Proposal for landlord tax break in budget

El_Duderino 09

RTE news are reporting a proposal for a tax break for landlords in the upcoming budget. There are no specifics in the article so I presume they want to gauge public opinion before making a decision.

What would be the benefits of a tax break for landlords?

Would it reduce rent rates by being passed on to tenants?

Is it a measure to prevent things getting worse by encouraging landlords to stay in the game?

What should a tax break for landlords aim to achieve and how should it be set up?

(I'm on the phone so I can't link the article. Could someone oblige?)

Gumbo

I don't think it will reduce rates big time, it may stabilise the market and encourage landlords that are on the fence about selling.

It may also mean that landlords will not look for rises in rent.

athtrasna

kceire wrote: »

It may also mean that landlords will not look for rises in rent.

It would only benefit landlords with mortgages so I wouldn't be too sure about that with the current supply shortages

Dardania

If they allow a tax break, maybe it could be matched with an investment in a REIT to build additional accomodation. So public organised but privately owned housing scheme...

Evil_g

El_Duderino 09 wrote: »

Is it a measure to prevent things getting worse by encouraging landlords to stay in the game?

Can you explain precisely how landlords "leaving the game" would make things worse? Do they burn down the house or what?

Jasper79

The Independent mentioned an increase in the mortgage interest relief of 5%, not really a tax break, not going to do anything really.

Evil_g

Jasper79 wrote: »

The Independent mentioned an increase in the mortgage interest relief of 5%, not really a tax break, not going to do anything really.

Apart from redirecting money that would otherwise have found its way to the exchequer into the pockets of landlords?

Evil_g

Evil_g wrote: »

Can you explain precisely how landlords "leaving the game" would make things worse? Do they burn down the house or what?

even less places to rent. rental prices go up even more due to less supply.

the groutch

there's bigger issues that should be looked at first, like entire properties being used for Air Bnb, something which if addressed properly could do more to correct the rental market than any tax break ever will.

the groutch

the groutch wrote: »

there's bigger issues that should be looked at first, like entire properties being used for Air Bnb, something which if addressed properly could do more to correct the rental market than any tax break ever will.

has it been proven that this impact is significant? it's spoken of a lot but what about hard facts.

Jasper79

Evil_g wrote: »

Apart from redirecting money that would otherwise have found its way to the exchequer into the pockets of landlords?

I've recalculated my 2015 tax based on the 5% increase, and would result in 40 euro less tax being paid for the year. It's not going to have a huge cost when rolled out I imagine.

Also it will work to correct the nonsensical situation where businesses can claim 100% interest relief but landlords, who are paying income tax rather than corporation tax ( 52% v 12.5%) cannot.

Evil_g

glasso wrote: »

even less places to rent. rental prices go up even more due to less supply.

So you're saying that the house is destroyed when the landlord decides he no longer wants to be a landlord?

No one can live in it therefore the supply of habitable property decreases?

quadrifoglio verde

If they want to incentivize a landlord to keep rents as they or reduce them, they should look into applying the rent a room tax break to properties landlords have rented out. If the annual rent is below X, no income tax, usc or prsi are paid. The second income goes over X, tax usc and prsi are payable on the full amount.
Appears to be working quite well in the rent a room scheme, no reason why it can't for other forms of private rented accommodation.
The landlord would end up with more money in his back pocket and the tenant with a lower rent

doolox

Because of the unfair treatment of deposit interest and the unconditional imposition of USC on landlords rental income and the new taxes such as LPT and PRTB fees not to mention BERS and other EU rubbish at around €150 a pop many ex landlords are getting out of the sector as quickly as they can.

The recent removal of bedsits from the available housing stock, the almost complete absence of social housing, built and maintained and let by public authorities and the almost complete stopping of new house builds has led to a perfect storm in terms of rent rises beyond most peoples ability to pay.

The govt should have kept these draconian rises at bay until they had a supply of social housing ready in order to dampen the inevitable price rises we are now seeing.

It is the tenant who is effectively paying the high govt taxes imposed on landlords because most landlords have been forced to increase rents in the face of increased costs or get out of the "game" if not able to do so.

Just as most workers when pricing a job will double the rate to cover VAT and taxes landlords are now increasing rents to cover their costs and avoid increasing debt on their often now regretted investments.

