Time to give small time landlords a fair deal

handlemaster

https://www.rte.ie/news/business/2021/0714/1234990-residential-tenancies-board/

I know its not popular but the reality is the small time landlords have been whipped in Ireland for a number of years. The Big institutional investors are effective paying zero tax and hone in on on the most profitable areas. This report shows 26 % of the small time landlords are planning to leave. How many have already left the business ? Not popular as I said and I know there will be replies great more housing for the non investor to buy. But in reality a proper functioning market needs alot of different property owners in order go operate smoothly for all home occupiers.

Browney7

Is a huge motivator for 1 and 2 property landlords looking to sell not linked to the very strong price performance of property in the last 8 years?

If a landlord had a 200k 2 bed apartment in 2013 renting for 1200 a month and now the property is worth 350k (for argument sake) and the rent is 1600 (cheap for a 2 bed in Dublin), are landlords happy to bank their asset gains at a high point in the market to enjoy the fruits of their investment? Who knows what the economic fallout will be in 2022 and beyond once the PUP and subsidies taps turn off - maybe the sellers don't want to look a gift horse in the mouth so to speak.

As a society what type of landlords do we want? - do we want the plumbers, carpenters, accountants and public servants taking out two or three BTL mortgages like 2006 and hope the economy stays fine to save the taxpayer stepping in again to rescue the banks or do you want cash rich individuals and funds? Normal people leveraging themselves didn't work out too well in the past in this country.

If the approach is to reduce the tax burden on rental income (often advocated for), won't this just fuel further money entering into a supply constrained market? Why would I put 300k into the stock market and pay 50% tax on dividends if I can invest the same money in a property and get a lower tax on rental income?

I'd agree with expediting evictions of very troublesome and ruinous tenants. Whether that would change people's minds on selling and banking gains? - I'm not convinced it would.

Yes landlords have been hit with RPZs and other meddling factors (and I have sympathy for that interference) but they have also benefited from a series of foolish governments entering the rental market via HAP and enhanced leasing deals and throwing money around like a sailor on shore leave contributing to higher rents.

Flinty997

"Is a huge motivator for 1 and 2 property landlords looking to sell not linked to the very strong price performance of property in the last 8 years?"

People need to stop thinking the only reason to have a rental is capital appreciation. Its distorting their understanding of the market and how its broken. The private rental market is a business. Its income generating. For many its another income stream, especially if its used in lieu of pensions. The vast majority of landlords have one property. Their business is not buying and selling properties.

If you remove the ability of rental to generate income, then indeed you might as well buy and sell property and not bother with renting and all the hassle, work, expense and stress that involves. If you want housing, renting, to be sustainable and people to make modest income from an investment. You need to protect that income even in if the trade off is locking in that property as a rental for a certain amount of time.

But the mindset that the only "profit" is capital appreciation and it should not be income generating, means there is zero incentive to keep a rental.

Flinty997

People wanted the small LL run out of town, and big business to come in. Well thats exactly what they've got. Pretty much all the downsides of that, have come to pass. There are advantages also. you can't have one without the other.

Browney7

https://boards.ie/discussion/comment/117613478#Comment_117613478

It's more the trade off has changed - most landlords haven't stopped renting out the properties, it's just they can get a large chunk of money now, in excess of what they've paid for it in lieu of waiting for 5 or ten more years renting out the property (and the hassle of renting) and receiving that rental income with no guarantee of what it will be worth when they may wish to sell.

If properties hadn't gone up 50 to 100%, would there be such a rush to the exits?

Ray Palmer

Browney7> You have a bit of a strange view on how the rental market works and what happened in the crash. The crash was not everybody buying second properties to rent. There were a small amount of reckless individuals buying off the plans and selling them near completion. They were a small group in real terms. I have no issue with anybody of any occupation owning rental properties and not sure why that is even an issue. You are misjudging the people leveraging being a big factor in the crash and it was more to do with development companies and finance. Some like to say we crashed before the global financial crisis but it was actually the beginning of the investigation into securities that made the banks here lose access to global money and evaluating their risk that caused the issue.

HAP is extremely disliked by landlords for a variety of reason so much so that they made it an offense to refuse it via the back door and made it an equal rights issue. I would have to reduce rent to rent to HAP so it has no bearing on my rent.

