Tuesday, 23 November 2021
Residential Tenancies (Amendment) (No. 2) Bill 2021: Committee Stage
Before we get to the formalities, I welcome the Minister of State at the Department of Housing, Local Government and Heritage, Deputy Peter Burke, back to the House. He is very engaging when he is here, and we welcome him.
I move amendment No. 1:
In page In page 3, line 26, after “2021” to insert “may not occur in the period of 36 months from the commencement of that section and”.
I thank the Minister of State for coming to the House. I broadly welcome the concept of this legislation, especially the acknowledgement that using the harmonised index of consumer prices, HICP, as the benchmark is now appropriate and that a new benchmark for increases in rents within rent pressure zones must be put in place, which, as is set out in the Bill, is 2%.
Amendment No. 1 seeks to introduce a rent freeze for a period of 36 months before a landlord would be subject to a rent cap of 2%, as set out in the Bill. For many months, the need for a rent freeze has been the repeated refrain by my colleague, Senator Moynihan. Recently, rents nationally have increased by 6.7%. Non-compliance with the rent caps within a number of the rent pressure zones has given rise to rent increases in excess of the 4% limit. Looking at average rents in Dublin in the area in which I and other Members, including Senator Fitzpatrick, are based, there are rents in excess of €2,000 per tenancy. We know of families and individuals who pay in excess of 40% of their net income on very standard or even worse than standard living accommodation or living conditions within private rented accommodation. The time has come for a radical measure to be introduced. A rent freeze cannot be the only solution and must be part of a number of measures currently taken.
A great deal has been said about the need for supply. We in the Labour Party have echoed that. However, within the constituency of Dublin Central, which I know best, we have a degree of supply because there are approximately 4,500 build-to-rent student accommodation and co-living units that are either going through the planning system or under construction, relative to about 2,500 conventional apartments.Supply is not necessarily an issue in some of the areas in which Senators are based; the issue is the type of supply and its affordability for those who desperately need affordable and sustainable rental accommodation in this city.
Amendment No. 2 effectively sets out that any rent increase should be confined to 2%. Some landlords attempted to impose cumulative increases this year as a result of the rent freeze last year. I have been contacted by tenants regarding a proposed 8% increase in their rent. Landlords are effectively able to claim that they should increase rents on the basis of last year and this year. Of course, 8% is an enormous figure. The increase possible under a 2% annual rent increase would, obviously, be less, but if there has not been a rent revision for several years, that cumulative percentage increase can be significant. We are clearly calling for 2% to be the maximum that can be sought in any rent increase, rather than the entitlement of a landlord on an annual basis.
I refer to amendments Nos. 3 and 4. Essentially, they propose that rent increases should be zero. Renters cannot take any more. Senator Sherlock mentioned the darker and more dysfunctional parts of the rental market, but even if a landlord is sticking to the rules, renters have had five years of 4% rent increases. It is not difficult to do the maths - five multiplied by four is 20, so if a landlord has applied the 4% increase each year, the tenants have had a 20% rent increase within the law. We know the reality for many renters is that rents have gone way beyond that because the landlord broke the rules or the tenant was too nervous to raise an issue or was moving into a new property. There have been five years of 4% rent increases.
The ship has sailed on any pretence that rent caps in rent pressure zones are effective in halting rising rents. They are not effective in that regard. Even if they were working, renters cannot take any more than the 20% that has been legally allowable. An increase of 20% in five years is too much. As for the 2% cap on rent increases, we in Sinn Féin believe that, just like the 4% cap, it will not work. It is too difficult to police and there are too many loopholes. As a policy, the rent pressure zone system does not work. It is broken and needs to be scrapped. Sinn Féin will forward an increasing number of amendments on later Stages of the Bill to deal with those problems. A total ban of rent increases across the State is the only way to stop rents rising any further for all new and existing tenancies.
As regards the contribution of Senator Sherlock, if there was a cumulative rent increase of 4% and 4%, that was illegal and not permitted under the legislation the Government brought forward earlier in the year. If a landlord has been in breach of that legislation, that should be reported to the RTB, which the Government is financing with additional resources of up to €21 million for next year. We need to see more enforcement in respect of landlords who are breaking the rules. That is 100% certain and I make no bones about it or apology for stating it.
However, the issue I have in respect of the amendments proposing a rent freeze outright is that it sounds fantastic in theory and in a sound bite that will go out on social media, the radio or the newspapers but, in reality, every action has an equal and opposite reaction. As I stated on Second Stage, we do not have to look too far from where we are today to enlighten ourselves in that regard. The left-wing government in Berlin stated that it would freeze rents for five years to solve the rental crisis there. Eighteen months later, the supreme court struck that measure down as unconstitutional. There are tenants in Berlin who now have to pay back money to landlords. The most important result of the measure is that within 12 months there was a 50% reduction in the number of rental properties available in Berlin. That was fantastic for those in a rental property, but it was catastrophic for those seeking one.
