Article: Landlords to get new tax relief in rental shake-up

The_Conductor

From today's Indo: http://www.independent.ie/business/personal-finance/property-mortgages/landlords-to-get-new-tax-relief-in-rental-shakeup-31218149.html

Tenants are to be offered greater certainty with Continental-style leases of up to 20 years as part of a radical shake-up of the rental market.

A new Government policy document also considers significant tax reliefs for landlords, as well as an end to the practice of ejecting tenants when a property is being sold.

The report, by the National Economic and Social Council, represents the outline of a new national policy for the private rental sector. It is now being put to Government. An estimated one-in-five households in Ireland (305,000) are renting and the report acknowledges that a third of people are unlikely to be able to purchase a home in the future. But several radical new proposals are being put forward to shake up the Irish rental sector and ease the accommodation crisis. The report was reviewed by Cabinet yesterday.

It stresses an effective solution to the rental shortage requires measures to help both landlords and tenants as "neither approach on its own will be effective".

Meanwhile, the Government is expected to hold a special Cabinet meeting today to sign-off on a mortgage-arrears package.

In what amounts to a major U-turn, ministers are due to agree to a change that will see banks effectively losing their veto over insolvency deals.

The Government fears a massive spike in repossessions if it does not act. Close to 38,000 residential mortgage accounts have built up more than two years of arrears.

An expanded mortgage-to-rent scheme will be outlined allowing homeowners in the Dublin and commuter counties to avail of it. And "red tape" involved in getting an insolvency deal will be removed.

And here: http://www.independent.ie/business/personal-finance/property-mortgages/higher-tax-relief-for-landlords-in-rental-market-shakeup-31218010.html

Significant tax reliefs for landlords and longer leases for tenants are part of a radical new Government policy document to give the rental market its biggest overhaul in a generation.

It also proposes an end to the practice of ejecting tenants when a property is being sold.

These are all among the new proposals contained in the policy report that has been designed to shake up the Irish rental sector and was reviewed by Cabinet yesterday.

The report contains some stark recognitions of where the accommodation crisis is now headed - acknowledging that a third of the population will find it difficult to buy their own home in the future.

The report by the National Economic and Social Council (NESC) represents the outline of a new national policy for the private rental sector which is being put to Government.

An estimated one-in-five households (305,000) are now renting.

It states: "Government policy now recognises the reality that up to one-third of the population will find it increasingly difficult to achieve home ownership going forward."

It stresses that an effective solution to Ireland's rental shortages requires "breaking free of the current debate . . . in which some argue for rent control and others counter with the need to create better incentives to keep existing landlords in the sector and encourage developers and investors to resume construction and supply. Neither approach on its own will be effective."

Its authors describe the new proposals as a "multi-faceted approach" to providing more rental accommodation under improved circumstances for both landlords and tenants.

Titled 'Ireland's Rental Sector: Pathways to Secure Occupancy and Affordable Supply', the report calls for:

Longer leases, which should mirror European models to 10 or 20 years - as opposed to a maximum of four years and nine months, the maximum to which that an Irish residential tenant is currently entitled.

Rules to prevent landlords from ejecting tenants when they plan to sell the property. Tenants would thus "accompany" the property in a sale, as they typically do in the commercial property sector.

The beefing up of the powers of the Private Residential Tenancies Board (PRTB) to resolve disputes quickly .

The introduction of "real" rent controls - this is likely to limited on the basis of a four-year average index, looking backward. The PRTB currently has an index which could help to provide the necessary figures.

"Controlled incentives" for landlords - subject to them adhering to the property standards and terms.

The report is not specific about this, but Dr Larry O'Connell, one of its authors, told the Irish Independent that this would be about "bringing conditions closer to those of commercial property landlords".

This suggests providing residential landlords with full mortgage interest relief. At present they can claim 75pc as opposed to 100pc for a commercial property landlord.
Disputes

Speaking about the Private Residential Tenancies Board, Dr O'Connell added: "At the moment the length of time it takes to resolve disputes - which could be more than a year - is a major issue for both landlord and tenant. This needs to be dealt with."

The document also says Government is clear that the goals of housing policy should be affordability, sustainability and inclusion.

More than one-third (34pc) are renting in Dublin, almost one-third in Cork (29pc) and even more in Galway (40pc).

NESC proposals on increasing supply of housing for both the social and private sector is expected to follow the rental report early next month.

Pat Davitt of the Institute of Professional Auctioneers and Valuers (IPAV) said: "Whether it encourages new landlords into the market or not, parity of mortgage interest relief with commercial property landlords will certainly prevent more leaving.".

