Government to cut rent supplement

AlekSmart · 21-01-2012 9:48am

A Disgrace wrote: »

The whole idea was to drive rents down, or so they say, but it seems that rents can't actually be driven any lower. It's all very worrying, not only for tenants, but also for Landlords

But,was this the "Whole idea"...?

I should think the better idea is to eliminate this half-baked "Social Engineering" idea and get back to basics....the only issue for Ireland being..."How Basic is Basic".

Private rented accomodation is just that...PRIVATE...leave the Landlords and their Tenants to negotiate their own business.

It might just lead to a bit of backbone amongst both parts of the equation,who currently sit taring at the letterbox awaiting some direction from the DSP or HSE or CIE or........

Bullseye1 · 21-01-2012 10:28am

With regards the property now in the control of NAMA I assume that 20% (1 in 5) of the residential units are being set aside for Social and Affordable Housing as they would have been originally under the granting of Planning Permission? Or is NAMA going to sell these to private individuals in the hope to maximise their returns?

murphaph · 21-01-2012 10:37am

gurramok wrote: »

Simples, where will you find 95,000 new tenants? Go on, let us know.

You maybe onto something, lets have cheaper rent like the continentals have. It would be a massive sea change and actually help the economy.

Munich folks certainly don't have cheap rents. A good deal more expensive than Dublin there. Germany, for one (and I presume France and I know Italy too) are highly regional countries with massive differences between cost of living in different parts. The south of Germany is much more expensive, but has the best employment opportunities. Berlin is a good deal cheaper and unless you have particular skills, it is also harder to find work (though this is changing in both respects as the Berlin economy improves thanks largely to IT).

So, I don't think it's as simple as this "where do landlords find 95,000 new tenants?" because I think Ireland will become more urban due to the economic crisis rather than less urban. I think people will be driven towards the cities to find work (exactly what happened before the Celtic Pyramid and what still happens in Germany, Italy, US etc.). Go to any small town in Eastern Germany-few young people, all gone to Berlin or Frankfurt or Munich for work. Loads of empty properties. Go to Berlin, property getting harder and harder to find as rents increase with demand.

Even inside Berlin there are "regions"- desirable older buildings can command much more than 1980s concrete stuff from the GDR era, despite being around the corner from each other. Indeed, Berlin is already seeing a bit of a mini-exodus of those on HartzIV (base subsistence payment for unemployed) as the RS they receive hasn't been increased in years as rents have been increasing around them. They are being forced to the tower blocks on the city's edge. This is fairly widely reported as it's feared that a Paris like Banlieue situation could develop.

djpbarry · 22-01-2012 5:27pm

A Disgrace wrote: »

The whole idea was to drive rents down...

No, the whole idea is to reduce state expenditure.

gurramok wrote: »

Simples, where will you find 95,000 new tenants?

You're saying that the supply of tenants is fixed. I don't have to find 95,000 new tenants to demonstrate the above assumption is nonsense - I only have to find one.

gurramok wrote: »

You maybe onto something, lets have cheaper rent like the continentals have.

Who are "the continentals"?

gurramok wrote: »

Rents will fall.

Who needs facts when you have opinions, eh?

marathonic · 27-01-2012 11:03pm

As a landlord, I've dropped my rent from 150 euro per week down to 140 and then, last year, 130. This was the result of past budgets.

I'm in Donegal and the new limit is 90 (couple with one child). I can tell you now, without any shadow of a doubt, I will not be dropping this low. My plan is to offer the tenant a drop to 120 and, if this isn't good enough, he can move out.

I'm in a slightly different position to a lot of landlords though - I'm single and moved out of my home house at a very bad time (near the peak of the property market). I'm still in full-time work and have moved back in with parents.

If I move back into the house myself, I get 30% TRS which equates to about 20 euro per week (although I bought near the peak, I bought sensibly - or so I thought - with a 30% deposit so I'm only SLIGHTLY in negative equity). I also avoid paying the second home charge of about 4 euro per week and avoid paying tax on profits - lets call it 11 per week tax.

That means I'm only gaining 90 - 20 - 4 - 11 = 55 euro per week by renting it out. I'd just move into the house myself at that rate.

murphaph · 27-01-2012 11:32pm

marathonic wrote: »

That means I'm only gaining 90 - 20 - 4 - 11 = 55 euro per week by renting it out. I'd just move into the house myself at that rate.

