Thursday, 19 January 2017
9. To ask the Minister for Housing, Planning, Community and Local Government if he will introduce measures to define market rent; if he has considered taking the example of the mietspiegel arrangement in Germany, whereby local rents are calculated by local government on the basis of square metre; and if he will make a statement on the matter. [2172/17]
At present, as we all know, market rent is an immeasurable quantity. Has the Minister considered looking at the mietspiegelarrangement in Germany, whereby local rents are calculated by local government on the basis of square metre? It is an index of the rent paid by tenants broken down by size, location, age and standard categories. It means there is a defined market rent by which tenant and landlord have a basis for comparison. I am not saying for one moment that we should throw the landlord to the wind. Security of tenure can also mean security for the landlord. There can be stability on both sides, which we lack at present.
Market rent is defined in the Residential Tenancies Acts as the rent a willing tenant would give and a willing landlord would take for the dwelling concerned, having regard to the other terms of the tenancy and the letting values of dwellings of a similar size, type and character and situated in a comparable area. It is important to note that any notice of new rent given by a landlord to a tenant must be accompanied by three examples of comparable rents, all relating to dwellings advertised for rent in the month prior to the date of the notice. Having considered the definition of market rent during the development of the strategy, I believe this is a robust definition which is enforceable having regard to the RTB rent index, and I do not intend to amend the definition of market rent at this time.
My understanding from a note I have about Germany is that new rent control measures were part of the programme for Government in 2013 and came into effect in September 2014. The legislation sets out that rents for new leases in certain areas can only be set at a maximum of 10% above average local rents. This is aimed at keeping local average rental inflation relatively low. In comparison, in Ireland rents cannot be set above the market rent and in a rent pressure zone rents under new leases are governed by new rent control measures with maximum increases of 4%. I am not sure that switching to the German approach would make a significant difference. Under the mietspiegel, which means "rent mirror", approach, local authorities attempt to calculate, on the basis of average local rent, what certain areas are paying as a guidance figure. We are trying to achieve that as well by forcing landlords to get at least three rent advertisements for similar properties in the area, a process that is overseen by the RTB. I understand the point the Deputy is making and that we need to find a mechanism to slow down dramatic rental inflation and protect against landlords taking advantage of the fact that there is a significant supply shortage in certain areas. We are trying to do that with the introduction of the rent pressure zone measures before Christmas.
The big problem is that the 4% rate is on top of a rate that is way too high and unaffordable for too many people. It is having a huge impact and the Government is now hearing how it affects the Brexit process. The fact that accommodation is so expensive will stop companies from moving here. One can rent an apartment in any city in Italy for €400 per month and there is no comparison between what one pays in Berlin and what one pays here. Putting 4% on top of what is already there is off the Richter scale for too many people.
I accept that we cannot build social housing overnight but we have to have an appetite to build a lot of it and to get the process started to do so. I am not convinced that the Minister really wants to build a lot of new social housing. Does the Minister agree that, to tackle the long-term problem, we will have to do that?
I do. At the moment social housing makes up between 7% and 8% of total housing stock. I think the average in Europe is between 17% and 18%. We need to significantly increase our social housing stock and that is why we are proposing to increase it by nearly 50,000 over the next five years, increasing social housing stock as a percentage of the total by nearly 30%. I am absolutely committed to that because the State's intervention in housing needs to be balanced. We need to intervene around affordable housing and, in particular, around social housing. We need to ensure we build housing in the right places, achieve integration and mixed tenure, as well as decent homes for people in vibrant communities. I have an agreement in Cabinet to spend €5.3 billion doing that, which is a pretty significant commitment.
We all accept that people having to pay almost 40% of monthly income on renting a roof over their heads is unsustainable in the long term. Rents are so much higher in Ireland than in Europe and it costs so much more to buy that up to 30% of people in the future may need social housing. Deputy Donnelly said we were looking for an incentive for house building to compete with the commercial sector. We should let the private sector build commercial property but the State must play a more active role in the residential sector.
I will not get to my next question but I do not understand why the Government has not dealt with the site value tax. The tax is supposed to come into effect in two years' time but there are more holes in it than in a sieve. We should charge a serious rate on land that is not being built on. A threshold of half a hectare has been set but that is one acre and a quarter. It means that any site under one and a quarter acres in Dublin city will not attract the tax. I built 28 apartments on a fifth of an acre but the Minister has introduced a minuscule levy that only applies to sites bigger that an acre and a quarter. There has not been a genuine attempt to tackle landbanking but it is the biggest problem we have.
I am not sure which element to answer now as there were a lot of questions. We need to bring vacant sites into use, particularly land that has been zoned for residential use. There is a lot of that in Dublin, some of it with full planning permission as well as zoning. We took advice on how soon we could introduce a vacant site levy and we are proceeding with that. If I could do it earlier, in a legally sound way, I would do so. Throughout 2017 local authorities will put together a register of vacant sites and in 2018 this register will be the basis for levies - effectively fines - for inactivity on sites in 2019.