Malcolm Noonan (Carlow-Kilkenny, Green Party) | Oireachtas source

I thank Deputies Murphy, Boyd Barrett, Smith, Canney and Barry for bringing forward this Bill. The Government opposes the Bill. Aside from its technical, practical and operational shortcomings, it would in all likelihood face a significant risk of legal challenge and is highly likely to have a severely detrimental effect on the supply of rental property in an already constrained market. The Government is working to safeguard and grow the supply of rental accommodation.

I note People Before Profit-Solidarity’s Bill today is identical to the Private Members’ Bill which was debated and defeated in July last year. Then and now, the Bill seeks to address rising rents, similar to Private Members’ Bills tabled by Sinn Féin in recent years. Reducing rents in such an arbitrary way as is proposed in the Bill will not increase the supply of rental accommodation. Supply is our constraint. Rents rise if demand outstrips supply. We need to strike a balance between restricting the level of rents tenants pay and keeping ordinary landlords in the system. Landlords leaving the sector does not help tenants. It is worth remembering that 70% of landlords own just one rental property, while 86% own one or two rental properties. Deputy Barry referenced big institutional landlords, but the reality is it is mostly small landlords. We need residential rental accommodation, landlords and a well-regulated sector. Rental properties need to be maintained and any increase in maintenance costs needs to be accommodated. Costs will rise whether rents are reduced or not.

We should remember that approximately 2% of all tenancies become subject to dispute resolution in the Residential Tenancies Board, RTB. The rental sector is working well for most landlords and tenants. Since 2019, the RTB has express legal powers and is resourced to investigate and sanction improper conduct by landlords, including the imposition of unlawful rent increases in rent pressure zones, RPZs. Landlords can face a sanction of up to €30,000. If we were to introduce an across-the-board reduction in rents, setting aside whether it would be legally permissible, we would see more exits from the sector, thus stifling the much-needed supply we talk about. The 2% cap, where the harmonised index of consumer prices, HICP, is higher, introduced in December 2021, constrains rent increases for an estimated 75% of all tenancies in RPZs. The Government recognises the legal issues at play and introduced measures that balance the need to stabilise rents with the constitutional property rights of landlords.

I will address the substantive issues in the Bill. The Deputies propose in section 2 to amend section 19 of the Residential Tenancies Act to cap rents at 25% of local monthly nominal median household disposable income for households of the equivalent size, or 25% of national monthly nominal median household disposable income for households of the relevant size, whichever is the lower, as determined by the national rent authority which is proposed to be established under section 3; reduce existing rents in line with the cap within 12 months of commencement; and provide that an exemption may apply for luxury accommodation, as defined by the proposed national rent authority.

Notwithstanding the policy desirability or otherwise of setting and aspiring to a lower ceiling on net housing costs, that is, 25% of disposable income, such a ceiling would be lower than the metrics used to assess housing affordability generally. The EUROSTAT indicator of housing cost overburden rate is the percentage of the population living in a household where total housing costs, minus housing allowances, are more than 40% of disposable housing income. Other affordability metrics use between 30% and 35% of total disposable household income but are above the ceilings proposed in the Private Members’ Bill. There is no empirical evidence to demonstrate that 25% is a meaningful threshold of affordability. Housing stress and deprivation are predicated by low incomes and certain household characteristics, not by simple ratios independent of household income.

Such a method of determining rent price ceilings could incentivise landlords to cherry-pick tenants. Large households would be favoured over smaller households, raising risks associated with overcrowding. Single-person households seem likely in many instances to be excluded from the market as couples would be in a position to offer higher rent. Detaching price from unit size, location and quality would have detrimental impacts on the operation of the rental impact. Such impacts could be severe and unintended consequences such as overcrowding seem likely.

Such a system of rent-setting would have arbitrary effects. The rent paid by equivalent low-income households would vary considerably depending on labour market conditions, and that variation would not be due to market dynamics, which arguably equilibrate over time, but by regulatory decree.

The measures proposed in the Bill are likely to result in the withdrawal of many units from the rental sector and severely constrain future supply. The proposal that the new national rent authority be comprised of tenant and employee representatives only does not balance the constitutionally protected rights of landlords, nor is there any proposed member with expertise in this area or any independent member.

The Government actions to date in addressing high rents are more comprehensive and targeted than the Private Members’ Bill. A key element of existing rent control policy centres on designation of our RPZs in areas where rents are highest and increasing most. The Planning and Development (Housing) and Residential Tenancies Act 2016 introduced the rent predictability measure to moderate rent increases in parts of the country where rents are highest and rising fastest. These are RPZs.

The Residential Tenancies (No. 2) Act 2021 introduced measures in July 2021 to extend the operation of RPZs until the end of 2024 and prohibit any necessary rent increase in an RPZ from exceeding general inflation, as recorded by the HICP. The Act also provides that rent reviews outside of RPZs can until 2025 occur no more frequently than biannually. This provides rent certainty for tenants outside of RPZs for a minimum two-year period at a time. To address the rent affordability challenges building on foot of the unexpectedly fast-rising inflation rate, as recorded by the HICP, the Residential Tenancies (Amendment) Act 2021 was enacted to provide, from 11 December 2021, a cap of 2% per annum pro rataon rent increases in RPZs where the inflation rate is higher. In all cases, section 19(1) of the Residential Tenancies Acts 2004-2022 prohibits the setting of a rent that exceeds market rent.

The Government is helping tenants and taking account of both constitutionally protected property rights and the need to secure the supply of much-needed residential rental accommodation. I believe we are being fair.

The Government opposes this Bill. We do not believe People Before Profit-Solidarity's Bill would ultimately help renters. The temporary fix proposed would negatively impact on the supply of rental properties, ultimately building pressure on future rents. The measures introduced by Government to date provide a timely, effective and proportionate response to help all tenants in RPZs by requiring that any rent increase does not exceed the 2% cap. Tenants outside of RPZs have rent certainty for at least two years as their rent reviews can occur no more frequently than every second year.

Aside from the legal issues, the Government believes a blanket reduction of rents will not work in the long term. It puts at risk investment in the supply and upkeep of rental properties. Supply is key to reducing rents in a stable and long-term way.

I thank all Deputies who intend to contribute to this morning's debate. Government earnestly seeks to resolve the problems we have in housing. If any Deputy has a proposal that will help to alleviate the crisis, the Government will consider its merits, as it has done in the past. The Government will implement appropriate policy proposals. I do not see this Bill as an appropriate policy proposal and, as such, the Government is opposing it on Second Stage.

The objective nature of RPZ designations respects the constitutionally protected property rights of landlords and aims to safeguard continued investment in the sector by existing and new landlords to deliver the requisite supply of high-quality rental accommodation.

Under the updated Housing for All action plan, my Department has commenced a review of the operation of the private rental sector. A report on the review will inform policy considerations ahead of budget 2024 and guide the future policy direction for the rental market.

The review will involve public and stakeholder engagement and will take account of the significant regulatory changes over the past several years. The Government will consider and act on the review recommendations and conclusions on how our housing system could provide an efficient, viable, affordable, safe and secure framework, for both landlords and tenants. We welcome Members' input into this review.

Deputy Smith referenced the referendum on the right to housing. The Minister, Deputy O'Brien, confirmed before the committee yesterday that we are moving with that. The Government is committed to a referendum on housing.

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