The last thing we need in a constrained rental market is to reduce supply even further. It sounds fantastic in theory and everyone acknowledges that rents are too high, but we also have to be practical and weigh up the pros and cons of legislation. That is the different between being in government and being in opposition. In government, everything has to be weighted up and decisions made that strike a balance for tenants and landlord. That is why we are trying to increase supply. While there may not be a supply issue in Senator Sherlock's constituency, there is certainly such an issue in the vast majority of the country. That is why we are rolling out cost rental, which will compete with the private rental market and drive down rents even further. It is not that Fine Gael or I do not want to see a reduction in rents, but we have to look at the evidence from another EU country in respect of the results of a rent freeze and apply it in the same context here to determine the effect a rent freeze would have in an already constrained market. The 2% cap in terms of the harmonised index of consumer prices, or lower, as the case may be at a point in time, is a fair balance in this respect. For that reason, I cannot support the amendment.
I thank Senator Cummins. I know all Members are being succinct and to the point, but I omitted to state at the outset that this business must adjourn at 10 p.m. I point that out so that Senators know where they stand and can measure accordingly.
I thank the Minister of State for coming to the House for a second time today. We appreciate his time, as well as the effort that he and the Department have put into trying to tackle the crisis that is affecting far too many people who are renting their homes not just in Dublin, but all over Ireland. All Members know that rents have become unaffordable. It is for that reason that this new Government has legislated no less than five times since coming into office to try to tackle the rental unaffordability crisis that is affecting far too many working people and other citizens.
Housing poverty has a corrosive effect on society. It deprives people of the opportunity to go to school or work and get on with their lives. This is important legislation and I and the Fianna Fáil group will support it. I urge the Opposition to act responsibly when it comes to this legislation and debate. I know the debate is to adjourn at 10 p.m. but the House is scheduled to deal with it again later in the week. This is important legislation for people who are renting today or are dependent on the rental market. It is reckless and irresponsible to speak about introducing things that are not legally possible and that will only make a bad situation worse for renters. Senator Cummins spoke about the rent freeze that was attempted in Berlin. That had a disruptive effect. Not only did it significantly reduce the amount of rental property that was available, it compounded the situation for people who were renting by leaving them in limbo with two types of contracts. There were shadow contracts and shadow leases and an overhanging burden of rent on renters, and they did not know when it would be demanded and collected. It did not apply to properties that were built after 2014, and there were a raft of other exemptions. Ultimately, it was found to be illegal. I heard the spokesperson for Sinn Féin, not Senator Warfield, deny on national radio that he ever called for a rent freeze and then, in the same breath, not only demand a rent freeze but also a reduction in existing rents. If he and Sinn Féin want to communalise all private property in this country, they must come clean and say it. They need to tell the public what they are proposing. Most important, they must tell the renters of Ireland what they are proposing. They have to accept that this legislation will put caps on rent on the Statute Book. It will provide renters with certainty in terms of the duration of their tenancies and give them extra protections.
However, this is not the only action the Government is taking. In Housing for All and the other initiatives that have been taken, there is €20 billion in capital. Sinn Féin called for us to increase capital spending and we are increasing it. Affordable cost rental has been spoken about for decades. We are delivering it, despite the objections from the Opposition and the legal challenges. Even last night, Sinn Féin voted against 850 public homes on public land in this city, where it talks about the unaffordability of housing. It continues to oppose. We can spend all tonight and later this week debating it, but Sinn Féin should be honest with the people outside this House, who desperately need a solution to the rental crisis in which they are trapped, and support this legislation. It should support it to give people certainty and tenancies of indefinite duration and to put caps on the rent. The reality is it will take time to build the 300,000 new homes and the affordable cost rental homes, but they will be built and delivered despite its opposition. I ask that party to be constructive in the debate tonight and during the rest of the week.
I wish to flag at the outset that the Government will be making a consequential technical amendment on Report Stage to section 3 of the principal Act.
Unfortunately, I cannot accept amendment No. 1, which proposes that the setting of a rent under tenancy of a dwelling may not occur in the period of three years from the commencement of section 3. Besides the difficulties with a blanket ban on rent increases, which I will address presently, the amendment as drafted would have significant unintended consequences. As provided for in this amendment, the setting of a rent under the tenancy of a dwelling in a rent pressure zone at any time after the commencement of section 3 may not occur in the period of three years from the commencement of that section. On the face of it, this means rent settings cannot legally take place for three years, even where a new tenancy commences in respect of a rental property. While freezing rents for existing tenancies, this amendment would also stop new tenancies being agreed for existing rental properties.
Now, more than ever, we need investment in the sector and people must be free to move within the rental sector as their needs change over time. The proposed imposition of a three-year rent freeze has been debated numerous times in both Houses of the Oireachtas. As has been said previously, a blanket ban on rent increases in all likelihood would face significant legal challenge. It would also severely impact investment in the supply of rental accommodation in the medium to longer term, and I am sure Senators would agree this would be an unwelcome and unintended consequence of this measure.
While affordability remains an issue, the introduction of rent pressure zones in 2016 and their subsequent enhancement in 2019, in July this year and as proposed in this Bill, have played and will play a key part in moderating rent increases. Rent pressure zones were a considered measure that would balance the needs of tenants with the legal rights of landlords and the imperative to ensure rental housing supply was not adversely affected. The current rent pressure zone arrangements, under which annual rent increases are prohibited from exceeding general inflation as recorded by the harmonised index of consumer prices, were introduced as a balanced set of arrangements which recognise the need to incentivise in situations of high and significant increases in rents while at the same time taking account of constitutional property rights and the need to avoid disincentivising the provision of rental properties.