_Kaiser_

Beat ya to it

Overall though I think from what's described this is a positive move for tenants and landlords alike... it remains to be seen how much makes it into the final legislation, and how they incentivise landlords to offer those longer leases for example (given the reaction in the other thread is already decidedly mixed from that side of things).

steddyeddy

Very interesting and it looks like they're dealing with the problem of landlords selling properties and turfing out tenants and increasing tenant security.

_Kaiser_

steddyeddy wrote: »

Very interesting and it looks like they're dealing with the problem of landlords selling properties and turfing out tenants and increasing tenant security.

Yep which leads to tenants feeling more secure in the property (and valuing it more as they can make it a home), encourages a more stable long-term business relationship with the landlord, and if it was managed properly could be start of a move away from the "must get on the property ladder (whatever the cost!!)" mindset that has already crippled the country once in recent times.

steddyeddy

I can't see much wrong with this myself. It could even have implications for rent allowance recipients if legislated properly.

_Kaiser_

steddyeddy wrote: »

I can't see much wrong with this myself. It could even have implications for rent allowance recipients if legislated properly.

Exactly.. on the face of it - everyone's a winner really if they step back from whatever situation they might be in now and look at this properly.

The key word though unfortunately remains "if" - IF they draft the legislation properly, IF the incentives are there for landlords to support longer term arrangements, IF the PRTB changes really do resolve any issues swiftly and fairly, IF the public as a whole gets behind the notion that you don't HAVE to own property to have a home!

steddyeddy

It will also root out the less qualified landlords.

billythefish99

steddyeddy wrote: »

It will also root out the less qualified landlords.

How you figure?

The_Conductor

Quick personal comment-

Putting mortgage lending to landlords on a similar footing to lending to other businesses is common sense- and is a simple increase in the allowance of mortgage interest as an allowable deduction from rental income from 75% to 100%.

Allowing tenants stay in a property when the property is being sold- is a complete non-runner. The issue here- is lenders will not lend for property unless a purchaser has vacant possession. Unless lending to landlords is treating in a purely commercial manner- this is a complete non-starter (and if they are- the restrictions on LTV ratios for landlords will also need to be abolished).

Longterm leases- should be accompanied by the letting of unfurnished property- the same as elsewhere. Specifying a kitout (cooker, fridge etc) plays to short term tenants who have no vested interest in the property.

Its a step in the right direction for both tenants and landlords- however, it *must* be accompanied by a complete overhaul of the 2004 Act- which is dysfunctional at best- and the PRTB needs a complete overhaul too- as they are being played for fools by both tenants and landlords.

_Kaiser_

steddyeddy wrote: »

It will also root out the less qualified landlords.

(Feel like this is a private conversation here ) but yes.. We need professional landlords more than anything who treat the whole concept as a business, not a charity/lesser option for poor people/get-rich-quick scheme.

On the other side we need tenants who use the added security as a opportunity to make a home and treat/respect it accordingly.. rather than the transitory "stepping stone to ownership" a lot treat renting as now

And we need a beefed up PRTB with the powers and authority to effectively deal swiftly with any nonsense from either side.

MarkAnthony

With 100% tax relief on mortgages it may also allow the banks to get some of the tracker mortgages off their books. I wonder how many trackers out there aren't PPR anymore and how many of those specify that to maintain the tracker they must be a PPR.

Frankly it's great news all round if we don't end up with some watered down, suits nobody solution. I sincerely hope that Rent Allowance is also dealt with here, perhaps by paying it directly to the LL and allowing unfurnished properties.

On the unfurnished note! Happy Days! TBH repairing walls and floors is noting compared to having to purchase a new kit out of furnishings and appliances. Hopefully it'll give people a sense of home. I'd be delighted with a tenant that wants in for 10 years - my only concern is how many tenants actually want this? I suspect this aspect will be tenant focused allowing them an out.

The_Conductor

Let them have an out then- but they still have to furnish it themselves (and return it unfurnished, freshly painted and a blank canvas- as is the case elsewhere in Europe).

Arbiter of Good Taste

One problem I would see with not being able to (legally) terminate a lease on the sale of a property is that it would effectively limit the market for buying investment properties to professional landlords unless the sale coincides with the natural end of a lease or the LL is willing to pay a fortune to the tenant.

Seems to be a bonus for professional investors, not so much for people looking to buy a home.

MarkAnthony

Arbiter of Good Taste wrote: »

One problem I would see with not being able to (legally) terminate a lease on the sale of a property is that it would effectively limit the market for buying investment properties to professional landlords unless the sale coincides with the natural end of a lease or the LL is willing to pay a fortune to the tenant.