I'd do the same if I were in your shoes. There are other costs you're not even including there: PRTB is another few bob, the premium you pay in house insurance for a rented property (in Dublin it costs me approx €200 a year more to insure than if it were my owner occupied home), the extra decorating costs associated with rented properties, so you're not even making the €55 a week at that rate. No way would I do that and live back at home.

thebman · 28-01-2012 4:42pm

2 bed house up on Daft in my area for 500 Euro now. Most of the others still at 800 Euro. This one has just gone up recently enough. Don't know if it has anything to do with the above though but 500 Euro is very cheap rent for a 2 bedroom house.

Also seen another one drop to 750 that was previously advertised at 800.

n97 mini · 28-01-2012 4:49pm

At the peak houses in my area were getting €1200 pm. Now the max rent covered by RS is capped at €790, but most rents are still in the €900-€1000 bracket.

Someone joked that at the rate things are going there will be no unemployed left in the town as they'll all have moved to places where rent is cheaper.

Slydice · 28-01-2012 7:05pm

n97 mini wrote: »

At the peak houses in my area were getting €1200 pm. Now the max rent covered by RS is capped at €790, but most rents are still in the €900-€1000 bracket.

Someone joked that at the rate things are going there will be no unemployed left in the town as they'll all have moved to places where rent is cheaper.

There'll be some serious eating of humble pie by landlords when they suddenly have no demand for their places if they decide on relying on their pride for their decision on whether to drop rates or not.

n97 mini · 29-01-2012 2:03am

Slydice wrote: »

There'll be some serious eating of humble pie by landlords when they suddenly have no demand for their places if they decide on relying on their pride for their decision on whether to drop rates or not.

It's nothing to do with humble pie.

Work or prospects = demand = prices hold up.

No work or prospects = no demand = slump.

Places like Longford, Leitrim, Cavan or Kerry are fooked. Places in or around the cities, while not as good as the were, will still hold up.

thebman · 29-01-2012 2:41am

n97 mini wrote: »

It's nothing to do with humble pie.

Work or prospects = demand = prices hold up.

No work or prospects = no demand = slump.

Places like Longford, Leitrim, Cavan or Kerry are fooked. Places in or around the cities, while not as good as the were, will still hold up.

I live in a high demand area, one of the main commuter belts.

murphaph · 29-01-2012 12:58pm

n97 mini wrote: »

It's nothing to do with humble pie.

Work or prospects = demand = prices hold up.

No work or prospects = no demand = slump.

Places like Longford, Leitrim, Cavan or Kerry are fooked. Places in or around the cities, while not as good as the were, will still hold up.

This is what I've been saying. The effects will be highly regional. Real urban rents will remain high(ish) as people relocate from the Longfords and Kerrys to the Dublins and Corks. What was commuter belt territory may become provincial town once again-Navan for example could see rents fall as people find they can get a similar property in D15 for the same price they were paying and save a bucket load of time and petrol money on commuting.

I actually expect to see properties in rural areas abandoned over the coming years, especially if there's a site tax brought in. You could see houses being demolished completely and land being returned to agriculture to avoid paying site taxes on a worthless property. Meanwhile demand in urban areas may increase as people see the cities as the best chance for employment.

AlekSmart · 29-01-2012 1:30pm

murphaph wrote: »

I actually expect to see properties in rural areas abandoned over the coming years, especially if there's a site tax brought in. You could see houses being demolished completely and land being returned to agriculture to avoid paying site taxes on a worthless property. Meanwhile demand in urban areas may increase as people see the cities as the best chance for employment.

Good synopsis Murphaph,and one which a significant number of our population are apparently blind to.

The property related taxes will all contribute to the realization that a country landscape nicely lined with 5 bedroom "luxury" bungalows sitting on an acre of landscaped garden with electric gates is now,and always was unsustainable.

Currently the Financials surrounding the above category (and it's a substantial one) tend to be discussed only in terms of who'se fault it was..ie The Big Bad Banks for lending the money,or The poor misinformed,largely gullible youing people for seeking/taking it.

That however ignores the reality of literally thousands of residences throughout the country who'se continued habitation is unsustainable.....no local work...increasing private motoring costs......no available public transport to remote work.....no income...what do we do...?

In nthe midst of this sits the State Buddah,balefully distributing this bizzarre Accomodation "Allowance" which since it's well meaning inception has been a major contributor to shaping Social Attitudes of hundreds of thousands of people who,if anything,desperately needed the opposite form of stimulous.

However,the PRAA along with many other acompanying benefits within the DSP's myrad schemes has become the new "Opium of the Irish Masses",something which now has the Government and established Civil Service caught in the glare of it's headlight.

