Tuesday, 14 May 2019
Residential Tenancies (Amendment) (No. 2) Bill 2018: Second Stage
We all know that we are in the middle of a serious housing and homelessness crisis. The early enactment of this Bill has been given priority by the Government and the Attorney General and facilitated by Deputies in all parties in Dáil Éireann and it now comes to the Seanad for its careful consideration. I thank Members for the time they are devoting to it this week in order that, hopefully, the Bill will pass both Houses this week. I will not pretend that this Bill will put an end to the current crisis. It will not, but it will definitely delay and has good potential to prevent homelessness for many households. The significantly extended notice periods for tenancy termination will afford tenants a greater chance to find alternative accommodation, with or without the support of a State scheme. The new powers for the Residential Tenancies Board, RTB, to investigate and sanction improper conduct by landlords will ensure that any rent increase in a rent pressure zone, RPZ, or any tenancy termination, is lawful. The RTB will have the choice at the outset to prosecute landlords for new related criminal offences through the courts rather than using its own new administrative sanctioning powers if it deems it necessary to do so. Neither the RTB, nor I, seek to criminalise landlords but if persistent and serious, unlawful conduct by landlords occurs, I think we can all agree that a criminal record, a fine and imprisonment might be the only appropriate course for the RTB to pursue. Under this Bill, all RPZs will continue in force until the end of 2021. If this Bill is not enacted, the RPZs or rent caps in the Dublin local authorities and in Cork city are due to expire in December of this year. Again, I think that we can agree that we still have high rents in those areas and in the other RPZs and that Government intervention is urgently needed to extend rent caps beyond the end of this year.
For the first time, new homes for the rental market and large institutional landlords will be covered by rent caps and associated regulation, which is significant. I will get into the detail of the Bill a little later but I wish to reaffirm for Senators that all of our efforts, as a Government and as an Oireachtas, are being directed towards solutions that will help bring the crisis to an end. Fundamentally, supply must be and is being increased, thanks to the policies the Government has pursued and is spearheading through Rebuilding Ireland. As supply increases, we must also ensure that we protect people who are currently struggling with housing affordability and security issues. That places a particular focus on the need to continue to reform the rental sector. The rental sector in Ireland still needs to develop and mature in order to provide a viable, sustainable and attractive alternative to home ownership, rather than serving as a temporary refuge or a staging post on the route to home ownership. The rental market here is not like that of other European countries yet. It is true that we do not have a mature rental sector but we are trying to transform the sector into a more mature European-type one, but we do so at a time of undersupply which makes it very challenging. We do not have a cost-rental market. In other countries, provision of cost-rental accommodation provides 20% to 25% of total accommodation. We are at the very early stages of building a cost-rental sector. If we get it right, the long-term benefits are obvious. What we do have is the Residential Tenancies Board, which provides strong protection to both tenants and landlords.
A professional landlord sector similar to other European countries is beginning to build in Ireland, but the majority of landlords, some 86%, own only one or two properties. Many are accidental landlords following the financial crash in this country, which is still having an impact today on housing, banking and public and private debt levels. The make-up of the landlord sector, with its heavy reliance on small and accidental landlords, has to be borne in mind. We must be careful in making changes to residential tenancy law, that the changes do not inadvertently cause an unsustainable exit of landlords from the rental sector, which would only make things worse. Recent data from the RTB tell us that landlords have left the market. More than 1,700 have done so since 2015. That is a real and legitimate concern that all of us must keep in mind as we progress new reforms in this sector that protect tenants. We must work with what we have and secure continued participation in the residential rental accommodation sector, as we improve and reform it. That will require participation from the traditional landlord as well as participation from the larger, institutional landlords, some of which have only recently begun to participate in the residential rental sector in Ireland. Such activity must be regulated and taxed appropriately. I accept that there is concern with regard to institutional investment in the sector and the Department of Finance and my Department will closely monitor developments in this area. At present, fewer than 5% of landlords own more than 100 units. The vast majority of landlords, or just over 70%, own just one property, with a further 16% owning just two rental properties. Official CSO statistics of the purchasing activity of institutional investors in 2018 will be available later in the summer but in 2017, the combined purchasing activity of property funds, real estate firms and real estate investment trusts, REITs, accounted for a net 1% of transactions. Crucially, institutional investment is adding to supply, and that is explicitly recognised and welcomed in this week's daft.iereport on the rental market. We must be careful and measured in our assessment of developments in the rental market. We need supply to grow.