While most jobs of work are now done by people on a DIY basis or on a casual black market economy basis in order to avoid taxes you will find that accommodation will increasingly be provided "by the back door" with little or no structure, protection or standards for either party.

El_Duderino 09

Evil_g wrote:

Can you explain precisely how landlords "leaving the game" would make things worse? Do they burn down the house or what?

I take it to mean that they sell s property that is being used as a rental property And the new owner will probably use it as a residential property.

If half are kept as rental properties then you lose the other half. Supply and demand and all that.

It's yours on this forum as a big problem do I included it in the OP

Evil_g

El_Duderino 09 wrote: »

I take it to mean that they sell s property that is being used as a rental property And the new owner will probably use it as a residential property.

If half are kept as rental properties then you lose the other half. Supply and demand and all that.

It's yours on this forum as a big problem do I included it in the OP

Ah, so the new owner of the property destroys the house that they had lived in up until now?

El_Duderino 09

Evil_g wrote:

Ah, so the new owner of the property destroys the house that they had lived in up until now?

What are you on about destroying houses for? If he new owner lives in the house and doesn't rent it out, then there is one less rented property than before the sale.

Evil_g, listen to me. There's no need to burn down your house. Don't do it.

Lux23

El_Duderino 09 wrote: »

I take it to mean that they sell s property that is being used as a rental property And the new owner will probably use it as a residential property.

If half are kept as rental properties then you lose the other half. Supply and demand and all that.

It's yours on this forum as a big problem do I included it in the OP

If the person buying the property is a renter then perhaps the place they are renting is freed up for someone else to rent it?

NinjaTruncs

El_Duderino 09 wrote: »

What are you on about destroying houses for? If he new owner lives in the house and doesn't rent it out, then there is one less rented property than before the sale.

Evil_g, listen to me. There's no need to burn down your house. Don't do it.

You are missing Evil_g's point. It's that the unit still exists. Granted it may not be rented any more but it will still be used, either rented out to new tenants or lived in by the owner either way it will provide accommodation to someone. If it's lived in by the owner the number of rented properties drops but so does the number of people looking to rent as one has just bought a home.

Evil_g

El_Duderino 09 wrote: »

What are you on about destroying houses for? If he new owner lives in the house and doesn't rent it out, then there is one less rented property than before the sale.

Unless the new owner was formerly homeless there is still a room or property available for someone else to buy or rent. Supply has not decreased.

This is not a difficult concept.

El_Duderino 09

NinjaTruncs wrote:

You are missing Evil_g's point. It's that the unit still exists. Granted it may not be rented any more but it will still be used, either rented out to new tenants or lived in by the owner either way it will provide accommodation to someone. If it's lived in by the owner the number of rented properties drops but so does the number of people looking to rent as one has just bought a home.

Thanks for explaining that. And you did it without mention of burning anything.

That's assuming that it was an existing renter who buys it.

Essentially you're talking about taking a solid rental property and turning it into a 'maybe' rental property.

Evil_g wrote:

Unless the new owner was formerly homeless there is still a room or property available for someone else to buy or rent. Supply has not decreased.

Or the owner is from outside the area.

Forget it. Ignore that point from the OP.

quadrifoglio verde

Lux23 wrote: »

If the person buying the property is a renter then perhaps the place they are renting is freed up for someone else to rent it?

Lets say a three bedroom property is rented to 5 people. 2 couples and a common friend of the two couples.
Landlord decides to sell the property.
Husband and wife buy that property. They were renting a one bedroom apartment before they bought.
The common friend of the first two couples decides to rent the one bedroom apartment.

While the number of housing units hasn't increased or decreased in the short term, the amount of people being accommodated has. We've gone from seven people living in two units to three people living in two units.

The landlords friend owns the property next to it and saw what his friend sold for. He too decides that this property letting business is for mugs and his money is better served invested in REITS. So he too decides to exit the market.
This keeps getting repeated until something changes to incentivise the landlord to continue being invested in the BTL model.

Gumbo

athtrasna wrote: »

It would only benefit landlords with mortgages so I wouldn't be too sure about that with the current supply shortages

Myself included.
I class myself as a good landlord. I haven't up'd the rent in 2 years.
I'm getting €1350 for a 4 bed semi that I could easily get 16-17 if I wanted to be greedy. I have a good tennant. I don't want to mess that.