Seems to be a bonus for professional investors, not so much for people looking to buy a home.

You mean converting investment properties to owner occupied properties. Only fair really, if the investor is dumping at the top of the market it's very difficult for the renter to find anything. I could see it as a disincentive to professional investors perhaps or is the thinking we've come out of people swooping in for short term huge gains?

If it's an investor selling on to another investor I'm sure the BTL mortgage product will allow for the transfer of tenants and would actually make the whole process easier for everyone.

The_Conductor

Is limiting the ability to terminate a lease on a sale- a bad thing?
Providing of course- that it doesn't impinge on a landlord's ability to fund the purchase (aka at the moment you can only get finance for vacant possession).

Looking at this though- there is no imperative to ever pay down loans- and part of our boomtime trouble came about because landlords (and other investors) stacked loans?

How about going about this in a different manner altogether- and while allowing mortgage interest as an allowable expense- incentivise landlords (and indeed all businesses) to pay down their loans, rather than simply flipping them........ So- the marginal tax rate on income would reduce, as the debt outstanding on the asset falls?

Simply allowing mortgage interest for everyone be treated as a tax deductible cost- means why would you ever pay it back- sure, you'd loose the deduction. There is a perverse incentive to never pay back the loan........?

hmmm

We need to get rid of the culture of amateur landlords with one or two properties, and move to a culture where companies or housing associations are the landlords - only then will we see consistent, professional landlords. Unfortunately there are so many vested interests who are those types of landlords (including many TDs), I just can't see it passing.

Gatling

I'd glady take a 10 +year lease especially with the current housing crisis here in Dublin

MarkAnthony

hmmm wrote: »

We need to get rid of the culture of amateur landlords with one or two properties, and move to a culture where companies or housing associations are the landlords - only then will we see consistent, professional landlords. Unfortunately there are so many vested interests who are those types of landlords (including many TDs), I just can't see it passing.

I completely disagree.

The market is better served by having a diversity of landlords. They should, of course, be all held to the same standard but allowing a few companies to monopolise the market will lead to the same issue with management companies; the majority of them are dire.

There are still a number of people, myself included, that are willing to break even/pay into our properties until they come out of negative equity and may even decide to keep it on beyond that to give our child a starter place. That personal choice should not be curtailed.

The_Conductor

I agree with MarkAnthony- whether a landlord has 1 or 2 properties- or a whole plethora of them- is immaterial. What matters is that the landlord is fully aware of his or her obligations, the law, and fulfills all their obligations to the fullest extent possible.

There are some rogue landlords out there- just as there is a significant cohort of tenants who seem to view payment of rent and keeping a property to a reasonable standard- to be completely optional.

A change in the law- which gives tenants greater tenancy rights- but also gives them a vested interest in taking care of the property- is long overdue.

Some of the current issues- such as an inability to speedily evict tenants who fail to their rent- need to be addressed as part of this process- its a two way street- the current system is failing significant numbers of tenants and landlords- the obvious deficiencies on both sides of the equation need to be addressed.

MouseTail

Whilst this is welcome, it is a deterrent to amateur landlords, and they currently make up a sizeable proportion of the supply. This needs to be phased or we will end up with a similar problem to the fallout of the bedsit regulations, ie a selloff of btls before the legislation is enacted thereby squeezing supply further. Will the short term pain be worth it for long term gain?

Barely Hedged

Adding definitive/legal accountability on both sides is the only way to improve the situation in the future.

Tenants

• larger deposits - 2 maybe 3 months
• a credit rating system where tenants repayments history and deposit recuperation records are tied to their PPS numbers
• social welfare rent allowance paid directly to landlords
• the minority of the rent allowance recipients that do not respect the system, will have real consequences for their actions. Refusal for private accommodation and extended boarding in hostels, garnishing of welfare payments for damage caused in previous properties etc

Landlords

• deposits held in escrow by a third party
• same third party provides an entrance and exit assessment of the property and mediates on the amount of deposit that is to be withheld
• a sliding scale of monetary fines for not dealing with tenant issues promptly, assuming the issue is not the fault of the tenant. This is held on record against the landlords PPS number

This will all cost money, but if you want to live in a better more functional society, thats the reality.

Barely Hedged

hmmm wrote: »

We need to get rid of the culture of amateur landlords with one or two properties, and move to a culture where companies or housing associations are the landlords - only then will we see consistent, professional landlords. Unfortunately there are so many vested interests who are those types of landlords (including many TDs), I just can't see it passing.