The Country can't afford to continue paying it,but equally the establishment simply cannot countenance reality and significantly reduce or abolish it for fear of the inevitable.

What price Egyptian,Libyan or Syrian scenario's developing on our streets...?

Laugh if you will,but don't fool yourself into thinking that the various sub-committee's which actually run the country have not considered or modelled just such scenario's.

As it stands all we can do is keep schtum and hope the monetary inflows continue to keep us in Beer n Crisps

woodoo · 29-01-2012 2:50pm

AlekSmart wrote: »

The property related taxes will all contribute to the realization that a country landscape nicely lined with 5 bedroom "luxury" bungalows sitting on an acre of landscaped garden with electric gates is now,and always was unsustainable.

Alot of those houses have been built over the last 10 years. They are largely lived in by people in their 30's and 40's. Among the age group that has bee hit hardest in this recession. I don't see the government hammer them some more.

If they want to change that going forward then planning offices need to be told no more one of houses in the countryside unless its for a farmer on his own land.

Punishing existing dwellers who broke no law is not fair or the answer.

AlekSmart · 30-01-2012 1:08pm

woodoo wrote: »

Alot of those houses have been built over the last 10 years. They are largely lived in by people in their 30's and 40's. Among the age group that has bee hit hardest in this recession. I don't see the government hammer them some more.

If they want to change that going forward then planning offices need to be told no more one of houses in the countryside unless its for a farmer on his own land.

Punishing existing dwellers who broke no law is not fair or the answer.

True indeed woodoo,or at least it would be in "normal" circumstances.

The very demographic you refer to,the 30+40 somethings,sit squarely in the sights of this Government and I'd suggest many more to come.

They are,for the most part,the Middle Class contributing class,registered for everything,fully tax-compliant and engaged with the civic process,such as it is.

This compliance makes them the easisest possible target for spineless Governments,ever keen not to provoke negative reaction from their burgeoning numbers of dependants.

The only reasonable answer,I feel,is for the State to get familar with the word "No" in terms of dispensing funds and services to individuals who have no contribution history or intent to accquire it.

The Planning Issue is,as you say,equally simple.

However,I would suggest that Planning Offices and Officers throughout the country were most keen to enforce the existing Planning Regulations,but in a frightening proportion of cases their professional judgements were continually overruled by traditional Irish getaroundery methods such as Section 4 motions or Planning Committee meetings in the wee small hours....nudge nudge wink wink,and the builder is on-site before the ink is dry.

Punishing,as you describe it,the existing target-group is neither fair nor an answer,but it is remarkably expedient,and Irish Politics is littered with the by-products of expediency

cast_iron · 31-01-2012 2:49pm

marathonic wrote: »

I'm in Donegal and the new limit is 90 (couple with one child). I can tell you now, without any shadow of a doubt, I will not be dropping this low. My plan is to offer the tenant a drop to 120 and, if this isn't good enough, he can move out.

Just on that, will the tenant not have no option but to move out?
They are not allowed to supplement the rent with their own funds as far as I'm aware, so either the rent must come down to the new limit, or the tenant has to find alternative accommodation at the lower rate.

marathonic · 09-02-2012 12:57pm

cast_iron wrote: »

Just on that, will the tenant not have no option but to move out?
They are not allowed to supplement the rent with their own funds as far as I'm aware, so either the rent must come down to the new limit, or the tenant has to find alternative accommodation at the lower rate.

I haven't been talking to my tenant yet about it and am not FULLY aware of the rules. Officially, it would appear that he'd have to move out as the rent isn't allowed to be supplemented. There is no accomodation available in my town at the reduced rates (and only 16 advertised rentals). There is accomodation at the reduced rates available in the next town about 20 miles away. Therefore, it would appear that tenants will have to move to different towns. This will be difficult for my tenant who works 2-3 days per week in the town.

Unofficially, I'm hearing stories about tenants subsidising the rent and marking the forms at the 'official' rate.

snubbleste · 09-02-2012 1:01pm

Minister for Social Protection states that taxpayer-funded rent supplement creates a floor in the private rental accomodation sector.

''It is essential that rents are allowed to stabilise from a natural balance of supply and demand, rather than as a result of a price floor funded by the taxpayer,'' the Minister added. http://www.rte.ie/news/2012/0209/daft-business.html

marathonic · 09-02-2012 4:11pm

snubbleste wrote: »

Minister for Social Protection states that taxpayer-funded rent supplement creates a floor in the private rental accomodation sector.