When introducing these measures the Minister was very clear about the need to monitor inflation carefully. At the time, the harmonised index of consumer prices inflation averaged 0.73% per annum over the previous three years but had risen to 1.6% per annum in the year ending June 2021. The Minister needed to revise the rent pressure zone rent control relatively quickly in July on the basis that it could be independently verified. Given the continuing rise in the harmonised index of consumer prices inflation up to 5.1% per annum in October, this Bill proposes to introduce a cap of 2% per annum pro rata to any rent inflation in a rent pressure zone to ensure effective rent controls are legally in force when the general inflation rate is too high and over 2% per annum.
I cannot accept amendment No. 2 which proposes to remove a reference to “relevant percentage” as defined in section 3 and replace it with a flat 2%. This would, in effect, cap any rent increase at 2% regardless of the time elapsed since the previous rent setting under the tenancy. The definition of “relevant percentage” in the Bill permits a 2% per annum rent increase since the previous rent setting whether the setting occurred under the current tenancy or under the previous tenancy. The aim of the definition is to avoid incentivising a landlord to routinely increase in a rent pressure zone, RPZ, annually. The Residential Tenancies Acts generally provide that a rent review in an RPZ cannot occur any more frequently than once per year. The definition would allow for existing tenants to enjoy occupation of their home under tenancy without annual rent increases should the landlord so wish.
The landlord could forgo annual rent increases for the existing tenants in the knowledge that he or she could legally increase a rent by 2% per annumpro ratawhen annual replacement tenancy is agreed. For example, if a landlord had set the rent at €1,000 for the existing tenant and did not review the rent during a three-year tenancy, he or she could legally set a new rent of €1,060 if lower than the harmonised index of consumer prices inflation for the subsequent tenant. We do not want to incentivise annual rent reviews in rent pressure zones for existing tenants. We do not want to impede a landlord from charging a reasonable rent for the dwelling based on the time elapsed since the previous rent setting and taking into account the time value of money and costs in maintaining and providing rental accommodation. Some 86% of landlords own one or two properties. We must encourage landlords to provide much-needed accommodation in the private rented sector. This amendment would unfairly penalise good landlords and drive away investment from the sector.
I cannot accept amendments Nos. 3 and 4. I appreciate that they propose, in effect, to reduce the quantum of any rent increases that may lawfully be imposed in a rent pressure zone. However, as with amendment No. 1, the proposed amendments would effectively freeze rents at their current levels. Any proposed measure that impacts on private property rights requires detailed consideration and scrutiny, having regard to the provisions of Article 43 of the Constitution and the associated legal complexities. On Second Stage, the Minister explained that this Bill will cap any rent increase in a rent pressure zone at 2% per annum pro rata. This measure has the approval of the Attorney General, and the Government is confident it is fair to both tenants and landlords and will have a desired impact in the rental sector. The Planning and Development (Housing) and Residential Tenancies Act 2016 introduced the rent predictability measure to moderate rent increases in those parts of the country where rents are highest and rising fast.The proposed rent increase cap of 2% per annum pro ratain rent pressure zones, if lower than the HICP or inflation, in the Bill has regard to the constitutionally protected property rights of landlords. It takes account of local rental market factors providing certainty to tenants and landlords with regard to medium-term rent levels.
Throughout this pandemic we have asked landlords to show forbearance towards their tenants where they may struggle financially with some requiring State support. In order to better enforce rent pressure zone legislation, the Residential Tenancies (Amendment) Act 2019 provided the Residential Tenancies Board with enhanced powers and resources to carry out investigations and sanction landlords, if required, for any contravention of a rent increase in a restricted rent pressure zone. The maximum sanction is €30,000. Alternatively, a tenant may wish to refer a dispute for resolution to the board so a lawful rent can be enforced and damages of up to €20,000 can be awarded to the tenant. The Department, the Housing Agency and the Residential Tenancies Board keeps the operation of the rental market under constant review. It is important to have transparency in the system, with fair rent and certainty for tenants and landlords alike.
We had a constructive debate on Second Stage in respect of planning and development and residential tenancies. The Minister was here for many hours of constructive debate during which we proposed ideas. I would like that atmosphere in the Chamber tonight, and that is how I intend to proceed.
I have been asked to outline Sinn Féin's policy for renters. I have dedicated a Private Members' business slot to it so I probably should not have to do so, but we would put one month's rent back in the pocket of every renter in the State up to the value of €1,500 through a refundable tax credit and seek to stop any future rent increases. Our motion at the time was and our policy is to have a three-year ban on rent increases at the current level for existing tenancies and at the RTB rent index level for new and future tenancies. The latter are determined by the size, type and location of the dwelling.
I have listened to criticism of Sinn Féin's housing spokesperson in the Dáil. I am surprised that criticism has been allowed to stand in view of the fact that he is not here. I appreciate that the Fianna Fáil spokesperson on housing was not here when we had a good debate on Second Stage. There was a good reason that the spokesperson was not here, but a reading of the transcript would have showed that we were constructive in our opposition.
I am not going to describe the situation in Berlin because I am not an expert on the housing market in Germany. Many of my friends live there because this city is not a good place for many young people, particularly in the context of the rental market. I know many creative young people who could be contributing to our culture but live their lives in Berlin instead so they will know that housing market well.