Why exactly and what other country does this renters utopia exist in?

matrim

hmmm wrote: »

We need to get rid of the culture of amateur landlords with one or two properties, and move to a culture where companies or housing associations are the landlords - only then will we see consistent, professional landlords. Unfortunately there are so many vested interests who are those types of landlords (including many TDs), I just can't see it passing.

Some of the worst landlords I've seen are ones who are professional landlords, especially if they have a monopoly on the houses in an area.

There are plenty of good and bad small landlords, as well as good and bad big landlords. As others have said it's about having people who understand their obligations and having an effective way for both parties to enforce their rights if something is going wrong

hmmm

matrim wrote: »

As others have said it's about having people who understand their obligations

The vast majority of "amateur" landlords I've ever dealt with had not the slightest clue of their obligations, and were completely inconsistent in their dealings. In recent years, we've had the "accidental landlord" class who see being a landlord as a nuisance, and are only doing this until house prices have recovered. They are a plague on the rental sector - one glance at the accommodation forum on boards will give you plenty of stories of landlords dropping in unannounced, and expecting their carpets to be steam-cleaned on a monthly basis.

I don't trust any public sector or quango operation to provide proper enforcement. We have multiple property quangos, and I'm unimpressed with all of them.

the groutch

On the flips of the "amateur landlord" thing, I would hope that they'd give greater powers for the PTRB to assist with the speedy eviction of problematic tenants too.

murphaph

Restoring 100% tax relief on mortgage interest would be just that, restoring it to the way it was and should always have been. Landlords in Ireland are allowed very few deductions when compared to Germany.

What landlords really need is an effective regime against delinquent tenants however.

steddyeddy

the groutch wrote: »

On the flips of the "amateur landlord" thing, I would hope that they'd give greater powers for the PTRB to assist with the speedy eviction of problematic tenants too.

Yea both sides need sorting. You're going to get amateur or problematic tenants if you get Amateur or problematic landlords IMHO.

handlemaster

Tenants who refuse to pay and cause damage or naissance should be easier to de al with. At the moment à tenant can stay à long time without paying. Maybe an insurance scheme

Cuddlesworth

The_Conductor wrote: »

Meanwhile, the Government is expected to hold a special Cabinet meeting today to sign-off on a mortgage-arrears package.

In what amounts to a major U-turn, ministers are due to agree to a change that will see banks effectively losing their veto over insolvency deals.

The Government fears a massive spike in repossessions if it does not act. Close to 38,000 residential mortgage accounts have built up more than two years of arrears.

Any more info on this? Seems like a huge topic with a slight amount of attention.

aido79

handlemaster wrote: »

Tenants who refuse to pay and cause damage or naissance should be easier to de al with. At the moment à tenant can stay à long time without paying. Maybe an insurance scheme

This the biggest problem for landlords. The cost of having a bad tenant can undo any benefit gained by getting extra money in mortgage relief. What's the point in having a long-term tenant if they are going to wreck the property?
They should bring in a system where:

Landlords are able to rent unfurnished.
Deposits are held by a third party and can only be released by having both parties signing for it.
The tenant should have insurance to cover any damage caused(aside from wear and tear).
PRTB or similar to be more helpful in helping a landlord get rid of bad tenants.

Michael D Not Higgins

aido79 wrote: »

They should bring in a system where:

Landlords are able to rent unfurnished.

Nothing stopping them doing that right now. In fact, it's the short term nature of tenancies and house ownership culture that promotes renting as a tool for young people's housing that leads furnished apartments as these people are less likely to have their own furniture.

aido79

Michael D Not Higgins wrote: »

Nothing stopping them doing that right now. In fact, it's the short term nature of tenancies and house ownership culture that promotes renting as a tool for young people's housing that leads furnished apartments as these people are less likely to have their own furniture.

That's true I suppose. Maybe it's more about changing people's mindset and not relying on a landlord to supply everything from a sofa to a spoon.

Michael D Not Higgins

aido79 wrote: »

That's true I suppose. Maybe it's more about changing people's mindset and not relying on a landlord to supply everything from a sofa to a spoon.

Well if the government are serious about this long term renting, then I can see many more unfurnished places coming onto the market. Or at least, the landlord will give the option of either/or.

I'm sure there are plenty of people who, with the right system, would take an unfurnished apartment and treat as their own home and build up their own stock of furniture.

jarmstrong001

handlemaster wrote: »

Tenants who refuse to pay and cause damage or naissance should be easier to de al with. At the moment à tenant can stay à long time without paying. Maybe an insurance scheme

It would seem like a massively socially regressive step to simultaneously introduce measures which make it easier for the landlords to collect rent on properties they have mortgaged from the banks without making repayments and without any fear of repossession at the same time as measures to reduce the security of tenure for tenants.

