Excellent article on Rental Reform

professore

This makes great sense to me - thoughts?

Time to make renting a long-term housing choice

Lorcan Sirr in his rented home in Donnybrook, Dublin 4: "If renting is to be made a long-term and viable option for society, then tenants need to know they have real security of tenure.

THE rental market in Ireland is not a serious, long-term attraction for many people – and it’s time that changed. Our obsession with home ownership, combined with a rental market that offers neither security to tenants nor stable returns to landlords, has given it secondary status when it comes to housing.
It need not be that way. And now that Government policy is, unsurprisingly, shifting away from subsidising house purchases, the time is right to make renting long-term a serious housing choice.

The concept that rent – compared to mortgage repayments – is “dead money” has been upended by the property crash. But it will be difficult to broaden the rental base away from young single people to families unless they know they will be able to stay in a home for as long as they need to, if they continue to pay the rent.

With security of tenure so tenuous, potential tenants are naturally cautious of the rental market.

There are currently at least three obstacles to transforming our rental market into something more attractive.

Firstly, our obsession with home ownership, which was reinforced by a lack of alternative options for many people, and driven by financial supports from the state. This may shift if Government alters policy – and legislation – wisely.

Secondly, there is the plethora of amateur landlords who see investing in property as a short-term game. Professionals see value in having tenants for decades, not until property values rise. Property is a long-term investment, not one of immediate wealth creation.

Thirdly, and most importantly, the Residential Tenancies Act of 2004 needs to be changed. If renting is to be made a long-term and viable option for society, then tenants need to know they have real security of tenure.

The notice periods – up to six months – which must be given by landlords to tenants are not unduly awful in the Act but the reasons by which a landlord can recover possession of a property need to be updated and made more impersonal.

Finally, the rental market needs to be made attractive to professional landlords, that is co-operatives, housing associations and investment companies who have no personal interest in the property but do have a professional interest in long-term tenancies, quality accommodation and good tenant relationships.

There is no reason why Dublin should not have a rental market like Antwerp or Berlin or almost any European city, but we need to level the playing field financially to support different types of accommodation, and the Residential Tenancies Act needs to afford much greater security of tenure to tenants.

We should make the rental market an attractive one for both occupiers and owners.

This means improving security of tenure for tenants, and creating the means to attract professional landlord companies and investors.

We could learn some lessons from the German example. Often thought of as “pro-tenant”, the German rental market is attractive to about 60 per cent of the population.

Being relatively pro-tenant has created a demand for accommodation, and many people regard their rented accommodation as their long-term home and, accordingly,treat it well. Many families rent for life.

Accommodation is invariably rented completely empty, frequently not even with lightbulbs. Each departing tenant paints the accommodation white, so that new tenants have a clean, empty space into which they can move. The quality of rental accommodation in Germany is generally good.

For landlords, the rental market has also consistently provided an excellent rate of return for investors – up to 8 per cent according to Deutsch Bank Research – precisely because renting is attractive to tenants.

This is even despite rents not being able to increase by more than 20 per cent over three years.

With cashflows relatively certain, the German rental market is also stable, attracting professional housing investors and housing companies.

Therefore, it’s not a question of deterring landlords from investing if regulations are too tough. If regulations offer an attractive package for tenants, then the rental base will expand, demand will increase and decent returns will be made.

Ultimately, domestic accommodation, rented or not, is somebody’s home, and not a commodity.

A professional rental market recognises this, and thrives because of it. We have a lot of catching up to do.

Dr Lorcan Sirr is a lecturer in the Department of Real Estate at Dublin Institute of Technology and editor of Dublin’s Future published by the Liffey Press

Renting: I get choice – and save money

I HAVE BEEN a “renter” in various countries ever since I left home. My experience has mostly been a very positive one. There is definitely more stigma attached to renting in Ireland than in other jurisdictions where it is seen as the norm.

Renting currently offers me two major advantages. Firstly, I can afford to rent in a part of Dublin in which I could not afford to buy. Hence, I live in a location of my choice, with good local facilities, and within an easy cycle of work. My commute is less than 20 minutes and I never have to pay to get to work.

Second, renting is currently making me money. Compared to the mortgage on a house I could afford to buy, my rent is around 40 per cent cheaper, meaning I can save the difference each month.

It also means I have a positive sum of money and not a house in negative equity with 25 years left on the mortgage.

Renting also affords me a degree of flexibility. If needs be, I can up sticks and move location or country.

Unfortunately, renting is not for everybody, although it should be. Our market and legislation is such that renting offers little security of tenure.