Okay - so why not abolish it altogether? Then all landlords would drop their rent to the 'new floor' of €0.

The floor on rented accomodation should always be a level where the rent is sufficient to offer landlords a reasonable yield based on interest rates and current house prices. With average 'low-end' houses in my area currently fetching €115,000 and the lowest mortgage rates at the moment being in the region of 3%, professional landlords should be looking for a return of at least 8% on the €115,000 so that there's sufficient income to cover other expenses as well as profit.

At this rate, house prices would need to drop to (90 * 52) / 8 * 100 = €58,500 before professional landlords come into the market - or almost a 50% drop from here.

Obviously, there's the 'cowboy' landlords who buy at low yields in the hope of getting capital appreciation but those days are gone.

I can see why the government would cut the supplement but to remove it altogether for rents above €90 per week in Donegal is rediculous. Those in towns like Letterkenny (where there is an oversupply of rental accomodation) should fare fine. However, those in other towns may be forced to re-locate (and probably will).

Regardless of peoples thoughts, landlords are providing a service for a fee. It should be considered a business to the landlord, not a get-rich-quick scheme. The government can, and should, control their expenses. However, they shouldn't intervene in a contract between a tenant and a landlord requesting the tenant to re-negotiate their rent.

It'll be interesting to see what happens but I personally don't see rents dropping unless there is an abundant oversupply in a particular town.

Sleepy · 09-02-2012 5:04pm

marathonic wrote: »

The floor on rented accomodation should always be a level where the rent is sufficient to offer landlords a reasonable yield based on interest rates and current house prices.

Why?

A floor on the price of any commodity lends itself to over-supply.

Rent, like the price of any good or service, should be subject to the laws of supply and demand.

Godge · 09-02-2012 5:31pm

marathonic wrote: »

The floor on rented accomodation should always be a level where the rent is sufficient to offer landlords a reasonable yield based on interest rates and current house prices.

Why? If that was the case, everyone would buy property to rent out as there would be no risk.

Buy-to-let is an investment, it is not even active enough to be called a business, and like all investments, there should be a risk. If the new rent supplement rules mean that people move from Carndonagh or Buncrana or whatever small town in Donegal you are talking about to places like Letterkenny where there is property available at the lower rent levels (and where they may have a better chance of a job, either there or in Derry), well then, that is good for the taxpayer. If the landlords of Buncrana and Carndonagh get screwed by that, who cares? It is an investment, you can lose money as well as gain money.

marathonic · 09-02-2012 6:49pm

I thought that post might have ruffled a few feathers. Well, if I'm to be honest, I'm not overly bothered about the rules. It's a slight annoyance as I'd obviously have kept on renting to my current tenant had they not changed. However, it's now a case of asking him to supplement the 90 euro or else serving him his 28 days notice.

It'll be interesting, to say the least, if there's another mini-budget this year as some are predicting. I don't see them hitting rent supplement again but, if they cut jobseekers benefit, which I hope they do, it'll limit tenants ability to even consider supplementing rent. This would have an indirect impact on landlords.

Oh the joys the next couple of years will bring - and, although another topic, David McWilliams is predicting Australia's recession to start this year.

AlekSmart · 09-02-2012 7:02pm

marathonic wrote: »

Okay - so why not abolish it altogether? Then all landlords would drop their rent to the 'new floor' of €0.

The floor on rented accomodation should always be a level where the rent is sufficient to offer landlords a reasonable yield based on interest rates and current house prices. With average 'low-end' houses in my area currently fetching €115,000 and the lowest mortgage rates at the moment being in the region of 3%, Professional landlords should be looking for a return of at least 8% on the €115,000 so that there's sufficient income to cover other expenses as well as profit.

At this rate, house prices would need to drop to (90 * 52) / 8 * 100 = €58,500 before professional landlords come into the market - or almost a 50% drop from here.

Obviously, there's the 'cowboy' landlords who buy at low yields in the hope of getting capital appreciation but those days are gone.

I can see why the government would cut the supplement but to remove it altogether for rents above €90 per week in Donegal is rediculous. Those in towns like Letterkenny (where there is an oversupply of rental accomodation) should fare fine. However, those in other towns may be forced to re-locate (and probably will).

Regardless of peoples thoughts, landlords are providing a service for a fee. It should be considered a business to the landlord, not a get-rich-quick scheme. The government can, and should, control their expenses. However, they shouldn't intervene in a contract between a tenant and a landlord requesting the tenant to re-negotiate their rent.