The_Conductor

jarmstrong001 wrote: »

It would seem like a massively socially regressive step to simultaneously introduce measures which make it easier for the landlords to collect rent on properties they have mortgaged from the banks without making repayments and without any fear of repossession at the same time as measures to reduce the security of tenure for tenants.

There is separate legislation being enacted to forfeit any BTL properties that are in arrears to lenders- and have local authorities take them on as social housing.

It is being dealt with- just not in this particular piece of legislation.

yellowlabrador

From what I remember when I was renting in Brussels, 30 years ago, There were 2 types of tenancies. the first long term, renewed every 3 years, index linked and unfurnished. Some people rented the same property for their whole lives. You could break the tenancy every 3 years. The second was short term accommodation. It was furnished and for 1 year. It was also more expensive and was aimed at workers relocating and tended to be the high end of the market. My parents have lived in Belgium since the late 50's and have always rented. They are both elderly now and have moved to smaller and larger places according to the size of our family. One thing that is very popular, is most people have a weekend retreat that they own. It can be an apartment at the seaside, a chalet or cottage in the countryside, etc. So every Friday night, families pack up, go to the countryside and come back on Sunday evening.

MarkAnthony

the groutch wrote: »

On the flips of the "amateur landlord" thing, I would hope that they'd give greater powers for the PTRB to assist with the speedy eviction of problematic tenants too.

A system I think that should be introduced is tying PRTB decisions to the address. So if you see a load of complaints about the LL, or a load of complaints that are not upheld by the PRTB against the tenants from the LL you know you're dealing with a nut. The same database could keep information that the property had been sold on.

Similarly when checking the previous address of a prospective tenant one could see if there had ever been a PRTB decision against them.

This might go someway to redressing the lack of credit referencing system, but also level the playing field for tenants. It would also become the standard to check if a property was registered with the PRTB before moving in.

aido79

Michael D Not Higgins wrote: »

Well if the government are serious about this long term renting, then I can see many more unfurnished places coming onto the market. Or at least, the landlord will give the option of either/or.

I'm sure there are plenty of people who, with the right system, would take an unfurnished apartment and treat as their own home and build up their own stock of furniture.

I live in Australia so I'm used to the unfurnished model. It works well as the tenant can chose their own furniture and as you say they treat it as their own home. If and when they move they bring everything with them to their new house. The landlord doesn't have to worry about things like a broken washing machine or bed because it is the tenants problem and the tenant doesn't have to deal with a landlord who supplies furniture that isn't fit for purpose. Rent is usually more expensive in a furnished house here(if you can find one).

awec

hmmm wrote: »

We need to get rid of the culture of amateur landlords with one or two properties, and move to a culture where companies or housing associations are the landlords - only then will we see consistent, professional landlords. Unfortunately there are so many vested interests who are those types of landlords (including many TDs), I just can't see it passing.

This raises an interesting point for me.

In the area I live in, within about a half mile radius at least 50% of the rental apartments are all owned and let by the same company.

Given that the acceptable rent rate is driven by the rate in the area, doesn't this give one company undue influence over rates if they can manipulate a large % of the rates in the area themselves?

handlemaster

jarmstrong001 wrote: »

It would seem like a massively socially regressive step to simultaneously introduce measures which make it easier for the landlords to collect rent on properties they have mortgaged from the banks without making repayments and without any fear of repossession at the same time as measures to reduce the security of tenure for tenants.

how landlords pay for their properties is of no concern to tenants

big assumption that landlords make no repayments on borrowed money

security of tenure would not be reduced if the tenants pays what they said they would

The_Conductor

handlemaster wrote: »

how landlords pay for their properties is of no concern to tenants

big assumption that landlords make no repayments on borrowed money

security of tenure would not be reduced if the tenants pays what they said they would

In any event- the proposal is to fast track the confiscation of properties from landlords who have delinquint loans outstanding on them. Its being floated as a way for local authorities to replenish their stocks of social housing at a discount to open market prices (presumably- the banks would have to allow them be transferred to local authority ownership at a discount to omsp).

If this is done- in conjunction with a continued tenancy by the pre-existing tenant- its wholly immaterial to the tenant.

MouseTail

awec wrote: »

This raises an interesting point for me.

In the area I live in, within about a half mile radius at least 50% of the rental apartments are all owned and let by the same company.

Given that the acceptable rent rate is driven by the rate in the area, doesn't this give one company undue influence over rates if they can manipulate a large % of the rates in the area themselves?

Indeed, and the rise of such Investment Trusts is one of the reasons we need this proposed legislation.