Damien English (Meath West, Fine Gael) | Oireachtas source

I welcome the opportunity to say a few words on the Bill. We have discussed the rental sector here a great deal along with housing in general over the last number of years. It is clear that the rental sector must be a more attractive choice for tenants and a safe and viable investment choice for investors. It is the balance we are trying to get right at all times. As Deputy Cowen noted earlier, 70% of landlords are not major investors. They are people who own an additional property for whatever reason and they are not investment companies. It is not all big companies and there is a mix of tenants out there. However, we want a more professional landlord base if possible which is in the market to provide a service in the way that is done in other countries. We are trying to create a rental market which attracts investment but which also gets the balance right with costs, security and the service. That is the balance we have been trying to achieve for the last number of years. That is our agenda and it is similar to the agenda of Deputy Shortall. She wants to focus on the rights of tenants, the cost of rent and security of tenure, but I believe she recognises that we also have to make it attractive for people to invest.

Tenants who are renting need to have certainty that as long as they pay their rent and meet their obligations, they will be able to stay in the properties they are renting. Equally, landlords and investors, from the individual wishing to secure a home to institutional investors seeking to build balanced investment portfolios, must have confidence in the long-term value for their investments and the income they can derive from them. It is not true to say that supply and demand cannot interact to give cheaper rents. There are lots of places where even four years ago there was lots of supply of empty housing and rent was half of what it is today. It has been forced up for different reasons. I listened to people contributing to a conference today claim that supply has nothing to do with it. That is not true. While I know there are lots of aspects to it, please do not try to tell me that supply does not come into it. Anyone who has studied economics knows without a doubt that supply comes into it. To hear so-called "experts" discuss today that supply is not an issue suggests they need to think twice. We recognise that there are a lot of factors, but it is beyond doubt that increasing supply is a major way to bring down the cost of rent and of housing, albeit the cost of a house is a slightly different story.

As the Minister, Deputy Murphy, outlined in his speech earlier, any legal changes cannot risk weakening the stability of and confidence in the rental sector. No new law should undermine the economic viability of providing rental accommodation or impact negatively on existing and future supply of residential rental units. That does not mean we should not introduce new laws; it means we have to tread carefully and get that balance right. There are knock-on effects on the wider economy to consider also. We need rents to be affordable, but they must also be viable and encourage long-term investors. I disagree with Deputy Ryan. We recognise in the Rebuilding Ireland document that a large proportion of people choose to rent as it provides a great deal more flexibility in circumstances where they like to move around a great deal more in their work. Our planners recognise that which is why we have issued guidelines to local authorities for the build-to-rent concept. There is a greater chunk of people who decide to rent and we want to provide for that. As such, I ask the Deputy not to put us in a box and say we are against the rental market and do not want to give people the option. We believe in that.

There are knock-on effects for the wider economy to be considered. While we need rents to be affordable, they should also be viable. Any new measure should be fair and capable of withstanding legal challenge, including a constitutional challenge. When we were working on the rental sector strategy last year, we had to be very careful to ensure that any changes we brought in would stand the test of time and the test of the courts system. There is no point bringing in new laws if they are then defeated in a constitutional challenge. That is why we tread very carefully when we make changes in this sector. Any change we make is well informed. A great deal of work went into last year's rental strategy and a lot of people from all parties in the House made submissions. We teased them through and spent a lot of time on it before making changes. We are prepared to review that and the Minister, Deputy Murphy, will bring forward legislation in the near future to make more adjustments which make the strategy more effective.

We all accept that there are acute pressures in the rental market, which are driven by a number of factors, including rising demand as a result of the economic recovery, a lack of supply and the high cost highly-indebted landlords face in servicing their loans. There is no point in denying that landlords want to make profits, which also contributes to high rents. However, there are a lot of landlords who do not make profits and who barely cover their costs. Deputy Danny Healy-Rae discussed that earlier because there are high tax implications. On the other hand, some make great profits. I am not trying to say that is not the case. The lack of supply, however, is also a major contributing factor because there is significant demand. These factors have led to significant rental price inflation in recent years. However, the long-term solution for the high level of rent is to increase supply. The strategy for the rental sector from 2016 contains a number of specific measures to encourage and accelerate new supply, keep existing rental units in the market and bring vacant units back into use. Deputy Healy-Rae also raised the issue of taxation not only on profits from rental income but on rental income itself.