I am not going to describe the housing situation in Berlin. I do know that the rent cap may well return because the court only narrowly ruled on which jurisdiction had the right to regulate housing. It did not rule on the rent cap itself. I will press my amendment for a 0% increase when the opportunity arises.
The Senator stated that he is not an expert on the Berlin rental market, yet seemed to have a prepared comment on the Supreme Court ruling. It is probably convenient not to have information on the Berlin situation because the fact of the matter is that the decisions that were made by the left-wing Berlin Government resulted in a more than 50% reduction in the number of rental properties. While it is convenient not to know anything about it, those are the facts and nobody can dispute them. We have to base what happens in Ireland on the evidence that presents itself. Where best to look, only at our near neighbours in Germany.
Garret Ahearn, Catherine Ardagh, Niall Blaney, Paddy Burke, Jerry Buttimer, Maria Byrne, Micheál Carrigy, Pat Casey, Shane Cassells, Martin Conway, John Cummins, Paul Daly, Aisling Dolan, Mary Fitzpatrick, Robbie Gallagher, Róisín Garvey, Pippa Hackett, Tim Lombard, Michael McDowell, Eugene Murphy, Joe O'Reilly, Pauline O'Reilly, Ned O'Sullivan, Mary Seery Kearney, Barry Ward.
Garret Ahearn, Catherine Ardagh, Niall Blaney, Paddy Burke, Jerry Buttimer, Maria Byrne, Micheál Carrigy, Pat Casey, Martin Conway, John Cummins, Paul Daly, Aisling Dolan, Mary Fitzpatrick, Robbie Gallagher, Róisín Garvey, Pippa Hackett, Tim Lombard, Michael McDowell, Eugene Murphy, Joe O'Reilly, Pauline O'Reilly, Ned O'Sullivan, Mary Seery Kearney, Barry Ward.
Garret Ahearn, Catherine Ardagh, Niall Blaney, Paddy Burke, Jerry Buttimer, Maria Byrne, Micheál Carrigy, Pat Casey, Martin Conway, John Cummins, Paul Daly, Aisling Dolan, Mary Fitzpatrick, Robbie Gallagher, Róisín Garvey, Pippa Hackett, Tim Lombard, Michael McDowell, Eugene Murphy, Joe O'Reilly, Pauline O'Reilly, Ned O'Sullivan, Mary Seery Kearney, Barry Ward.
I move amendment No. 5:
In page 5, between lines 31 and 32, to insert the following: “(f) by the insertion of the following after subsection (5B):“(5C) A dispute between a landlord who seeks to rely on subsection (5) and a tenant as to the appropriate increase in rent following upon a substantial change in the nature of the accommodation provided under the tenancy may be referred to the Board for resolution under section 76.”.”.
A key part of this Bill is to strike a greater balance in the rights between landlords and tenants as reflected in the introduction of tenancies of indefinite duration, which is welcome. There are other measures that can be taken in this Bill to bring about a greater balance in the power and control between landlords and tenants. That is reflected in a number of our amendments, particularly in amendment No. 5. In the event where there is a dispute about the grounds for a rent increase, there should be a ground whereby the tenant can bring his or her dispute to the Residential Tenancies Board. As my colleague Senator Moynihan and I see it, there are very narrow grounds upon which a tenant can bring a dispute to the board.We need to look at that and broaden it. We need to allow greater recourse to the RTB for tenants and, in this particular instance, where there is a dispute about the nature of a rent increase. I look for the support of the Minister of State on that.
What I want to say about this Bill is that I do not agree with the substance of it at all, that it is a fundamental mistake, that it is going in the wrong direction and that it will eventually, over time, reduce the amount of residential accommodation available for tenants in this country.
I do not agree with the new concept of tenancies of indefinite duration. What we are effectively doing is saying that landlords cannot, in any circumstance, recover possession of a property except on one of the limited grounds which exist at the moment for the curtailment of a section 4 tenancy. I do not believe it is in the interests of the rental sector generally that the establishment of a six-month tenancy should effectively, from now on, allow a tenant to stay in a property forever, subject to the landlord not being able to comply with one or other of the nominated grounds for termination. For instance, to say that a landlord can always obtain vacant possession when selling a premises, one has to bear in mind that in this day and age that is quite likely to give rise to significant capital gains tax. I do not think private landlords will come into the market at all as a result of this Bill. It is foolish and shortsighted.
I want to put on the record of the House that I speak as somebody who was brought up in a rent controlled house on Leeson St. Eventually, my parents succeeded to my grandparents' tenancy in that house. For a house which was on about a fifth of acre on Upper Leeson St., with its own drive 60 or 80 yards long, they paid £120 a year in rent to landlords who had effectively lost control of the property completely. The landlords were liable for external repairs. My parents were in a position whereby they were living in a house for which they were paying well below the market rent. Some of those who owned the house, who were relatives by descent, lived in New Zealand. I will not mention who they are, but they found themselves with an interest in very valuable land which was effectively out of their control. That situation would not exist under this Bill, but the amendment proposes to, yet again, take away from a landlord the right to estimate the rent he or she thinks is appropriate, having refurbished the premises substantially, and instead hand it over to somebody else to decide the value of the rent to be paid thereafter. This is all one-way traffic. It will all end up with a hugely diminished private rental sector.