Figures from the RTB show that more than 339,000 tenancies registered from both private and approved housing body landlords at the end of 2017. People are not renting solely because they cannot afford to buy a home, although I recognise that is a challenge for many in Ireland today.Many are renting because they choose the flexibility that renting offers or because they do not want to take on the significant debt that is a mortgage, or the liability that home ownership can sometimes become. It is also true that Irish life is changing, and has been for some time. As far back as 1991, the level of home ownership started to decrease. Changes resulted in people staying in education longer, marrying or committing to a partner later and putting down roots in a community at an older age than in previous generations. These factors are also leading to a growing demand for rental properties, different types of rental properties from the ones that we may have seen before and a better functioning rental sector. Not only in our rental policy have we sought to meet this demand but also in the new planning and building guidelines that we have developed in the past 18 months around build-to-rent apartments, more cost-effective apartment delivery and the introduction of new concepts such as co-living. These reforms are now leading to an upsurge in planning applications for new apartments.
While it is the case that renting has been a negative experience for some and has not meant a secure and safe home, renting works for the vast majority, and we need it to continue to work, but to work better than it has been working, with greater transparency and accountability for tenant and landlord and, crucially, greater affordability.
Under Rebuilding Ireland, a rent increase restriction of 4% per annum was introduced in rent pressure zones, where very steep rent hikes arose on foot of particularly high demand. What we have seen in RPZs to date has been a moderation of rent inflation, particularly for existing tenancies, but rent inflation and rents themselves remain unacceptably high in many parts of the country. This is also having an impact on people's quality of life as they try to save for a home. They try to make unacceptable sacrifices to meet the rent or sacrifice time with their families by making long commutes because they cannot meet the rent closer to where they work. Others are living in overcrowded circumstances or have to move back in with parents at a time in their lives when they should not have to. Those really suffering have found themselves without a home and are in emergency accommodation today. There are too many in that situation. These scenarios demonstrate the importance of the Bill that we have before us.
The Residential Tenancies (Amendment) (No. 2) Bill 2018 builds on what has been achieved by the Residential Tenancies Acts and the RTB to date. The Bill provides for the future development of the rental sector, with stronger protections for tenants. The Bill centres on priority proposals in order to facilitate quick passage through the Oireachtas. It does not address everything that we need to do in the rental sector. I expect to submit a further rent reform Bill for pre-legislative scrutiny later this year. The Bill before Members today contains the priority measures that we believe are necessary and must be enacted now in the best interests of existing and future tenants. My colleagues in Dáil Éireann have helped prioritise its passage, and I hope Senators will agree that this Bill will improve the situation for many households and assist in having it put onto the Statute Book as soon as possible.
The Bill delivers on a number of commitments flowing from Rebuilding Ireland and the commitments made in September 2017 to provide the RTB with additional powers and resources to deliver enhanced protections to both tenants and landlords. The key measures and reforms are designed to enhance enforcement powers for the RTB; provide greater security of tenure for tenants; and further underpin the operation of the rent caps, along with some further targeted priority measures, including bringing student accommodation under the remit of the RTB, in addition to RPZs, and introducing amendments to the Planning and Development Acts to provide for the regulation of short-term lettings.
The Bill is set out in three Parts and 38 sections. I will now refer in some detail to the main provisions. Part 2 amends the Residential Tenancies Act 2004 and provides for a number of key changes. For example, sections 3 and 37 of the Bill are key provisions to apply the Residential Tenancies Acts to student-specific accommodation let under a tenancy or a licence to a student by a private provider or a public educational institution. I have worked together with the Minister of State responsible for higher education, Deputy Mitchell O'Connor, the Attorney General and members of the Oireachtas Joint Committee on Housing, Planning and Local Government to make this happen. I thank all involved, specifically student representatives and the RTB, for assisting to make sure that this important legal change has made it to the Seanad for consideration today. It is important that the rent increase restriction in RPZs apply in this sector and that there be recourse for students to the dispute resolution services of the RTB. Sections 4, 5 and 18 provide for consequential technical amendments required in the context of the student-specific accommodation sector.