For example, why and how would families rent if they can’t be assured of being able to stay for long periods of time? I take this risk.

Others can’t, but security of tenure shouldn’t be a risk in a proper rental market.

http://www.irishtimes.com/newspaper/property/2011/1117/1224307694424.html

Snakeblood

professore wrote: »

This makes great sense to me - thoughts?



http://www.irishtimes.com/newspaper/property/2011/1117/1224307694424.html

I agree with this, with the caveat that when I bought, I could have rented the place for 750 euro, or I could have bought and paid the mortgage for 500 euro a month (plus deposit and associated fees). I'm sure people will disagree, but I found the rental market vastly overpriced (and still is). Generally speaking, now I'm renting a house for 1000 a month, and if I look to buy a similar property, It'd work out at roughly the same over the term of the mortgage..

While the last couple of years have proven 'rent is dead money' to be a lie, at the same time, there's not much obvious advantage to renting a place for 1000 a month over buying a place and paying 1000 a month, assuming I want to stay there over at least the next few years.

Rents should drop more. Mind you, so should house prices.

Kosseegan

Altering the Residfential Tenancies Act is not the way to go. There is a need for a new Act catering for a limited range of accommodation with streamlined procedures. Are there tenants prepared to take over shell units and install their own appliances? Are there tenants prepared to sign long leases and stick to them. Are there landlords prepared to rent long term and truist the legal system to protect them?
The way to go would be to provide an initial supply of units and prover that it can work. If it does, it can eb expanded. A variation of this work with social housing i.e. the RAS system.

Ray Palmer

I don't think it is very well written or researched. Germany and the like were massively damaged during WW2. This lead to masses of state funding to rebuild which lead to the creation of rental property run and managed by companies.AS time went on these companies were able to expand and also get stae payments and tax breaks. The regulations stemed from this set-up where large companies provided the majority of rental property.

So to replicate it here you need mass destruction, eliminate individual ownship of massive amounts of property then provisde state money to rebuild.

Other countries that have similar companies were like wise destroyed in WW2 former comunist or socialist countries where it was state provided.

That also ignores that the menatlity of renters would have to radically change. They would have to buy furniture and start mainting the property much more than they do now.

The system does need to be addressed but mostly through quick responses from the governing body along with protection for both landlords and tenants. If somebody stops paying their rent in this country it can take well over a year to get them out. The PRTB system seems to bias towards tenants yet funded by LL. A seriously messed up system

markpb

Ray Palmer wrote: »

So to replicate it here you need mass destruction, eliminate individual ownship of massive amounts of property then provisde state money to rebuild.

I disagree (and in fact, I can't imagine why you think we need to destroy properties to change the ownership structure!). I think it's quite likely that we'll see housing companies buy up a lot of houses for rental properties in the near future. We've already seen it with the Gasworks in Ballsbridge. People will find it hard to get mortgages for investment properties but there are quite a few development companies that have a good credit rating and/or good cash reserves.

professore

Kosseegan wrote: »

Are there tenants prepared to take over shell units and install their own appliances? Are there tenants prepared to sign long leases and stick to them. Are there landlords prepared to rent long term and truist the legal system to protect them?
The way to go would be to provide an initial supply of units and prover that it can work. If it does, it can eb expanded. A variation of this work with social housing i.e. the RAS system.

Surely this could be done with the free market, especially now? I think families renting a house on a long lease at reasonable rent and fixity of tenure would be hugely popular. Three year leases would be a start. When I lived in Belgium 9 year leases were the norm for decent family size accommodation. I had to make an exception to get a 3 year lease.

Oh and saying this requires state ownership and mass destruction is crazy talk. Any LL's I met there were private individuals with 1-2 properties.

Ray Palmer

markpb wrote: »

I disagree (and in fact, I can't imagine why you think we need to destroy properties to change the ownership structure!). I think it's quite likely that we'll see housing companies buy up a lot of houses for rental properties in the near future. We've already seen it with the Gasworks in Ballsbridge. People will find it hard to get mortgages for investment properties but there are quite a few development companies that have a good credit rating and/or good cash reserves.

No matter how many vacant properties there are currently about they would not negate all the current rental properties in the market. A few companies trying it here will not suddenly make the current rental market disappear.

The point is the article ignored why other countries have what they have and failed to see how that is not possible here withourt masses of change. It is pretty much the same as asking why RTE isn't as good as BBC, why the USA doesn't have old castles like us but without looking at cause and effect.

robd

The article was well intended and certainly started off well. Comments about Germany, as identified by poster above, are off alright.