Maybe the big American corporations that are building new apartments will think this is nothing to do with them, and maybe they are right. I am talking about people who have one house, apartment or piece of land anywhere in the country and, for whatever reason, have let it out. We are now proposing to tell them that they cannot agree with a tenant that he or she will only be there for eight years. The agreement has to state that the tenant will only be there for eight years if the landlord wants to have the property back for specified statutory purposes, such as sale, refurbishment, to give the property to a member of the family or whatever. In the Bill, references to family do not include nieces or nephews. All we are talking about is immediate members of the family.
What amuses me is that nobody has spoken up for the other side in this debate. I see where the Senator is coming from with her amendment. All of this is going to kill off an entire sector. It will expropriate an entire class of landlords. Whether it is the Minister's amendment to section 5 or this amendment, I want to put on the record of the House that I know I am in what is perhaps a minority of one, but I think this Bill is a disastrous mistake. In five or ten years' time, we will wonder how we ever created this situation.
I remind the Minister of State's Department of one thing. In 2009, the charity Threshold persuaded the then Minister for the Environment, Heritage and Local Government, who succeeded me in Dublin South-East, John Gormley, to introduce regulations which ended the possibility of leaving a house in bedsits. He introduced a regulation under the Housing Act which made it impossible or unlawful to let rooms in a house unless they had their own bathroom and kitchen. Precisely why that should have been done when house sharing is permissible, as long as everybody is a tenant of the whole house, I do not know, but the result was that between 10,000 and 20,000 people on the lowest end of the private rental ladder, such as students, elderly people, single people and people who were separated lost their homes because of a well-intentioned change. Most of the houses on the road in Ranelagh where I live were in bedsits. They were all cleared out to become trophy homes for the rich and wealthy. Some of them now have huge price tags. A new development on the road will cost €2.5 million, a road which was, I can tell the House, most unfashionable when I went to live there.
All I am saying is that laws can be introduced which we think are great and are giving tenants all of the rights, but we must look around corners in the housing market. I believe that what we are doing in this Bill is a big mistake. That this is being done on foot of an agreed programme between the Government parties does not interest me in the slightest. In five or ten years' time, when the market diminishes and disappears, it will be realised that we switched the balance in favour of tenants too much and away from the landlords. Ordinary landlords who were letting houses and all the rest lost too many rights and fled the market. That is what is going to happen.
I thank Senators for their contributions. I cannot accept amendment No. 5 as we deem it unnecessary. Section 19(5), which is referred to in the amendment, provides for limited exemptions for RPZ rent control, including where a substantial change in the nature of accommodation provided for under the tenancy occurs. Section 76 of the Residential Tenancies Act provides, inter alia, that either or both of the parties to an existing or terminated tenancy of a dwelling may, individually or jointly, as appropriate, refer to the board for resolution any matter relating to the tenancy in respect of which there is a dispute between them. Section 78 provides for a non-exhaustive list of particular matters that may be referred to the board for dispute resolution.This section specifically provides that without prejudice to the generality of section 76, the matters in respect of which disputes and, where appropriate, complaints may be referred to the board for resolution include a time at which a review for rent, as referred to in Part 3, should take place or the amount of rent that should be determined on foot of that review. The requirements for the rent control exemption to apply in this respect are fair and reasonable, given that we want to encourage new investment in the private rental sector. Satisfying the requirements for a substantial change in the nature of accommodation provided under the tenancy will constitute a significant investment on the part of the landlord and an exemption from rent control in respect of the first setting after which the works are warranted. Accordingly, I cannot accept this amendment.
Senator McDowell made a timely contribution. Through the first four amendments, I have referenced the fine balance we are trying to achieve in the landlord and tenant relationship. I have clearly outlined that 86% of tenancies are in homes owned by landlords with either one or two properties. Such landlords are leaving the market in large numbers. That is an issue of which the Government must take cognisance. We obviously need to ensure that investment in that marketplace is incentivised. We also must consider society at large. It is a fine balance. In the economic cycle we find ourselves, if I were to look for a rental accommodation in my own town of Mullingar, I would be unable to find one. The harmonisation index shows almost a double-digit increase, quarter-on-quarter. We are at a difficult point until supply catches up to meet demand. The laws of economics in any marketplace dictate that when demand significantly outstrips supply, prices go up. We are working hard to provide an adequate supply and meet the Economic and Social Research Institute targets but until that happens, it will be difficult to ensure that rent prices are stable. That is what this legislation is doing. It is a reaction to ensure that the market does not leave vulnerable citizens behind which, unfortunately, has happened too often. We must work hard to ensure that.
I heard the Senator's points. I note that some political parties in this House, notwithstanding the legislation that is proposed here and the arguments and amendments involved, are proposing enormous charges on those one-property and two-property landlords. They have suggested additional taxation of more than €500 for additional properties. That is not reflective of the Thirty-third Dáil or where this Government is coming from. It ignores the backdrop to the circumstances in which we are operating. We are hearing extreme voices in this debate. On balance, this legislation is proportionate for the point of time we are in. It is a response that I consider reasonable, on balance.
I worked in practice as a chartered accountant for more than a decade, looking at the rental return for small landlords. It is a difficult space for landlords and the figures back that up. It is difficult to balance the rights of landlords and the rights of vulnerable citizens. This legislation is a reasonable response.