Section 6 amends section 19 of the Act of 2004, which relates to rent setting by, among other things, modifying the exemption from the rent increase restriction of 4% per annum for dwellings coming onto the rental sector in an RPZ. Under the Bill, any dwelling being let that has not been let in the previous two years can set a rent that does not exceed the market rent level. Any rent increase thereafter cannot exceed the rent increase restriction of 4% per annum until after the expiry of the RPZ. This modification tightens the exemption in respect of new lettings and new landlords and should be effective in better restricting annual rent increases in RPZs.
We are inserting a definition of a "substantial change in the nature of the accommodation provided under the tenancy" in respect of which an exemption applies from the rent increase restriction or cap of 4% per annum to the extent that the works carried out to the dwelling concerned consist of a permanent extension that increases the floor area of the dwelling by at least 25%, improves the BER by seven ratings or results in at least three of the following: the internal layout of the dwelling being permanently altered; the dwelling being adapted to provide for access and use by a person with a disability; a permanent increase in the number of rooms within the dwelling; in the case of a dwelling with a BER of D1 or lower, an improvement of at least three ratings; or, in the case of a dwelling with a BER of C3 or higher, an improvement of at least two ratings. This definition is important and has been developed as the Dáil debates on the Bill progressed. The most recent changes relate to the BER improvements required. I am happy that the Bill recognises the importance of reducing emissions. I am also happy that tenants will see real benefits and real cost savings as a by-product of better restricting the use of this exemption. The provision makes clear that the exemption cannot be claimed in respect of works solely carried out for the purposes of compliance with regulations covering minimum standards for rented dwellings.
Landlords will now also be required to notify the RTB, and to provide supporting information, where they wish to avail of an exemption from the rent increase restriction. Also, three new offences are provided under section 6, namely, non-compliance with the rent increase limit provisions, knowingly or recklessly furnishing information to the RTB that is false or misleading in a material respect in a bid to claim an exemption, and non-compliance with the new requirement to notify the RTB of an exemption claim.
Section 20 of the Act currently provides that after 4 December 2019, rent reviews outside RPZs can again occur on an annual basis. Currently such reviews can only occur on a biannual basis. Section 7 of the Bill amends section 20 of the Act of 2004 to extend the provision for biannual reviews until 31 December 2021.
Section 8 of the Bill amends section 24A of the Act of 2004 by providing that the average rent criterion to be used for the purpose of qualifying an area within Kildare, Meath or Wicklow as a RPZ should be based on rents in the 27 local authorities outside Dublin and the average rent to be used for areas outside of the greater Dublin area, GDA, should be based on the rents in the 24 local authorities outside the GDA.
Currently, a single average rent is used for the entire country, and section 8 is intended to make it easier for areas to become a RPZ and to recognise the effect that rents in Dublin and the GDA have in raising the average rent level that must be exceeded. Section 8 also provides that existing RPZs shall now expire on 31 December 2021, irrespective of the expiry date placed on any RPZ designation order made to date.
Section 10 of the Bill inserts a new section 24BA into the Act of 2004 to provide that the administrative area of Cork City Council, which was deemed a rent pressure zone on 24 December 2016, shall include the area transferring from Cork County Council to Cork City Council on 31 May 2019. Some of the areas being transferred, in Ballincollig and Carrigaline, are already designated as RPZs.
Sections 12 and 13 of the Bill amend sections 34 and 35 of the Act of 2004 in connection with tenancy terminations. A registered architect or surveyor will be required to certify that any substantial refurbishment or renovation works cited as a ground for a tenancy termination would pose a health and safety risk to any occupants and should not proceed if the dwelling is occupied and that such a risk is likely to exist for at least three weeks. Once such works are complete, a re-letting must be offered to the former tenant, where contact details have been provided. Currently, such a re-let offer is only required where such works are completed within six months of the termination date. Where a landlord notifies of a tenancy termination grounded on his or her intention to sell the dwelling, this Bill provides that such an intention must be framed within the nine months following the termination date rather than the current three-month timeframe. The Bill also requires a landlord to provide a statutory declaration to the tenant that where he or she does not enter a contract of sale within that nine-month period, he or she is required to offer a re-letting of the dwelling to the former tenant.
