rental sector can offer.

To date, the rental market in Ireland has not responded well to this increased demand. The levels of new investment and the numbers of new rental units coming onto the market are low and in many parts of the country, particularly urban areas of high population density, demand for rental accommodation far outstrips supply. In these areas, rents have been spiralling upwards and people, including many ordinary working families, are finding it more and more difficult to find accommodation they can afford. This situation is unsustainable, causing uncertainty and hardship for many, contributing to homelessness and threatening our economic recovery by undermining competitiveness, driving up wage demands and making Ireland a less attractive investment destination.

The last Government made some important improvements. Significant amendments to the Residential Tenancies Act introduced in December 2015 mean that the minimum period between rent reviews for tenancies has increased from 12 to 24 months. This will apply for a four-year period, until 2019. In addition, the minimum period of notice of new rent is increased from 28 days to 90 days and longer notice periods for the termination of long-term tenancies have been introduced.

I have gone further, with a comprehensive package of reforms of the entire rented sector, addressing issues of security of tenure, supply, services and standards. While the acute pressures on the rental market mean that we need to manage the inflation of rent prices in the short term, ultimately, the most effective way to reduce and stabilise rents in the medium to long-term, and benefit the entire sector, is to increase supply and accelerate delivery of housing for the private and social rental sectors. That is why, in Rebuilding Ireland, the Government has set out a practical and readily implementable set of actions to increase and accelerate housing delivery across all tenures to help individuals and families meet their housing needs. As of today the most recent figures of the number of social houses now in the pipeline is over 10,000 across 607 different sites across the country at various different stages. That figure was 8,400 last January. We are accelerating delivery. We are opening up more sites through local authorities and approved housing bodies, which I think is what the Deputies are calling for.

Together with the strategy for the rental sector, the housing policy sets out over 100 actions that the Government is taking through new policy, new legislation and innovative measures to achieve increased supply. Supply measures include the use of public land. My Department has requested local authorities in rent pressure zones to use publicly owned sites to kickstart supply. Dublin City Council has brought forward a land initiative project covering the three sites at O’Devaney Gardens, Oscar Traynor road and St. Michael's, Inchicore, and is seeking partners to deliver a mix of social, affordable and private housing.

We are also supporting more build to rent development through pathfinder sites to help ensure a more supportive regulatory approach. In February, I launched major infrastructure works on the Cherrywood site in Dublin costing €35 million, a first step towards the delivery of over 1,300 new build-to-rent homes, which will start later this year. The repair and lease scheme, under which local authorities will refurbish vacant properties and lease them from their owners, was rolled out nationwide in February to bring vacant properties back into use. This will deliver 3,500 properties by 2021 and cost just over €150 million. Funding this year will cover getting 800 dwellings back into use for families on the social housing list.

On foot of a commitment contained in the strategy for the rental sector, the Department of Finance has set up a working group on tax and fiscal treatment of landlords. This group will examine and report on the tax treatment of landlords, and, having due regard to the critical role of landlords in a properly functioning rental sector, will put forward options where appropriate for amendments to the tax treatment. The working group is chaired by the Department of Finance and includes officials from the Department of Housing, Planning, Community and Local Government, the Revenue Commissioners and the Residential Tenancies Board. This group will report to Government on potential tax measures in the middle of the year.

Although supply is the central problem, we cannot ignore the high and rising levels of rent in certain areas of the country. The strategy for the rental sector recognises that rapidly increasing rental inflation is the most significant challenge to security of tenure in the rental sector at present and that there is a need for a targeted, time-bound and transparent policy response to the issue of rising rents. That is why the Government has introduced the rent predictability measure and established a system of rent pressure zones.

The rent predictability measure is one of the most significant actions provided for in the strategy. The measure was enacted by the Planning and Development (Housing) and Residential Tenancies Act 2016 and introduced the concept of rent pressure zones to moderate the rate of rent increases in those areas of the country where rents are highest and rising quickly. Rent pressure zones are defined as areas where rent increases have been 7% or more in four of the last six quarters - that is annual rental inflation - and where the rent levels are already above the national average. Once an area is designated a rent pressure zone, rent increases are capped at 4% per annum for up to three years.

Rent pressure zones were introduced with immediate effect last December across the four Dublin local authority areas and in Cork city. On 26 January, I made an order designating a further 12 local electoral areas as rent pressure zones in parts of counties Cork, Galway, Kildare, Meath and Wicklow. On 29 March, I made another two orders designating Maynooth and Cobh as rent pressure zones. Altogether, some 57% of tenancies nationally are now located in rent pressure zones.

