Michael McDowell (Independent) | Oireachtas source

While passions are growing strong on this debate we should remember a few things. First, it is the case that some tenants are being gouged by excessive rent increases. The people who are riding the crest of a wave of a shortage are exploiting other people to provide them with housing. I look forward to hearing what the Government will do about the matter. I listened with interest to what was said by Fianna Fáil Senators about their plans to address it.

We are not in the simple binary situation suggested by Senator Gavan of either one does this or one does nothing. That is not the policy choice that is before us. We live in a world where the rate of inflation, due to international austerity and banking policies laid down by the European Central Bank in Frankfurt, is going to be between zero and 2% indefinitely as far as I can see. Senator Colm Burke referred to a period when inflation was at 10% and 12%. I cannot imagine, as long as we are members of the euro, that this will happen again. If that be the case then the Senators, with their rent certainty or CPI-related proposal, are advocating a situation where rent is completely taken out of the market sector and made into something equivalent to a static value of money. That is what CPI is about. The proposal will mean that properties will be available in five years' time for the same real amount as they are today. That proposal has been dressed up with the phrase "rent certainty". It is not rent certainty but a rent freeze. If the Senators are proposing a rent freeze, subject to the real value or purchasing power remaining the same, then as far as the property market is concerned in future there will be a permanent rent freeze in Ireland that has been dressed up as a rent certainty proposal.

If it had been suggested here that 3%, 5% or 7% was a figure over which there should be an excess profits tax or something like that then I can see somebody saying this represents a measure of social justice. To describe a permanent rent freeze as rent certainty is codding oneself.

Senator Gavan is full of genuine passion because he has seen people at the wrong end of the housing shortage who have suffered as a consequence. I fully accept his bona fides in respect of that situation. When one legislates for a market situation please let us remember one thing. Let us examine all of the consequences of a proposal.

Senator Coffey has made a point that I think is unanswerable. That may be offensive for some people to hear but it is unanswerable. If one effectively institutes a permanent rent freeze, subject to CPI, there will be consequences for those who would otherwise invest in properties for others to live in. There will be consequences for those who have such investments now as to how they treat them in the future.

The Cathaoirleach and I are long enough in the tooth to remember when there was rent control in this country. In those days there was a differentiation between furnished and unfurnished accommodation. It was interesting to hear what was said about Germany. In some places in Germany the landlord provides the shell of the building and the tenant, thereafter, is responsible for everything apart from the basic structure of the building. Installing washing machines, erecting beds, hanging curtains and laying carpets falls to the tenant. We have had that differentiation before. If one wanted to escape rent control in the days of rent controlled accommodation then one had to let one's house or flat furnished. The Rent Restrictions Act was very clear about what was and was not a furnished flat.However, it should be remembered that if one says one will have it CPI related, meaning the real value of the rental property will never change over a period of five, ten or 15 years, one should ask oneself who will pay for the new carpets and curtains. Who will pay for the washing machine or cooker when it goes wrong and the new television when the old one is antiquated? Who will do all that sort of stuff? Who will buy a new sofa and repair the kitchen chairs when they break in this system? No one seems to be addressing this issue and no one is asking what are a landlord's obligations, but it goes further than that.

There are people who bring their savings to the post office to get whatever the best rate is on deposits. It may be 2% or 3%. I do not know what rate is available, but I presume it is in that territory these days. Most people who are investing in rental accommodation are looking for a return of 5% or 6% per annum. That is the return most people actually have in mind. If they get up to 10%, they will say it is a really good investment. If a property rental roll was yielding 10%, there are certain people who have plenty of money who would just pour it into that property to get that kind of return. However, the important point is that if one is going to invest one's pension pot in bonds or savings schemes in local authorities or in some fund operated by an international financier, one is going to expect a return of 2% , 3% or 4% per annum. If one is willing to take the risk of being a landlord, one will require more than this. They are not the same thing. There is a risk in being a landlord. One has a problem if the roof falls off one's property. One has a problem if the tenants become insolvent or the place will be vacant for a while. These are risks that must be remunerated. To say the rate of return on properties is frozen by reference to the consumer price index is simply to turn off the remuneration associated with that risk.

I see a considerable moral force in saying one cannot gouge people for increased rent when there is an acute housing shortage. I can see the strong force in that argument, but, equally, what is being proposed fails to learn the lessons of history. It will involve a flight of capital from the rented sector, an exit of money, landlords and the like. They will ask why they should bother being stuck with a poor investment when they can get a return of 2% or 3% simply by placing it in an investment fund. These are the choices they make. They are not the plutocratic rich. They are people who, as has been pointed out, find themselves as accidental landlords. They include married couples who used to have two apartments with a mortgage but who have moved into one or who sold one to buy a family home and ended up with one on their hands, sometimes leaving them in negative equity. These are real situations. Those which involve vulture funds are not the norm in Ireland. It is not the case that if one goes around a rural town, one will find vulture funds rushing in to buy up all houses for letting. It is usually individuals who own these properties, including farmers and shopkeepers and members of Sinn Féin, not members of the grand classes in our society.

All of these proposals on so-called rent certainty which is not rent certainty but rent freezing will be counterproductive. If we enact them, we will find in two years time that there is less property available for rent. People will walk away from the rental market because it will simply not be worth their while to participate in it. If the ideologues who have decided to link with the consumer price index and freeze the real value of rents indefinitely have their way on one night in the Oireachtas, the result will be a trickle which will grow to be a stream of money leaving private provision of rented property. The money will go to other places where the law is more remunerative. I remind the House that some genius in Dublin City Council decided a number of years ago, for the very best of reasons, to get rid of bedsit accommodation. That genius said it was no longer acceptable in the early 21st century for people to share a bathroom. Any accommodation let out on that basis would be illegal from a certain date. I often wonder about this because now one has the phenomenon of a group of people renting a house and sharing a bathroom, but it was decided that the idea that they could all have their own separate rooms and share a bathroom was no longer acceptable. As a result, between 10,000 and 12,000 housing units were taken out of the market. Whole houses were emptied of their tenants at a time when there was an impending housing crisis. The only reason I mention this is that I have no doubt that the person who came up with that policy thought as passionately as Senator Paul Gavan that he was going to improve the living conditions of people who had the least in our society. The result was that he drove them out of their accommodation and exacerbated an emerging crisis.

Let us look at the consequences of linking a rent freeze with the CPI. If people really believe the consequence of that policy will be less capital being invested in providing homes for others, be it by small or big landlords, let them not make that mistake. This country has made many mistakes. The mere fact that one is well intentioned and passionate about the justice in one's case does not excuse one from the responsibility to look around the corner to see what market there will be in two years time if a rent freeze is introduced. For the foregoing reasons, I am opposed to the proposal. I fully accept that there are issues of social justice at stake, but nobody who proposes a rent freeze will stand up in two or three years and say, " I am sorry; I got it wrong. I drove out landlords and made fewer properties available for people to rent. I did not realise it at the time. I was blinded by the immediate injustice in people being gouged by a small minority of landlords and made a mistake." Apologies will not do. We have a responsibility to get our policies right and look at the consequences of the changes we are proposing. Freezing rents by reference to the CPI, even temporarily, although the small print indicates that this is not a temporary arrangement, will be counterproductive and have the effect of reducing, rather than increasing, the number of properties available to rent. Everybody who spoke this morning and this evening in the House has said supply is the issue. Please, do not turn it off.