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

I thank Senators for their recommendations. 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 difficulties 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 address I acknowledged that housing is undoubtedly the biggest domestic challenge we face today and remains a top priority for the 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 and 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. The most recent data from the RTB on notices of termination show that from quarter 3 of 2022 to quarter 2 of 2023, some 20,000 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 was in the order of 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. That is a significant reduction over that period. The evidence is clear that small-scale landlords are leaving the market in significant numbers.

This proposal seeks to encourage investment which is already in the market to stay in the 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 necessary to have a rental sector where there is a continued supply of private rental accommodation in the market. This measure can make a contribution towards achieving that goal. In respect of the recommendation put forward by Senators Kyne, Ahearn and Cummins, the relief will be as follows: €3,000 in the tax year 2024; €4,000 in 2025; €5,000 in 2026; and €5,000 in 2027. This will equate to a tax credit of up to €600 in year one, €800 in year two and €1,000 in each of years three and four. As the credit increases from €600 to €1,000 during the lifetime of the relief, I do not believe it is necessary to prepare a report on changing the rate of the relief at this time.