Here's one of the main problems with the current tenancy act.

Reasons a landlord may terminate a tenancy during later 3 1/2 years.

the landlord intends to sell the dwelling in the next 3 months the landlord requires the dwelling for own or family member occupation the landlord intends to refurbish the dwelling
the landlord intends to change the business use of the dwelling.

I mean, this has to have been written by someone like Ivor Callely, himself of the landlord classes. Remove this and you'd encourage a much more professional class of landlords. I mean, this is totally open to liberal abuse.

Something does really need to be done about furnished vs unfurnished. Furnished is great when your younger and in a lot of situations but it's not ideal as you get older and like better quality accommodation. The beds in rented accommodation are a particular peeve of mine. A €199 bed from Bargain Town is completely unsuitable for most full size adults and lasts about 6 months, yet this is what every landlord buys and leaves there for 10 years. There's a still a lingering view around that allowing a tenant to furnish a property provides them with more rights; this needs to be cleared up.

There's definitely a case for developing 3/4 bed unfurnished housing market aimed at families and older renters. 1/2 bed furnished apartments is already very well served and more than meets needs of a younger sector of society.

Thoie

While I'm familiar with renting on the continent, one of the things that I've never got around to asking is "What happens after you retire?"

Do people save during their lifetimes to cover their rent after retirement, or do they manage the rent on their pension, or... ?

My personal plan (and I'm not saying it's a good/bad idea) is to ensure that I am mortgage free by the time I retire, so that any income I do have isn't being eaten by accommodation costs.

Ray Palmer

robd wrote: »

I mean, this has to have been written by someone like Ivor Callely, himself of the landlord classes. Remove this and you'd encourage a much more professional class of landlords. I mean, this is totally open to liberal abuse.

While I do agree it is open to abuse and has been used as such. We have so many individuals of normal back grounds who rent property. It just wouldn't be right to restrict them in the same manner you can do with large businesses. Many buy property with the express purpose to house their children later on when in college or even for their own retirement.

I also don't think there is a such thing as the landlord classes. It is a very old attitude about LLs that exists in Ireland that is a major part of the problem.

AFAIK what people do who rent in the continent at retirement is move to much smaller and affordable property often state subsidised. They tend to have better private pensions too.

I bought a smaller house that I rent which I intend to move into at retirement and then rent out my own home which is larger. You can do up the rental property and get tax breaks on it so the tennat has a good place and I will in the future.

gurramok

If my memory is correct, once you invest in property in Germany you have to hold onto that property for at least 10 years. Otherwise you will be stung with a very high tax(forget name, its like CGT) hence you would actually have a financial loss on the property. This encourages wise long term investment from professional landlords and not cowboys/speculators.

Molloys Clondalkin

Thoie wrote: »

While I'm familiar with renting on the continent, one of the things that I've never got around to asking is "What happens after you retire?"

Do people save during their lifetimes to cover their rent after retirement, or do they manage the rent on their pension, or... ?

My personal plan (and I'm not saying it's a good/bad idea) is to ensure that I am mortgage free by the time I retire, so that any income I do have isn't being eaten by accommodation costs.

Thats a very good point esp. with the way everyones pension is going now imagine if you were renting for life and your pension collapsed there would be an epidemic of homeless people.
Andthen to put them in state sponsored homes well we cant even do that for the homeless now with all the nama homes.

Zamboni

Thoie wrote: »

Do people save during their lifetimes to cover their rent after retirement, or do they manage the rent on their pension, or... ?

Rent, save and then buy in cash.
You can do this without getting a mortgage or having to wait until you're OAP age.
It is also the most overlooked option.
Probably because of the lack of instant gratification.

Ray Palmer

Zamboni wrote: »

Rent, save and then buy in cash.
You can do this without getting a mortgage or having to wait until you're OAP age.
It is also the most overlooked option.
Probably because of the lack of instant gratification.

While possible for some it actually requires earning enough to effectively pay for twice. I am sure there can be some calculations where considering interest this might work out but it is not going to be cheaper in a normal market. You might get lucky with the market but it is a gamble.

It isn't really overlooked it is risky so some won't try it and others will not have the money to both save and pay rent. You could easily end up with two properties if you used the same amount of money.

Short term investing in property was always a bad idea but it doesn't eliminate it as a good long term plan.

BostonB

The main problem is the lack of fast legal resolution for both tenants or landlord where there are problems. Until that's resolved there's no point changing anything. its like putting in speed limits then not enforcing them.