It is something that was raised with us while working on the rental strategy in autumn 2016, as were all the other implications of it. There was a commitment in the rental strategy to set up a working group chaired by the Department of Finance to examine the tax and fiscal treatments of landlords. This group, which was chaired by the Department of Finance and included officials from my Department, the RTB and the Revenue Commissioners, examined the tax treatment of landlords or residential accommodation providers and having due regard to their critical role in a properly functioning rental market put forward policy options in its report, including proposals to amend their tax treatment because some people say it is unfair. It is about getting the balance right.

A public consultation was conducted in March and April 2017 to seek views on a number of subjects such as the mortgage interest relief, the capital repayment relief, rental accommodation as a pension investment, the deductibility of various expenses, capital gains tax, long-term tenancies, accidental landlords, the rent-a-room scheme and vacant properties. All of that has been analysed in detail by that working group and the Department. About 70 written submissions were received - I expected there to be more - from a wide range of interested parties, including individual landlords, representative bodies and charitable organisations, and were considered and finalised in the Government's report which fed into budget 2018 considerations and will feed into budget considerations in the future as well. That report is now available. It is a valuable source of information which tries to review this through the eyes of the various stakeholders and to tease it out. There are some parts that are feasible and which merit further consideration. If people get an opportunity they should read through that document. We will have an opportunity to discuss it because we are bringing forward this Bill and others in the months ahead. We have to bear that in mind. It is not all rosy in the garden for every landlord. While I accept some make great profits, not all do.

When it comes to rent predictability and certainty, we need to ensure our rent certainty measures work and do not undermine our efforts to get rental supply. We need to monitor the effectiveness of our rent predictability measures, and the public consultation and the review carried out last year as part of this work is very important. That review started in summer 2017. Implementing change through the Government's upcoming Bill to amend the Residential Tenancies Act is the next step and in our view it is an important one. We recognise we need to do more in this area. The Government has given this Bill priority for early publication during its current Oireachtas term. We will all have an opportunity to take part in that discussion and to frame it through the committee and on the floor of the House.

The Government's rent predictability measure is carefully designed to control rent increases without having negative effects on the supply of rental accommodation. That is the balance we are trying to achieve. Its implementation can and will be enhanced and it limits rent increases to a maximum of 4% per annum. We want that to happen. There are all sorts of different stories out there and the reason we commissioned the report and the review was to gather that evidence. Tenants should see significantly smaller rent rises than those prior to its introduction or than would have taken place if the measures had not been introduced. This has to happen and we want it to happen. The law will be changed to ensure the rent pressure zone controls are effective and enforced. There are different reports out there and different information coming through the system. The measure can and should have a substantial impact. The practical effect of the measure is that the rents of the more than 180,000 households that currently rent their homes in rent pressure zone should be lower than they would have been if market rents had continued to apply. That is in most cases.

We are aiming to bring about a new market rent that will change in a predictable manner with a known maximum annual rent increase and to achieve in time one that is much more affordable. We all agree that some of the figures being quoted here tonight are not accessible to most people and are putting them under extreme financial pressure.

In terms of enforcement of the 4% cap in rent pressure zones there is a statutory obligation on a landlord at the beginning of a tenancy to provide a tenant with details of the previous rent under a tenancy and a statement of how the rent has been calculated under section 19(4) so that a tenant can ensure his or her rent complies with the legislation. A similar provision applies when a landlord is serving notice in the context of a rent review. The tenant is informed how the rent is calculated having regard to the rent predictability measure and whether the landlord is claiming that any exemptions apply.

The RTB published a comprehensive set of guidelines in November 2017 for landlords and tenants and those working in the rental sector clarifying the situations in which a landlord can claim substantial change in rented properties for the purposes of exemption from the rent increase restriction of 4% that applies in rent pressure zones. The RTB also has an easily accessible online rent calculator which both tenants and landlord can use to check their rent is in line with the legislation. The calculator can be also used by landlords to produce the rent notice required. If a tenant believes the rent is above the market rent or above the permitted increase in the rent pressure zone he or she can refer a dispute to the RTB. The rent cannot be increased pending the determination of that dispute. I heard Members say earlier that most people would be reluctant to engage in that process or do not want to for fear of losing the property. That is something we are trying to deal with through the review because we acknowledge that might happen in some cases. We are trying to strengthen that position. The Residential Tenancies Board has significantly developed its methodology for producing its quarterly rent index in this report as a result of close co-operation between the RTB and the ESRI, one that gives a significantly more detailed understanding of market behaviour in the rental sector.

I am conscious of time so I will finish up. The new methodology and the substantial database collected and maintained by the RTB means the rent index continues to be by far the most accurate and authoritative report of its kind on the residential rental sector in Ireland. It is the one on which we will base our policy changes. That is the information gathered and the detailed answers with which we have been provided.

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