I understand I am now going to breach my undertaking not to contribute any further to the debate but I want to make a focal scoire. I fully understand there is a housing shortage at the moment. I fully understand that people are being gouged for rent. I understand all of that. However, the amendment the Minister of State is proposing to section 5, which I realise I am being slightly disorderly in referring to, is a permanent change to our law. It is not something which will disappear when supply increases, or whatever. It is a permanent change to our law to the effect that all tenancies, once they have gone past six months, become tenancies of indefinite duration, terminable only in certain circumstances. That is the point I am making. The Senators' amendment is clearly to deal with temporary situations. If the Minister of State told me that this was all temporary, I would have a different view of it, but it is permanent.
Going back to what I mentioned about my own family upbringing, we were paid large sums of money to get out of that house. I am just saying that. In the end, somebody bought out the poor people who had got nothing by way of rent for years and the site was redeveloped for another purpose. My father, for the first time in his life, had some money in his hands because he was bought out as a tenant. I am just making that point. That legislation was brought in because of a jump in rents during the First World War. That is the point I am making. If a permanent change is made to the law because of a temporary situation, what the Minister of State has said about people leaving the market is going to come true. I wish him every luck in making more housing available and I admire what he and the Minister, Deputy Darragh O'Brien, are doing to get more housing built now. However, those landlords who may leave the market are not looking two or three years down the line. Someone who is deciding to quit the market now is looking five or ten years down the line. Because this legislation is permanent, not temporary, in its effect, those landlords will be gone.
I move amendment No. 6:
In page 6, between lines 12 and 13, to insert the following:
“State deemed to be rent pressure zone
5. The Principal Act is amended by the insertion of the following section after section 24BA: “24BB. With effect from the date section 10 of the Residential Tenancies (Amendment) (No. 2) Act 2021 comes into operation and notwithstanding anything to the contrary in section 24A, orders under section 24A(5) shall be deemed to have been made in respect of the administrative areas of every housing authority in the State which on that date are not, or are not deemed to be, rent pressure zones; accordingly, each of those areas is deemed to be a rent pressure zone from that date for a period of 3 years.”.”.
I am struck by the contribution of Senator McDowell. I know he has left the House now but it will be on the record. There is a point to be made about the future of renting in this country. Right across this Chamber, there is a desire to ensure it is a sustainable way of life for people because that is the future for many people in this country. We must not treat renting as a transient existence. It can be a sustainable, permanent solution for certain persons who will never be able to afford to buy a house. We are putting forward these amendments to ensure there is fairness for renters on a permanent basis into the future.
I heard Senator McDowell say that if some of the amendments were temporary measures, they may be justified. It is important that the tide is turned. We must not treat tenants as a temporary phenomenon who will only be renting for a few years. The reality is that renting will be part and parcel of life for young people and older people. In particular, an increasing number of those facing into retirement are now renting and have no prospect of buying anytime soon. It is vital that we get the protections for renters right.
Amendment No. 6 intends for the whole country to be declared a rent pressure zone. As I understand it, there are two criteria to designate an area as a rent pressure zone. Those are that there needs to have been an increase in rent of 7% in four of the past six quarters and the rent in a particular area must also be above the national average rent. I have a fundamental difficulty with the second criterion. The national average rent is, of course, driven by the main urban centres. A massive increase in the cost of rent in Leitrim, Longford, Clare or a very rural area in Cork is no less important than a significant increase in the main urban areas. It is in the context of that criterion that there are, according to survey data collected by Daft.ie and the Residential Tenancies Board, double-digit rent increases in the likes of Leitrim, Kilkenny, Clare, Roscommon and other counties. The question has to be asked as to why the whole country has not been designated a rent pressure zone. I think it was September 2020 when an area was last added to the list. There are very serious questions to be asked now as to why no other area has been added. We want to hear the plans the Government does have to add additional areas. We believe, based on the evidence that is in front of us, that this rental crisis is not confined to the main urban areas but is happening across the country. We hear stories from some very rural areas about massive demand for places to rent. It is a good thing in some ways. People are leaving the main urban areas and going back to the areas where they grew up because they are able to work from home. That is a good thing. The downside is that some people are no longer able to afford living in the city and are being forced to relocate. Nonetheless, there is rent pressure in areas where previously we would not have expected it. There is a very strong argument to be made that the whole country needs to be made a rent pressure zone.
I was asked to make a point in favour of this amendment on behalf of Senators Ruane and Black. They acknowledge that limits on rent inflation need to be imposed across the State. They recognise that where rent pressure zones are already established, rent increase limits are not being adequately enforced. They say that while expanding rent pressure zones is a positive suggestion, they want adequate enforcement of rent caps where they are already imposed and adequate scrutiny of the enforcement mechanism. Senators Ruane and Black will table amendments on Report Stage. They regret that they could not be here tonight.
