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

The purpose of the residential premises rental income relief is to provide for a new tax incentive for small-scale landlords. This measure is specifically targeted at attracting and retaining small-scale landlords in the private sector. The purpose of this relief is to support the continued participation of small-scale landlords in the rental market, an objective being progressed through Housing for All, the Government’s housing plan to 2030.

Landlords are an essential feature of a functioning housing market. Rising rents are driven by a shortage of supply, so stabilising and increasing the supply of rental properties should ease upward pressure on rental prices and make it easier for prospective tenants to find affordable homes. The Government is acutely aware of the challenges in the housing market. As I have said on many occasions, the key problem is a lack of supply. This is why the Government is committed to increasing the supply of all types of homes, including social, affordable, rental and owner-occupier.

In my budget 2024 address, I acknowledged that housing is undoubtedly the biggest domestic challenge we face today and remains a top priority for Government. I also acknowledged that in recent years we have seen a decline in the number of small investors in the market owning one or two properties. A full 86% of landlords in the market own just one or two properties, and they have a vital role to play. However, we are seeing the departure of a significant number of small-scale landlords. I believe taxation is a factor in that regard.

The evidence demonstrates a change in our rental market. There has been a significant reduction in the number of small-scale landlords owning one or two properties. That evidence is clear. The most recent data from the RTB on notices of termination show that from quarter 3 of 2022 to quarter 3 of this year, more than 24,000 notices of termination were received by the RTB. The number of such notices where the reason given was because a landlord was selling the property is 60%. In 2017, the number of registered tenancies with the RTB was 313,000, falling in consecutive years. For 2022, the latest figure from the RTB, which now has a system of annual registration, was 246,000, down from 313,000 in 2017. That is a significant reduction over the period. The evidence is clear that small-scale landlords are leaving the market.

This proposal seeks to encourage investment that is already in the market to stay in the market. In that respect, relief is provided where the property remains in the rental market. It will also try to address that dramatic imbalance between the exodus from the market and the very low level of entry into the market in respect of the provision of private rental accommodation. It is important that there is a recognition of the importance of the private rental sector. The State is already providing over €5 billion of capital through the Exchequer, the Land Development Agency and the Housing Finance Agency to build the homes that we know we need, including affordable and cost-rental homes and public housing. We are providing over €5 billion but there will always be role for the private rental sector. There seems to be an unwillingness to acknowledge that among many in this House. In order to have a private rental sector, we have to have property owners, or landlords, who are willing to provide that property to tenants, to provide homes. It is necessary to have a rental sector where there is a continued supply of private rental accommodation in the market and this measure can make a contribution towards achieving that goal.

The point was made by the Deputy this evening, and was also made on Committee Stage, about the alleged unfairness of the income tax treatment here versus that of ordinary PAYE workers, for example, but we have already made decisions for public policy reasons to treat income from different sources in a different way because we are trying to achieve a certain outcome. I give the example of land leasing in the agricultural community. We want to encourage the retention of the family farm and, ultimately, succession. Another example is the rent-a-room relief, where a person can earn €14,000 entirely tax free. That income is free from income tax, USC and PRSI because we want empty bedrooms in homes to be made available for people who need accommodation. That is a public policy choice we made to increase the supply of rooms in the rental market. We have also made decisions around the treatment of certain income in relation to the provision of some childcare services, for example and it is important that we put all of that on the record.

Earlier this year, as Deputies will be aware, Focus Ireland, the homeless charity, made a submission to the Government. It partnered with Chartered Accountants Ireland and called for specific measures to help to retain investment in the rental sector by small-scale landlords. It set out a whole series of measures that the Government is not in a position to do. What we are doing here, I acknowledge, is a modest measure. It will only cost in respect of the properties that remain within the market over the full period of this particular relief being available and that is important. There is no doubt that we are seeing and continue to see a reduction in the number of small-scale landlords in the market providing accommodation for our people. On the other side, we are seeing very little inward activity. There is very little investment by small-scale landlords and we have to remember that we must have accommodation available in towns and villages throughout the country, with one or two units here and there. Institutional investors have a role in providing large blocks of rental accommodation, but in villages and communities around Ireland, we need rental accommodation available in small numbers in different pockets around the place. When we look at the data from the Central Bank on investment mortgages, we are not seeing any significant level of activity in terms of buy-to-let mortgages. Small-scale landlords are leaving and there is very little inward activity in the market. That means an ever tightening supply of rental accommodation. Ultimately, the people who lose out in that scenario are the people who are trying to find a home. This is a measure designed to help to retain investment and retain rental accommodation in the market at a time when, we all acknowledge, it is badly needed.

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