Under the Bill, where a tenancy is terminated because a landlord or a family member wishes to occupy the dwelling, that dwelling must be offered for re-letting to the former tenant where they have provided contact details if it becomes vacant within 12 months of the termination, rather than the six-month period provided for currently. Also, where a tenancy is terminated because the landlord intends to change the use of the relevant property and where the tenant has provided contact details, the landlord will now be required, within one year of the termination, rather than within the current six-month period under the Act, to offer a re-letting of the dwelling to the former tenant. A landlord will now also be required to copy the RTB with a termination notice within 28 days after the termination notice period expires. This will assist the RTB in the operation of its new investigation and sanctioning power under section 28 of this Bill.
Section 15 of the Bill inserts a new section 64B into the Act to clarify that the combined duration of any Part 4 tenancy and any subsequent further Part 4 tenancy should count in the “duration of tenancy” used in calculating the termination notice period to be given under the tables to section 66 of the 2004 Act.
Section 16 of the Bill amends section 66 of the Act of 2004 to increase significantly the notice periods a landlord must provide in serving a notice of tenancy termination to any tenant who has occupied a dwelling for more than six months and less than seven years. For example, for any tenancy of a duration longer than three years and less than seven, the tenant is entitled to 180 days' termination notice, which is approximately six months' notice, representing an increase of almost 100 days' notice for some tenants. These longer notice periods should take some of the pressure off tenants at what can be a very stressful time. Section 16 also specifies 28 days as the minimum notice period applicable to tenancy terminations by a landlord or tenant in student-specific accommodation. Sections 19 and 20 technically amend sections 93 and 109, respectively, of the Act of 2004 to empower the RTB to charge for its mediation service. There are no plans at this time to charge for its mediation service, but there is a recognition that it is a costly service for the RTB to provide and that cost recovery may be required in the future.
Section 21 technically amends section 123 of the Act of 2004 to make it mandatory for the board to publish its determination orders and notices of cancellation thereof. The board currently has the option of publishing. The amendment aims to enhance transparency.
Section 22 amends section 134 of the Act of 2004 to require the annual registration of tenancies with the RTB. The aim is to gather accurate and detailed tenancy and rental data on an annual basis.
Sections 25 and 26 amend sections 137 and 137A, respectively, of the Act of 2004 to provide for the RTB to charge a €40 fee for annual registrations of tenancies. A reduced registration fee of €20 applies for approved housing body, AHB, tenancy registrations by an AHB. A late fee of €10, or €5 for AHBs, will apply for each month a tenancy remains unregistered.
Section 27 inserts a new section 144A into the Act of 2004 to empower the RTB to pursue updates to its register from landlords on rent alterations related to tenancies in their dwellings. A new criminal offence is created for non-compliance with the requirement to update rent information on the RTB register. The contravention of the requirement under section 139(1) of the Act to update the RTB on rent alterations is also listed in the new Schedule 2 as improper conduct by a landlord which will be subject to the sanctioning regime under the new Part 7A of the Act.
Section 28 inserts new sections 148R to 148AG, inclusive, into the Act of 2004 to form a new Part 7A dealing with complaints, investigations and sanctions. This is the key section of the Bill, providing the RTB with its new administrative investigation and sanctioning powers. The RTB is empowered to initiate an investigation with or without a complaint being made by the public of improper conduct by a landlord under the Act. Oral hearings on improper conduct may take place. Sanctions may be imposed that take into account the nature of the improper conduct in question and may comprise one or all of the following: a financial penalty of up to €15,000, payment of RTB investigation costs up to €15,000 and a written caution. The section provides for a right of appeal to the Circuit Court against a sanction. If no appeal occurs, the section requires the Circuit Court to confirm all sanctions.
Section 29 technically amends section 151 of the Act of 2004 by extending the functions of the RTB to include the investigation of landlords and the imposition of sanctions in accordance with the new Part 7A. As Minister, I will be legally required by this amendment to report to the Houses of Oireachtas on prevailing rent levels in the private rented sector based on 12 months of annual registration data collected by the RTB.
Section 30 inserts a new section 164A into the Act of 2004 to provide for the appointment of authorised officers and decision makers by the RTB and the creation of a panel of authorised officers and a panel of decision makers for the purposes of implementing the new sanctions regime under Part 7A.
Sections 31 and 32 provide for minor technical amendments to the Act.