If I got some extra tax breaks then I would consider leaving the rent as is going forward.

Nirrom

This is not rocket science. There is plenty of data to show that landlords are leaving the sector in droves. And that many others are losing money / breaking even. The govt. cant create much housing (much like jobs) so all they can really do is create the conditions for the private sector to step in.

If a landlord leaves the market it would in a lot of cases reduce supply - e.g. a 4 bed house was rented by the room etc. had maybe 4 people and is bought up by a couple. Or they may do nothing with it let it become vacant (if they are losing money why not just let it ly idle and wait for capital appreciation). If they are selling it will also prob be unoccupied for several months while the sale is going through so there is an overlap reducing overall supply.

Landlords are being shafted by the tax system, and tenants are also being shafted by high rents. Also some landlords are also tenants, e.g. stuck with houses in Negative Equity, and had to move for work / family reasons. So they pay tax on the rent they get (which doesn't even cover the mortgage most likely) and then they've to shell out rent for another place. That is leprechaun economics...

To draw a comparison, if you own farming land you can rent the land on a long term basis (5 years or more) TAX FREE which was brought in to encourage greater stability in farmers who rely on rented land. So the government is willing to interfere / bring in tax breaks for the sake of cattle and sheep but not people...

They should have a similar arrangement for property rental income, geared to also benefit tenants. I repeat this is not rocket science.

They could allow all rental income tax free subject to conditions (and limits / caps for major landlords). E.g. year one of a lease 50% exempt from tax, year two 75%, year three and thereafter 100% tax relief, all subject to rental increases in line with inflation. This would incentivise landlords to keep the same tenant and prevent spiraling rents. Sorting out two of the biggest problems with the sector...

The cost of those tax breaks would most likely be a drop in the ocean of what they are spending on housing overall...

Rent control is a nonsense as its basically communism so off to North Korea with you if that's what you're looking for, the answer is a proper tax code that encourages / incentivises landlords to meet the needs of tenants. But if the government is penalising landlords its not realistic to expect landlords to be happy about providing a public service at a loss.

Landlords also need to decide if they are amateurs or professionals, get rid of this crap about relatives being able to take over the house, a rented property is either a business or its not.

Dardania

Would any of the landlords here consider handing over their properties to a REIT in exchange for shares in that REIT (and the associated dividend, replacing their rental income)?

As far as I understand, REIT dividends have some tax advantages. And a single REIT managing multiple properties could achieve economies of scale with the management of those properties

Gumbo

Dardania wrote: »

Would any of the landlords here consider handing over their properties to a REIT in exchange for shares in that REIT (and the associated dividend, replacing their rental income)?

As far as I understand, REIT dividends have some tax advantages. And a single REIT managing multiple properties could achieve economies of scale with the management of those properties

I don't think I would tbh. You need some sort of cash flow to replace items on a monthly basis. I would rather a check list that would highlight good/bad tenants/landlords.

And tax breaks, can't say no to a tax break although 2015 broke even.

the_syco

the groutch wrote: »

there's bigger issues that should be looked at first, like entire properties being used for Air Bnb, something which if addressed properly could do more to correct the rental market than any tax break ever will.

Increase in landlord rights would be the only thing that could fix that. I'd say most landlords that went the Air BnB route did so after getting burnt.

Evil_g wrote: »

Supply has not decreased.

This is not a difficult concept.

Instead of 4 bed having 4+ people in it, there may only be one or two people living in it. Thus the supply has decreased. Have come across certain "student houses" in Carlow where you'd have 10 or 12 people in the one house (attic + extension). If this was bought by a husband and wife, there'd be 8-10 less "student" places, and they'd go for the non-student houses pushing down the amount of houses available, and pushing up the rent for non-students.

newacc2015

El_Duderino 09 wrote: »

I take it to mean that they sell s property that is being used as a rental property And the new owner will probably use it as a residential property.

If half are kept as rental properties then you lose the other half. Supply and demand and all that.

