Tuesday, 14 May 2019
Residential Tenancies (Amendment) (No. 2) Bill 2018: Second Stage
The 70% figure relates to those landlords who own just one property. I think that is what Senator Mullen meant. His point was that most landlords in this country own just one property. He was commenting on how we talk about landlords. Maybe this relates to the points that have been made about the Irish psyche. Perhaps the word "landlord" has a connotation that does not apply to landlords in this country. Some 70% of them own just one property and 16% of them own just two properties. Some 86% of landlords own just one or two properties. As a result of the financial crash, many of our landlords are accidental landlords. They never wanted to be landlords. They bought properties at the wrong point in the market and when their employment or family circumstances changed, they acquired a second property. When we talk about landlords, we have to be careful not to treat them like demons or like the caricatures we have seen in films, plays or books in the past. Of course some rogues exist.
Senator Marie-Louise O'Donnell spoke about whether the Bill is balanced. In and of itself, it is not. As a Bill, it is there to bring new protections for tenants and to try to bring balance to our rental sector as a whole. It recognises that there are rogue landlords who should not be called "landlords" because they are abusing human rights. They should not be called "landlords" because that is not what they are. Some of the things that people are doing when it comes to accommodation standards, overcrowding and everything else falls more into the space of people trafficking. We need to make sure we can get them properly and get them good, in order that their cases will act as a disincentive to others who might try to take advantage of the system.
We recognise that we are in a period of transformation. We are moving from a rental sector that is not modern, European or functional to one that is more modern and European and meets the expectations of a new generation. That is challenging at a time of supply difficulties.On the specific point regarding balance, there is an imbalance of power at the moment for tenants who have a problem with their property and who want to make a complaint. They can run into difficulties with their landlords and find themselves getting a notice to quit. That is why we have given the RTB the power to make an independent inspection without tenants having to make a complaint. Tenants will also be able to make a complaint anonymously. We are giving powers to them that they did not have previously, but which they should have, because their position is more precarious than that of the landlord given the property is their primary residence.
Landlords are leaving the market and I have been warning about this for two years, since I became Minister. I look at the data. I am criticised all of the time for looking at and speaking to data but they tell us what is happening. More than a year ago I said, on the basis of what the data were telling us about planning permission applications, commencement notices and completions, that the increase in house prices would slow and prices would fall. That is exactly what we are seeing now. Due to rent caps, we are also seeing this in rent pressure zones, albeit not as quickly as we should. Recent data from the RTB showed rents falling for the first time. The daft.iereport is from one company and is based on advertised rents rather than on rents agreed. It also uses a very small dataset but even that report is showing that things are not moving as quickly as they were before the crisis. That is important because it tells us that there is some progress. Of course, it also tells us that rents are too high and that we need to do more, which is exactly why this Bill is so important.
Some landlords are leaving the market because they were accidental landlords in the first place and because house prices have recovered. While they have not reached peak level - they are still 20% below that - house prices have recovered enough to enable some to get out of the landlord game. Some landlords are leaving the market because they have had a negative experience, with tenants not paying their rents. They cannot afford to carry that and so rather than trying to fix that, they have decided to get out of the market. Some landlords are leaving simply because of changed circumstances in their own lives. What this speaks to is some of the dysfunction of the market whereby our rental sector is dependent on small landlords. A full 86% of landlords only own one or two properties which makes the sector very volatile, given how things can change in an individual's life.
We want to find a balance. We want to have landlords coming into the market and making a long-term commitment of at least 20 to 30 years. That is what we want because then we can secure long-term leases. While people like to criticise large institutional investors, it must be acknowledged that what they bring to the sector is a commitment to rent a property for a long time. Furthermore, because they are often publicly listed companies and have shareholders, they cannot even try to break the law. They cannot go anywhere near the temptation to which some individual landlords might succumb because they have a responsibility to their boards, shareholders or parent corporation. That is not to say that all of these large companies are angels. That is why for the first time, through this legislation, we are bringing these large landlords into the scope of the rent pressure zone regulations. That is why the Minister for Finance and I have said that we will examine the tax treatment of these entities to make sure that any entity in the rental sector is operating under fair regulation and is compliant with the tax code.
We are trying to provide more balance and stability in the rental sector in the context of landlords. We know from the data that large institutional investors comprise a small percentage of the rental sector. Only 1% of transactions in 2017 involved large institutional investors. We are keeping an eye on this but we know that if we want to remove some of the volatility in the market, particularly over the past ten years, we will need more of the larger, long-term players. Benefits come with that. We want to manage the benefits and embrace the upside while minimising any potential downsides that might arise. One of the things we did for landlords in this year's budget was fast-track the reintroduction of 100% mortgage interest relief. It had been cut because of the crash. We said we would bring it back and we did it more quickly than initially intended because we recognise that landlords, if they are to remain in the market, need to be able to make enough money to at least cover the management of the property properly and to make a profit. I am not talking about a super profit but why would landlords take the risk of investing and why would we even ask them to do so if there was not going to be some return? We must remember that we cannot force people to be landlords. As more landlords leave the sector, our challenge in respect of people in housing insecurity and at risk of homelessness increases. That is why this all comes back to the crucial word which many Senators have used - balance.
We are bringing forward this Bill to ensure balance in the sector. It has 38 sections that are supportive of tenants because there is a lack of balance in the market at the moment. However, this is not one piece of work that will do the job. Of course, we will not all go home tonight and say that we have fixed the rental sector. That is why I also mentioned a second rent Bill that will be presented for pre-legislative scrutiny in the fourth quarter of this year. If I can, I would like to commence that legislation in the Seanad. I gave a commitment a number of weeks ago in this House that I would seek to commence more legislation in the Seanad which is only fair, given the time this House has given to rental measures. That is what I would like to do with that Bill later this year. It will deal with issues raised by Senators, which are not addressed in the Bill before us today.
The deposit protection scheme was a significant issue in 2014 and 2015 but deposit problems have fallen down the list of complaints received by the RTB. It was becoming less of a priority but, at the same time, we were seeking to bring forward priority legislation that would have the greatest support in the House and would move through the legislative process quickly-----