It'll be interesting to see what happens but I personally don't see rents dropping unless there is an abundant oversupply in a particular town.

This pretty much underlines where successive Irish Governments have collapsed and totally failed to appreciate the necessary reality,thus instead of fostering and assisting the "Proffessionalization" of Landlordism they have consistently aided and abetted the "Cowboy" landlord element in return for the considerable financial sympathy shown to the Political Parties in return...

lmimmfn · 10-02-2012 1:08am

Sleepy wrote: »

Why?

A floor on the price of any commodity lends itself to over-supply.

Rent, like the price of any good or service, should be subject to the laws of supply and demand.

exactly, but having a percentage of rental property socialised creates an artificial value of rental properties rather than leave them dwindle in value as per capitalism where they would find their floor( NAMA makes sure thats not going to happen ).

Its worse than that though, most people who get the rent supplement cant renegotiate with landlords due to the red tape involved, i.e. move out, find temp accommodation, move back in at the lower rate.

Those who receive rent supplement should receive a one off 50euro or whatever bonus if they reduce the cost of their rent and with no red tape and no moving out and back in again.

snubbleste · 02-03-2012 5:31pm

Minister for Social Protection states that rent supplement covers 40% of the rental market as of January 2012.

As the Department currently funds approximately 40% of the private rented sector it is essential that State support for rents are kept under review, reflect current market conditions and do not distort the market in a way that could increase rent prices for others, such as low paid workers and students. http://debates.oireachtas.ie/dail/2012/01/31/00231.asp

Hotblack Desiato · 04-03-2012 2:01pm

snubbleste wrote: »

Minister for Social Protection states that rent supplement covers 40% of the rental market as of January 2012.

Shocking!

Godge · 04-03-2012 10:30pm

snubbleste wrote: »

Minister for Social Protection states that rent supplement covers 40% of the rental market as of January 2012.

And what percentage of the market is covered by student grants? That would be more landlords subsidised by the government.

murphaph · 04-03-2012 11:34pm

Of course these %age figures would be MUCH lower if more people rented in general in Ireland. Because the general desire is for home ownership at any cost, nobody pushes the government for better legislation for tenant/landlord relationships. In Germany pretty much anyone who is unemployed will be living in private rented accommodation too, as Germany doesn't have large stocks of public housing available to it, but because most people will be living in private rented accommodation anyway, the %age of rent payed by the state is probably much lower.

If Ireland wants to significantly reduce the amounts paid to private landlords, it has some choices:

1) Build or buy (or use and accept losses on NAMA owned) housing stock for those unable to afford to put a roof over their heads.

2) Remove itself from the business of providing any housing and hope for the best that people are not made homeless in great numbers.

3) Reduce the amounts paid in rent supplement drastically and hope that landlords are under enough pressure to accept whatever is offered.

Number 3 will work in some regions. It will work to a point in the areas of higher demand and then it will stop working and people in receipt of RS will have to leave and move to areas of lower demand.

Personally I'd like to see far better legislation brought in, to give long term security to tenants to make renting for your entire life a realistic prospect and also to enable quick evictions of tenants who fail to pay their rent and/or damage the landlord's property. Landlords shouldn't be able to jack up the rent at the drop of a hat, but tenants shouldn't be able to screw landlords over by withholding due rent either. It should be a mutually beneficial scenario.

I'd also like to see RS reduced and maximum room sizes and square footage sizes introduced. Working people should, in general, be able to afford better accommodation than those in receipt of RS, anything else seems grossly unfair to me. No property for rent should fall below certain minimum standards, but these standards need not be "gold plated". The property should be clean, dry and capable of being heated reasonably efficiently, with running water and electricity supply and inside toilet.

You can't really have a nation of homeowners and at the same time a competitive rental sector, because if 90% of people own their own homes, then there will be a far smaller supply of rented property to begin with and this will always result in tenants paying somewhat of a premium IMO. The best way to remedy this is to legislate to make renting long term/forever a realistic option in Ireland, as it is here.

Jesus Shaves · 04-03-2012 11:38pm

ninja900 wrote: »

Shocking!

Oh Jaysus it's terrible isn't it, feckin terrible

antoobrien · 05-03-2012 10:24am

murphaph wrote: »

Of course these %age figures would be MUCH lower if more people rented in general in Ireland. Because the general desire is for home ownership at any cost, nobody pushes the government for better legislation for tenant/landlord relationships.

Interesting logic, care to explain it or is the second part of the argument the only reason you think that way?

Government to cut rent supplement

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