Following on from the introduction of rent pressure zones at the end of last year. The methodology for producing the Residential Tenancies Board, RTB, rent index has been revised and developed so that we can now use the RTB data to calculate and monitor changes in average rents at the level of local electoral areas, which allows us to be much more targeted. Up until now, this has only been possible to do from a local authority perspective - Dublin versus the rest of the country, in fact. The new approach recognises that the same pressures do not apply equally in all parts of the country and gives us the objective evidence base we need to appropriately target the rent predictability measure we introduced last year and designate the correct areas as rent pressure zones.

The practical effect of these measures is that over 186,000 households that currently rent their homes in these areas now know exactly what maximum rent they will have to pay over the next three years. It also means that the rents they will have to pay will be lower than they would otherwise have to pay if the market was allowed to continue as was previously the case. We have also taken account of legitimate concerns that rent regulation can discourage investment in supply. The measure allows exemptions for new rental properties and for those which have been substantially refurbished, thus ensuring a predictable and fair return on investment for landlords. The measure is also time-bound, providing that rents can be capped in an area for a period of three years only to allow for additional supply to come on-stream.

It is essential that any measures taken to address rental prices do not jeopardise supply. So while I appreciate the motivation behind the Residential Tenancies (Housing Emergency Measures in the Public Interest) (Amendment) Bill 2016, its provisions would have a negative effect on both existing and future supply of rental accommodation and risk perpetuating the very imbalance between demand and supply that is driving rental price inflation. Without counterbalancing measures, there is a very real risk that the measures proposed in this Bill would force existing supply to exit the market and discourage future supply for the sector, making the problem much worse. That is why, although I agree with the intention of the proposers to achieve more affordable rents and increased security of tenure, I believe the rent predictability measures that I have already introduced, in addition to the other measures contained in the rental strategy, will bring increased security and provide significant certainty to both landlords and tenants by allowing for reasonable growth in rents while preventing the instability and uncertainty caused by volatility such as we have seen in the last number of years.

The pressures in the rental market are borne out by the data published by daft.ierecently. This shows that rent asking prices rose nationwide by an average of 13.4% in the year to March. In Dublin rents increased by 13.9%, while rents outside of Dublin increased by 12.7%. However, the report also shows that rent inflation has slowed over the last quarter. The rate of increase in Dublin for rent prices between the fourth quarter of 2016 and the first quarter of 2017 was significantly slower than the rate of increase over the year. The annual inflation figure of 13.9% implies an average quarterly inflation of 3.5%. The quarterly inflation registered in the first quarter of 2017 was less than half of this with south County Dublin at 0.7%, west County Dublin at 1.4%, north County Dublin at 1.6%, north city at 1.5%, city centre at 2.1% and south city at 1.4%. Dublin was designated as a rent pressure zone in December 2016. The daft.iereport data for Dublin shows that the rate of rent price increases has dropped since then. Therefore, I believe it is having an effect. It is not perfect, but it is certainly having an effect.

Through implementing the rent predictability measure and establishing the rent pressure zones, the Government has already substantively addressed the objective of this Bill. In passing the relevant legislation the House has already extensively discussed and reached decisions on the issues and options involved. The rent predictability measure currently being implemented does cover the majority of private tenancies that are under real pressure today.

A significant change, of course, such as that involved in undertaking the rent control provisions contained in this Bill, is not appropriate until we have had the opportunity to review the effectiveness and impact of rent pressure zones. We are due to do that in the summer, by the middle of the year. I have already committed to carrying out that review in June this year. At that point, the provisions will have been in place for six months, we will have data from the Residential Tenancies Board and it will be possible to ascertain the effectiveness of the rent predictability measures that we introduced before Christmas and whether any changes, amendments or improvements need to be made. The review will provide the opportunity for Deputies to propose and discuss any new ideas in this regard.

I will issue a word of caution. We are committed to that review - of course we are. That was the basis on which some Deputies supported the legislation before Christmas. We will honour the commitments that we made. However, I believe we need to be careful. The property sector, and in particular the rental market, cannot bear dramatic changes on a regular basis. We need to give certainty, on the back of which we will get investment. We need to give certainty to tenants too. We cannot give the impression that we are going to change this dramatically every six months. Let us look at this with an open mind. If there are things that need to change and improve, I will certainly be open to that. However, we do need to try to bed down an approach that can allow us to give certainty to the market so that we can facilitate market forces to help us solve some of this problem of a lack of supply.

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