Proposal: Extension of Rent a Room

MarkAnthony

I had a thought and wanted to get some feedback on it.

Assumptions:

(i) I assume there are a fair number of 'accidental landlords' who purchased apartments during the boom and now are renting the out and live elsewhere. Many will be in neqative equity and unable to sell.

(ii) Those landlords are struggling to pay the mortgages and this is applying upward pressure on rents.

(iii) A proportion are probably dodging tax and given most are probably in PAYE employment the chances of being caught aren't that high.

Options:

(i) Why not reduce the rent a room allowance back to 10K a year and extend it to include rooms or self contained apartments outside of the family home?

(ii) Any rental over 10K would result in the whole amount becoming chargeable to prevent actual investors taking advantage of the system, or alternatively don't and just give everyone a 10K allowance on rental property.

A problem exists with couples, would you allow one or two bites at the apple and how would you prevent that - perhaps link it into whether you're single or join assessment and also whose name is on the mortgage/property.

Ancillary matters:

Would the scheme create a tenancy and require PRTB registration or would one allow this scheme to create licensees only. I favour the licensee approach because this would be designed to cater to accidental landlords. It would also provide more flexible options for tenants, in that there wouldn't be the enforceability of a 12 month lease.

Perhaps there could be some incentive to sell after a certain amount of time/the scheme could be time limited e.g. 10 years max.

Aims:

To create a section of the market of lower cost with more flexible terms for the tenant and more protection for accidental landlords. A side effect could be to allow investors one bite at this (upto 10K pa) to create even more properties under €833 per month.

Ideal Feedback:

Links to stats/reports backing up/refuting the assumptions.

Any sort of stat/report that could possibly cost this.

Depending on the feedback I might actually try and get somewhere with this and send it off to a TD or something.

hfallada

MarkAnthony wrote: »

I had a thought and wanted to get some feedback on it.

Assumptions:

(i) I assume there are a fair number of 'accidental landlords' who purchased apartments during the boom and now are renting the out and live elsewhere. Many will be in neq equity and unable to sell.

(ii) Those landlords are struggling to pay the mortgages and this is applying upward pressure on rents.

(iii) A proportion are probably dodging tax and given most are probably in PAYE employment the chances of being caught aren't that high.

Options:

(i) Why not reduce the rent a room allowance back to 10K a year and extend it to include rooms or self contained apartments outside of the family home?

(ii) Any rental over 10K would result in the whole amount becoming chargeable to prevent actual investors taking advantage of the system, or alternatively don't and just give everyone a 10K allowance on rental property.

A problem exists with couples, would you allow one or two bites at the apple and how would you prevent that - perhaps link it into whether you're single or join assessment and also whose name is on the mortgage/property.

Ancillary matters:

Would the scheme create a tenancy and require PRTB registration or would one allow this scheme to create licensees only. I favour the licensee approach because this would be designed to cater to accidental landlords. It would also provide more flexible options for tenants, in that there wouldn't be the enforceability of a 12 month lease.

Aims:

To create a section of the market of lower cost with more flexible terms for the tenant and more protection for accidental landlords. A side effect could be to allow investors one bite at this (upto 10K pa) to create even more properties under €833 per month.

Ideal Feedback:

Links to stats/reports backing up/refuting the assumptions.

Any sort of stat/report that could possibly cost this.

Depending on the feedback I might actually try and get somewhere with this and send it off to a TD or something.

The last thing we need is the Government narrowing, our already narrow tax base. The rent a room scheme is designed for people who have a spare room or two, that they want to let out.

If people are 'accidental' LLs, they usually have rent that doesnt meet their mortgage. So they arent making a proft. Therefore they have no tax liability. A fairer compromise, might to allow they use some of the loss as a tax credit. But where do you draw the line? If your business is lose making should you get a tax credit. No! As with any financial investment or purchase of an asset. There is potential for profit, but most importantly a risk of loss.

Its disturbing to see that people think lobbying for the benefit of a minority, at the cost to the majority of tax payer should still be acceptable. Irish people need to learn, any purchase of an asset carries a risk. But after the mess that was Eircom floatation. Tens of thousands got burned again when the Irish banks went under.

At what stage are Irish people going to take responsibility for their financial decisions. If you dont understand financial planning. Pay an expert for a hour or two. Dont make a poor decision and blame it on everyone but yourself

MarkAnthony

hfallada wrote: »

The last thing we need is the Government narrowing, our already narrow tax base. The rent a room scheme is designed for people who have a spare room or two, that they want to let out.

And it's designed to make that an easier process for all with the hope to more accommodation being available.

hfallada wrote: »

If people are 'accidental' LLs, they usually have rent that doesnt meet their mortgage. So they arent making a proft. Therefore they have no tax liability.

That's not actually how it works out. You can be showing a profit for tax purposes that results in negative cash flow. I'll maybe do some worked examples.

hfallada wrote: »

A fairer compromise, might to allow they use some of the loss as a tax credit. But where do you draw the line? If your business is lose making should you get a tax credit. No! As with any financial investment or purchase of an asset. There is potential for profit, but most importantly a risk of loss.

Fair point in relation to businesses, not so much in relation to domestic property IMHO. I concede a large element of ex post facto reasoning here in attempting to deal with the reality of the situation on the ground now.

hfallada wrote: »

Its disturbing to see that people think lobbying for the benefit of a minority, at the cost to the majority of tax payer should still be acceptable. Irish people need to learn, any purchase of an asset carries a risk. But after the mess that was Eircom floatation. Tens of thousands got burned again when the Irish banks went under.