It's yours on this forum as a big problem do I included it in the OP

On paper yes, but in reality the opposite is happening. One of the major estate agents in Dublin said that around 45% of properties being sold in Dublin are former BTL and only 20% of properties being brought are for BTL. So for every 100 properties being sold, only 20 are going remain BTL. This is a very worrying trend

Take a former bedsit. There might be 9-15 units in it and some of them even had 20 units in them. If a person buys that as a home, they will take out those 20 units and put it into a single family unit. There is 19 housing units gone from the cities supply. This what is happening all along the NCR. Multi-unit properties are being converted into a single home

REITs dont want to buy one off properties. Most are vultures who were set up to buy distressed assets at knock down prices, set up management companies to look after these properties and pay no tax on the profits. Until recently the only people making money off REITs were the dodgy management companies to manage the properties. A certain REIT flipped 4 units recently with a 75% profit

The whole future of foreign REITs in Ireland is threatened. The Government is considering changes to the fact they are paying a cent in tax to Revenue.

REITs dont want to build homes generally. They came/set up here to take advantage of bottom prices and make a quick buck. They are generally only building commerical properties or housing for the rich. REITs will not solve the housing crisis.

Pawwed Rig

Jasper79 wrote: »

Also it will work to correct the nonsensical situation where businesses can claim 100% interest relief but landlords, who are paying income tax rather than corporation tax ( 52% v 12.5%) cannot.

25% + surcharge you mean. It is a silly comparison though as after CT the money will be subject to 52% on distribution. So the only benefit a company get is reinvestment opportunities. Anyone can incorporate if they have the capital.

appfry

Landlords dont need "tax breaks"
What they need is to be taxed fairly.
And to be able to evict tenants who dont pay the rent or wreck their properties within a month.
Those are the biggest problems landlords are facing.

Uriel.

appfry wrote: »

Landlords dont need "tax breaks"
What they need is to be taxed fairly.
And to be able to evict tenants who dont pay the rent or wreck their properties within a month.
Those are the biggest problems landlords are facing.

I'd agree with this, tax breaks of course would be nice, given the cost of taxes, fees, etc. But as it is I can more or less break even on the rental property. I've been lucky to have pretty decent tenants. If got unlucky and had a bad tenant it would probably wipe Me out for several years and might take anything up to 5 years to recover to break even point.

Would prefer more powerss/options for dealing with rogue tenants being prioritised.

Theduke1960

I just found this thread. Am I right in saying it was started in 2016.

So 7 years later we are still talking about it?

Gumbo

https://www.boards.ie/discussion/comment/120375624#Comment_120375624

Still talking indeed!

Tax breaks in exchange for long leases is what I heard too. I’d settle for equal liability on both sides.

Quick removal of unruly tenants and quick intervention for unruly landlords.

HeidiHeidi

https://www.boards.ie/discussion/comment/101190449#Comment_101190449

This is the main reason I've just sold up.

I've had good tenants for the 20+ years I was renting, whether that's good luck or good judgement when letting I can't say. But the fear of the consequences if just one set of tenants went rogue on me was growing steadily over the last few years.

Plus, because I hadn't raised rent for a good tenant over the approx 5 years they were there, I got badly stung when the RPZ limits were introduced. I still had some mortgage left, so the interest rate rises were wildly outstripping any increases I could make to the rent (the last tenants stayed on the same rent the whole time, again because they were excellent tenants). So while I just about broke even over the last few years, that was starting to go up in smoke as well.

When the latest tenants left, the place got sold, sharpish.

HeidiHeidi

https://www.boards.ie/discussion/comment/101181465#Comment_101181465

Just as most workers when pricing a job will double the rate to cover VAT and taxes landlords are now increasing rents to cover their costs and avoid increasing debt on their often now regretted investments.

Getting harder to do this with RPZs spreading wider, and the allowable rise in rent getting smaller, and tax breaks for renters forcing landlords to register and operate above board (no bad thing).

While most jobs of work are now done by people on a DIY basis or on a casual black market economy basis in order to avoid taxes you will find that accommodation will increasingly be provided "by the back door" with little or no structure, protection or standards for either party.

Again, more and more landlords getting pushed into "the system", which in itself is a good thing - but the risk/reward balance is so uneven that it's making it unattractive or uneconomic to continue renting.

Theduke1960

Thanks for all that. I have one property with a good tenant. Im going to sell when she goes

Theduke1960

https://www.boards.ie/discussion/comment/120375642#Comment_120375642

I emailed the RTB on Jan 31. I got an email reply yesterday.

I'm lucky to have a decent tenant but I'd be wary of SF.