The amendment proposes to deem the entire State as a rent pressure zone. Having regard to the constitutionality of protected property rights of landlords, including the right to receive an income from their property, a blanket extension of the rent protection zone rent predictability measure to rental properties across the country could be regarded as an unjust interference with those rights as it places a legislative limit on the rental income without adequate or proportionate justification, that is, the interference is disproportionate to the objective sought to be achieved. For an area to be designated a rent pressure zone it must satisfy the following criteria: The annual rate of rent inflation in the area must have been 7% or more in four of the past six quarters. The average rent for tenancies registered in the area with the RTB in the last quarter must be above the relevant average rent comparator under the Acts. The RTB rent index report provides a summary of data used as the criteria for designating rent pressure zones in respect of all local electoral areas in the country. The Housing Agency continually monitors the rental market and may recommend further areas for designation. The proposal to deem the entire country as a rent pressure zone is not considered to be warranted or legally justified. The proposed amendment is highly likely to be subject to a constitutional challenge in the courts and accordingly I will be unable to accept it.
Amendment No. 7 simply changes the verb in a new section 28(1) of the principal Act, as substituted by section 5(1) of the Bill, from "remain" to "continue". Amendments Nos. 10 and 11 are consequential technical amendments to refer in section (5)(2) to the new section 5(4) and section 6 of the Bill.
Amendment No. 12 to section 5 of the Bill as published provides for tenancies of unlimited duration. Section 5(3)(a) provides that a landlord with an existing Part 4 tenancy or further Part 4 tenancy may notify his or her tenant using a form to be specified by the RTB of his or her consent to that tenancy continuing in existence for a period of unlimited duration from the date of such notice. The proposed revised text of paragraph (a) provides greater clarity and where a landlord consents to a tenancy continuing in existence for a period of unlimited duration, that tenancy cannot be terminated by the landlord under section 34(b) and it will not roll into a further Part 4 tenancy as before. A tenancy of unlimited duration can be terminated by a landlord on one or more of the grounds contained in the table to section 34. This amendment also clarifies that where a landlord grants his or her consent in writing, the tenancy continues in existence for a period of unlimited duration and section 6 of this Bill shall apply to such a tenancy. Accordingly, the duration of any tenancy of unlimited duration and the duration of any further Part 4 tenancy that precedes it shall count for the purposes of calculating a termination notice period to be given to a tenant under section 66 of the principal Act.
Amendment No. 13 provides for a new subsection (4) into section 5. The amendment, if passed, will clarify that where there is an existing tenancy in place before the commencement of section 5 and if, at the end of its six-year duration, no valid notice has been served in line within paragraph (a), grounds for termination by a landlord or (b), termination of Part 4 or further Part 4, of section 34, or section 36, termination by a tenant, then that tenancy shall continue in existence for an unlimited duration. If this amendment is passed, the current section 5(4) will be renumbered to become 5(5).
On opposition amendment No. 9, while recognising the absolute genuine intent behind this amendment, I am unable to accept it. If passed, this amendment would cause all existing tenancies to be of unlimited duration from enactment. As the Minister outlined on Second Stage, section 5 amends Part 4 of the Residential Tenancies Act 2004, which pertains to security of tenure, to provide for enhanced tenancy protections on the basis that after six months' duration, a Part 4 tenancy is established for an unlimited duration and not subject to expiry at the end of the six-year term. Should a landlord exercise his or her right to terminate the tenancy, as currently provided for under section 34(b) of the principal Act, it is legally required that the provision shall apply prospectively in respect of tenancies commencing six or more months after the passing of this Bill. The intention is to enhance security of tenure for tenants and to simplify the operation of the Act of 2004.
In addition, where any existing six-year Part 4 tenancy is renewed, rather than commencing a Part 4 tenancy, it will become a tenancy of unlimited duration. Existing tenants may also seek the consent of their landlord to have their tenancy treated as a tenancy of unlimited duration. However, the landlord will not be compelled to grant his or her consent and where consent is not granted, the existing protections of the Act will apply. The aim is to transition to tenancies of unlimited duration while respecting the landlord's constitutionally protected right under section 34 of the Residential Tenancies Acts 2004 to 2021. Only new tenancies commencing six or more months after the passing of this Bill must be on the basis of an unlimited duration but naturally over time all Part 4 tenancies will be of unlimited duration. As existing Part 4 or further Part 4 tenancies terminate or expire over time or are renewed, it will involve the creation of a new tenancy of unlimited duration in respect of that dwelling should it remain in the rental sector. For this reason, I am unable to accept the amendment. The lead-in of six months is legally required prior to the provision coming into operation. This measure is required to respect the constitutionally protected property rights of landlords.
I do not know whether the Minister, on Second Stage, gave us notice of this amendment, although I may have missed it. It is a bit disappointing we were not given a briefing note on these Government amendments. I appreciate the Minister of State has explained as clearly as he could the intent behind them, but I am disappointed this is the first detail we are getting from the Government about the amendments.
I am just saying we would have appreciated a briefing note. I can still hear talking. All night I have heard talking from the Government side of the House while I am contributing to the debate, or laughing or whatever it was.
To be fair to the Minister, he noted in his Second Stage contribution, as the record will show, that he intended to introduce Government amendments to the section. From recollection, I believe that happened last week.