At what stage are Irish people going to take responsibility for their financial decisions. If you dont understand financial planning. Pay an expert for a hour or two. Dont make a poor decision and blame it on everyone but yourself

I'm glad someone had made this point and you've made it well. I wonder if we could avoid the entire thread becoming one half remaking this point and the other half refuting it without anything to back it up. It's fair comment here I think as my OP is not backed up, but going forward I'd be very much obliged for links etc.

Of course anyone is free to post as you like within the bounds of the forum, it's not my job to backseat mod just a polite request from the OP.

jimmycrackcorm

MarkAnthony wrote:

(i) Why not reduce the rent a room allowance back to 10K a year and extend it to include rooms or self contained apartments outside of the family home?

Like a normal landlord?

MouseTail

I cannot see any benefit to Policy Makers in this, it does not increase supply, it narrows the tax base, it deals with an issue that is no longer 'noisy' (accidental landlords).

Victor

MarkAnthony wrote: »

(ii) Those landlords are struggling to pay the mortgages and this is applying upward pressure on rents.

Recent rent increase are based on demand, not costs.

hfallada

Victor wrote: »

Recent rent increase are based on demand, not costs.

There is the element of supply push inflation. I know plenty of landlords passed on the increases in USC and PRSI levied onto them, with high rents. But OP belief that introducing a tax break for landlords to increase, wont increase supply. As the amount of property being put on the market wont increase

athtrasna

Is it just me or does this thread suggest restricting the scheme it claims to want to increase?

MarkAnthony

athtrasna wrote: »

Is it just me or does this thread suggest restricting the scheme it claims to want to increase?

It's just you, I think.

athtrasna

The suggestion to reduce the current limit by 25%?

MarkAnthony

athtrasna wrote: »

The suggestion to reduce the current limit by 25%?

Required to dampen prices. I'm very dubious of the increase in limit doing very much to increase room availability. But feel free pop up your facts and figures.

MarkAnthony

Victor wrote: »

Recent rent increase are based on demand, not costs.

Honest question: What has caused this massive influx of people to Dublin? I was under the impression there had been a reduction in the population. Perhaps you could point me in the direction of the data that shows either?

EDIT: All I could find - http://www.cso.ie/en/releasesandpublications/er/rpp/regionalpopulationprojections2016-2031/#.VOk4mfmsVXs

Victor

MarkAnthony wrote: »

Honest question: What has caused this massive influx of people to Dublin? I was under the impression there had been a reduction in the population. Perhaps you could point me in the direction of the data that shows either?

EDIT: All I could find - http://www.cso.ie/en/releasesandpublications/er/rpp/regionalpopulationprojections2016-2031/#.VOk4mfmsVXs

Despite emigration, the population is growing by about 1% - 40,000 people - per year.

Table 8 here: http://www.cso.ie/en/releasesandpublications/er/pme/populationandmigrationestimatesapril2014/#.VOlC4CzkNnR estimates Dublin city & county population in April 2014 at 1,274,600 (State: 4,609,600). This compares with 1,273,069 (State: 4,588,252) in Census 2011.

What has really happened in the last year is that people were no longer happy with their previous accommodation arrangements and as people have some additional money, new households are being formed.

MarkAnthony

Victor wrote: »

Despite emigration, the population is growing by about 1% - 40,000 people - per year.

Table 8 here: http://www.cso.ie/en/releasesandpublications/er/pme/populationandmigrationestimatesapril2014/#.VOlC4CzkNnR estimates Dublin city & county population in April 2014 at 1,274,600 (State: 4,609,600). This compares with 1,273,069 (State: 4,588,252) in Census 2011.

What has really happened in the last year is that people were no longer happy with their previous accommodation arrangements and as people have some additional money, new households are being formed.

I'd concede your second point with perhaps bedsits feeding into this, but the population increase seems based on future changes. 2011 v 2014 there is an increase of less than 2000.

While I agree there is a demand element I'm not sure it's the only consideration. Thanks for looking through that though and giving me something to look at it's appreciated.

hfallada

MarkAnthony wrote: »

I'd concede your second point with perhaps bedsits feeding into this, but the population increase seems based on future changes. 2011 v 2014 there is an increase of less than 2000.

While I agree there is a demand element I'm not sure it's the only consideration. Thanks for looking through that though and giving me something to look at it's appreciated.

http://www.cso.ie/en/releasesandpublications/er/pme/populationandmigrationestimatesapril2014/#.VOniz1V1-uY

There was actually an increase of 35k in the population of Ireland between 2011 and 2014.

MarkAnthony

hfallada wrote: »

http://www.cso.ie/en/releasesandpublications/er/pme/populationandmigrationestimatesapril2014/#.VOniz1V1-uY

There was actually an increase of 35k in the population of Ireland between 2011 and 2014.

I was looking more specifically at Dublin but point taken.

scrimshanker

MarkAnthony wrote: »

I had a thought and wanted to get some feedback on it.

Assumptions:


(iii) A proportion are probably dodging tax and given most are probably in PAYE employment the chances of being caught aren't that high.

I get what you're saying, but Revenue now have the tools to clamp down on this (LPT) and they're beginning to send letters to such owners saying that their form 11/12 is incomplete.