Section 34 inserts a new Schedule 2 into the Act of 2004 which details the improper misconduct by a landlord in respect of which investigations may be caused under Part 7A, including non-compliance with the rent increase restrictions; non-compliance with the new requirement under the Bill for a landlord to notify the RTB where he or she wishes to avail of an exemption from the rent increase restrictions; seeking to rely on an exemption from a rent increase restriction in respect of a dwelling that does not comply with the exemption requirements; non-compliance with the requirement to register a tenancy; non-compliance with the requirement to update the register with particulars of rent alterations; false or misleading citations of tenancy termination grounds in tenancy termination notices; and a failure to make re-letting offers to former tenants where required to so do in accordance with the new provisions we have included surrounding re-letting offers.
Section 38 inserts a new section 3A into the Planning and Development Act 2000 to provide for the regulation of short-term lettings, proposals which are aimed at addressing the impact of short-term letting on the private rented housing market in areas of high demand. In that regard, it provides that the short-term letting of a house in a rent pressure zone is a material change of use. Accordingly, planning permission is required, unless a specific exemption applies. The Bill provides me, as Minister, with specific regulation making powers that will enable planning authorities to require persons involved in short-term letting in rent pressure zones to provide specific and specified information for their local planning authority. A contravention of a requirement of such regulations will be an offence and subject to a summary fine of up to €5,000.
Short-term letting is defined in the Bill to mean "the letting of a house or part of a house for any period not exceeding 14 days, and includes a licence that permits the licensee to enter and reside in the house or part thereof for any such period in consideration of the making by any person (whether or not the licensee) of a payment or payments to the licensor". The provisions in the Bill related to short-term letting will be supplemented by exempted development planning regulations which will clarify that home sharing and limited short-term letting in a person’s principal place of residence will be allowed in rent pressure zones to an annual cap of 90 days without the need for planning permission. As required by the planning code, the regulations will be brought before the Oireachtas for approval before signature. Accordingly, there will be an opportunity to discuss the short-term letting regulations in detail with the joint committee before they come into effect on 1 July. These proposals strike a reasonable and appropriate balance between alleviating the impact of short-term tourism letting on the private rental market and facilitating tourism letting where private rental need and housing demand are not acute. I trust they will receive the support of the House.
In addition to the changes being ushered in by the Bill, the RTB is actively pursuing a range of modernisation initiatives and being better resourced to deliver enhanced protections to tenants and landlords. The proposed new powers for the RTB under the Bill are a crucial step in expanding its overall role and functions as part of a multi-annual change management programme to enforce tenancy law proactively within the residential rental sector. Budget 2019 provided for a 67% increase in Exchequer funding to strengthen the RTB's powers and provide for greater local authority inspections in the residential rental sector. The Bill represents a significant evolutionary step in the development and enforcement of residential tenancy law. The introduction of powers through the Bill for the RTB to sanction improper conduct by landlords who flout the rent increase restrictions in RPZs and tenancy termination procedures should deter such conduct and protect tenants. I do not want to see landlords sanctioned or criminalised, but I want the RTB and the courts to have the power to do so, if required. Landlords who conduct their affairs lawfully have nothing to fear. I do not want to deter investment in the rental sector, particularly during a housing and homelessness crisis, but I do want to prevent homelessness. Every section of the Bill protects tenants. The Government has to step in to protect the most vulnerable. A household facing homelessness because of an illegal rent hike simply deserves better protection. I commend the Bill to the House as an important and necessary step to strengthen and enforce security of tenure for tenants.
Although I recognise it is not normal conduct of business to take the Bill in one week as proposed, the importance of the legislation and it being brought into effect as quickly as possible speaks for itself. Any further unfortunate delay would have a consequential impact, particularly on our ability to commence the regulation of short-term letting on 1 July as proposed and agreed to in the Dáil and on Committee Stage. Senators have performed due diligence on this issue. The Minister of State, Deputy English, and I have appeared many times in the Seanad to deal with housing issues. On many occasions we have discussed the challenges of affordability and insecurity of housing facing those who are renting who sometimes, unfortunately and unacceptably, find themselves homeless, as well the challenge of getting short-term letting stock back into long-term letting stock. All of these issues have received a great deal of scrutiny in this Chamber and at the joint committee. The Bill has been subject to a great deal of scrutiny and it is imperative that it now be passed by the House in order that it can be enacted and we can proceed to have the new laws in place to protect tenants and, crucially, that on 1 July we can begin to get short-term letting rental homes back into the long-term rental market in rent pressure zones where the demand is highest and they are needed most.