I move amendment No. 8:
In page 6, between lines 22 and 23, to insert the following: “(c) in the Table—(i) by deleting paragraph 3, and
(ii) in paragraph 5, by substituting “, no reasonable measures can be taken to maintain the dwelling fit for human habitation during the refurbishment or renovation” for “in a way which requires the dwelling to be vacated for that purpose”,
Across the House, we have all dealt with individuals and families who have been served with an eviction notice or a notice to vacate on the basis the landlord wishes to renovate the dwelling. While a landlord has a very legitimate right to renovate a dwelling, I have seen many questionable examples of people being made to vacate, effectively being evicted, from a rental property for very minor works. In that context, we need to raise the bar with regard to the grounds on which families, couples and individuals can be evicted or given notice to vacate a tenancy. In that respect, the amendment will provide that rather than stating, "in a way which requires the dwelling to be vacated for that purpose", the wording will be, "no reasonable measures can be taken to maintain the dwelling fit for human habitation during the refurbishment or renovation". Effectively, it will have to be deemed impossible to live in the dwelling while the renovations are being made.
This is a reasonable amendment, again in the spirit of ensuring there are greater protections for renters. It will mean it may be in only legitimate cases where there is substantial renovation that tenants may be asked to leave or be evicted from the property. We seek Senators' support in that regard.
Unfortunately, I am unable to accept amendments Nos. 8, 15 and 17, which propose, retrospectively, to remove the ground for termination of a tenancy under section 34 of the principal Act such that if the landlord intends, within nine months after the termination of a tenancy under that section, to enter into a enforceable agreement for the transfer to another for full consideration of the entirety of his or her interests in the dwelling or the property containing the dwelling, that is, if the landlord intends to sell the rental dwelling, and to amend the wording of the termination ground under paragraph 5 of the table in section 34, relating to the substantial refurbishment or renovation of the rental dwelling to remove the grounds for termination based on the landlord's intention to sell, or the landlord requiring the rental dwelling for his or her occupation or for occupation by a member of his or her family, or the landlord intending to substantially refurbish or renovate the rental dwelling in a way that requires the dwelling to be vacated for that purpose.
The ground for termination of a tenancy on the basis the landlord intends to sell the dwelling has been debated in respect of both Government Bills and Private Members' Bills and motions before the Houses. An outright ban on the sale of rental properties as a ground for tenancy termination would deter investment in the sector. It has been recognised the termination of tenancies for the purposes of the grounds listed in the table in section 34 of the Residential Tenancies Acts 2004 to 2021, inclusive, including where a property is to be sold, is a legitimate use of the legal provisions designed to underpin the constitutional property rights of landlords. Nothing in the Residential Tenancies Act prohibits a landlord from selling a property with the tenant in situ or selling with vacant possession. The commercial reality is there is generally a lower market value with tenants in situ. I think the Senator will accept the landlord owns the property. A total of 70% of landlords own just one property, as I outlined, 86% own just one or two properties and the vast majority operate on a small scale.
The Residential Tenancies Act 2019 implemented a number of amendments to the termination provisions of sections 34 and 35 of the principal Act of 2004 to make it more difficult to falsely cite or rely on any of the grounds for termination in the table in section 34. Such invalid citation is now dealt with as improper conduct by a landlord for the purposes of Part 7A of the Residential Tenancies Act, with the Residential Tenancies Board, RTB, empowered to sanction such conduct. Where a former tenant provides his or her contact details for such purposes, a landlord is required to offer a former tenant a reletting of the rental dwelling where, for example, a sale does not conclude within nine months of the termination, where the landlord or family member moves out of the rental dwelling within 12 months of the termination or where necessary substantial refurbishment or renovation has concluded. If the landlord does not offer a relet in such circumstances, he or she will be liable to a sanction of up to €30,000. The RTB has been resourced to carry out this function.
Landlords need to be in a position to manage their property to suit their financial needs as their life circumstances change. Covid-19 will have badly affected some landlords and financial pressures may force a landlord to sell a rental property. The law should not reduce the sale proceeds to landlords by removing their right to terminate a tenancy. While it may be the case the termination of a tenancy can lead to homelessness if the tenant is unable to source alternative accommodation, it would not be appropriate to prevent a landlord from making a rental dwelling available for occupation by himself, herself or a family member.
The proposed amendment to remove the landlord's constitutionally protected right to terminate a tenancy and occupy his or her own property dwelling cannot be accepted. The Constitution recognises the strong sense of family that exists in Ireland and when it comes to providing a home for a family member in favour of a stranger, I believe an Irish citizen will, innately, come down on the side of blood being thicker than water.We need to respect the Constitution and it is reasonable to expect that many landlords with one or two properties might need to provide a home for a relative at some stage. The Residential Tenancies (Amendment) Act 2019 significantly strengthened the protections around the grounds of termination of a tenancy, particularly regarding paragraph 5. Where the landlord intends to substantially refurbish or renovate a rental dwelling in a way that requires the dwelling to be vacated for that purpose, the notice of termination must contain or be accompanied in writing by a statement specifying the nature of intended works. In the case where planning permission has to be obtained, a copy of the planning permission is attached, or that planning permission is not required, specifying the name of the contractor, if any, employed to carry out the intended works, and the dates on which the intended works are to be carried out, and the proposed duration of the period in which the works are to be carried out, the landlord is required to offer the tenant a tenancy of a dwelling if the contact details requirement is complied with, and that the dwelling becomes available for reletting by reason of the completion of the works or of refurbishment or renovation. These substantial changes were made in 2019 to strengthen the enforcement of tenancy termination protections while respecting the constitutional rights of landlords regarding their properties.