Bottom line is the government response for both tenants and landlords is a joke.

I'm inclined to sell before SF take control.

They are going to find that we don't have enough builders. Landlords will pay for their hubris

Gumbo

https://www.boards.ie/discussion/comment/120375812#Comment_120375812

I know. I have decent tenants and not one bit of hassle. Feck, I’d go as far as saying I get worried as I don’t here from them in months!

As much as I support SF (amongst others) yes I’d be worried what they would do to the market and general taxation in general!

dumb_parade

Closed the sale of a rental property this week too. I never had an issue with my tenants either, but when they moved out last summer, I decided I had enough of it. Negative cash flow and increased regulation and risk. The one query I had with the RTB about rent pressure zone exemptions is still unanswered, they seem to think they have no responsibility to landlords. If there had been reasonable tax treatment and a more balanced set of rights and responsibilities for both landlords and tenants, I might have not have sold.

Theduke1960

https://www.boards.ie/discussion/comment/120375838#Comment_120375838

I support the way SF goes after vested interests like the insurance industry.

But they think we can have better services by simply squeezing those on high incomes?

We have a massive national debt which is like a cancer nobody mentions. I don't use the word lightly

I wish them luck but anybody who is on 50 % tax would be naive to vote for them

They are pitching to those who pay **** all tax and expect you to support them or simply those who think we have a magic money tree

Furze99

No problem here with small landlords getting lower tax rates.............. once the same measure is applied to ALL sole traders etc. As that's how small landlords are assessed, they are sole traders.

herbalplants

SF won't get elected. And yes they will do more damage to the rental market, if let in.

DownByTheGarden

I think they proposed breaks to come in the budget every year to keep landlords hanging in there and then pull the rug from under them in the budget.

Surely no one is going to fall for it again :)

Like Leo looking after those who get up in the morning or noone on under 50k should be on the high tax rate.

I dont klnow how many other things that lad has promised but i wouldnt believe a work from him especially or any of the rest of them at this point.

My best advise for landlords. Get out now while you can. Anyone saying they will give you something for staying in 6 months time ... wee just look how their promises have gone so far. In 6 months time you will be trapped and wont be able to get out. Thats the only plan here.

DownByTheGarden

https://www.boards.ie/discussion/comment/120375839#Comment_120375839

Same story here. Finally gave up and sale agreed at the moment. Hopefully all done and dusted in a few more weeks.

Ray Palmer

https://www.boards.ie/discussion/comment/101181759#Comment_101181759

What happens is well known and only takes a little thought. Occupancy of rental properties is higher than privately lived properties. Owner buy for what they may want where as tenants rent what they need. So a 3 bed house near me had 4 adults renting it. The landlord sold it and a couple with no kids bought it. If the tenants were lucky enough to get where the couple rented you still have 2 people with no where to rent and one less rental.

In reality the tenants may not be able to afford to rent the place the people that can afford to buy were probably renting a more expensive place or they were living with parents.

The other thing about selling is the property is normally empty for a bit. So even just that means less rental on the market for a period when we don't have enough rentals. Less rentals more people looking to rent.

They don't need to burn down anything for it not to be on the market. All of this while the population is growing.

Claw Hammer

https://www.boards.ie/discussion/comment/120376025#Comment_120376025

Landlords are taxed on case 5 not as sole traders. Big diifference.

DownByTheGarden

Dont believe a word about tax breaks coming in the next budget. They said that the last time too.

The only way that isnt some stalling tactic again to keep landlords in on the hook until the next budget again would be if they stated what these tax breaks will be now. but they havent have they. More smoke.mirrors and lies.

Grumpypants

Massively disappointed to hear the tax break is in the next budget. Not sure how that helps to stem the flow of landlords now. Especially since they gave no indication what that break is.

DownByTheGarden

https://www.boards.ie/discussion/comment/120384601#Comment_120384601

There is definitly no tax break. If there was they would have given details of what it is going to be. its a stalling tactic. The best it will be is some tax break that it costs you even more to avail of.

MacDanger

A tax break would do damn all to resolve the problem so it's a moot point anyway

HeidiHeidi

https://www.boards.ie/discussion/comment/120384621#Comment_120384621

Agreed.

I was far more afraid of the implications of a tenant wrecking the property, or failing to pay rent, than a shortfall in income in the short/ medium term.