The government seem like they want big business in so they can bring in stricter letting laws where the landlord is always the loser to make it so small landlords can't operate. For all the talk of government all being landlords I would love to see what favours have they done landlords as opposed to big investment companies.

People really don't get how the housing market is going to go thinking certain things are stable and won't change. Normal suburban homes are being split as we speak into two different properties. Some just to rent others are parents homes with a child having a separate place. This is going to spread in many Dublin suburbs as it has in every other city when expanding

Browney7

https://boards.ie/discussion/comment/117613899#Comment_117613899

Genuine question, do you believe the government supporting c. 100k private tenancies via HAP and other mechanisms has no bearing on the levels of rents that can be charged in the market as a whole?

On people borrowing money from banks to become BTL investors, look at the arrears figures on these loans compared to owner occupier. These loans performed poorly and contributed to banking losses after the BTL mortgagee lost their primary source of income or couldn't service the debt (tax rises, income cuts etc) and that contributed to the bailout paid by Joe taxpayer.

Ray Palmer

HAP has no bearing on rent prices. They reduced HAP and prices inflated afterwards and they had to increase the rates and then add secretly on top of HAP limits under emergency requirements. If HAP was leading rent t would be a false support but as it is chasing prices it is not. They had to force landlords to take it. If it was so good why did they need to do that.

So what if BTL performed baddly it is about how many are in the market and what effect it actually has. The same with people complaining about REITs taking over the market. The aren't the account for a very small portion. The public are easily mislead to scapegoats, they are a problem but nowhere near the main issue or even the top 5 just more visible in the media

Bass Reeves

https://boards.ie/discussion/comment/117613984#Comment_117613984

Small single buy to let's were only a minimal part of the property crash most of these were never discounted and most people with a single rental property worked there way out of the crash mostly at a cost to themselves.

There was some larger investors that had issues. Most of these had multiple investment's (3-5+) with a good few that were tax incentivised investments. Some of these lost money but were managed in-house by the banks.

People forget that NAMA only took over loan books of 10 million+( I think that was the cut off point) none of these were small time property investors.

NAMA took over 77 billion of loans (68 original value and 9 in rolled up interest) 28 billion in commercial loans 21billion in land bank loans and 28 billion in other associated loans.

Banks handed over a lot of there equity( virtually all of AIB and PTSB, all of Anglo and about 50% of BOI) to cover any cash injections.

The rest of the economic crash was caused by Government overspending on wages and day to day sending. It a bit of an urban legend that the poor f@@ker with 1-2 or even 5-6 rental properties caused it

scheister

I have no issue with Landlords regardless of size but do think the smaller ones are being squeezed out of the market.

The main thing I have seen with smaller landlords is a lack of knowledge particularly around Rental profit v taxable profit.

On the rental market on a whole I want people to look with a longer term view. It should not be a case of rolling 1 year contract and increase the rent each year because I can. I would love the ability to rent longer term and understand what is ahead of me. I am look to buy a PPR next year but if I was offered a secure affordable long term tenancy I would be more then happy to take it.

handlemaster

https://boards.ie/discussion/comment/117618777#Comment_117618777

Rent is increased because its within the law, to keep up with continually increasing regs and taxes adding extra costs, Inflation ( tried getting a work man to do repairs lately ? . If all costs were fixed why not have a fixed rental cost year in year out but it doesn't work like that. Also there are landlords who were caught out by the regs introduced a few years back which froze the rental price and are still below open market value.

DubCount

Its like that old joke about the tourist lost in rural Ireland who stops a local and asks for directions. "Can you tell me how to get to Cork?" "Well if you're looking to go to Cork, I wouldn't start from here !!"

There has been a long line of legislation, government interventions, flying kites, press statements and the like. Mostly, its knee-jerk populist stuff, with little concentration on a final destination. Everyone wants a functional private rental sector, with "affordable" rents (which means different things to different people). To reach the destination, we need to decide what that destination is, and then start from where we are and try to figure out a route to that destination. Not everyone will agree on the destination or the route, but continuing to wish for cheep rents, plentiful supply, lots of landlords prepared to accept low rents etc., while only planning the next 10 yards of the route is not going to work.

ednwireland

https://boards.ie/discussion/comment/117613509#Comment_117613509

i remember thinking careful what you wish for when everyone was complaining about small landlords, and saying r

professional companies were the answer. (im a 1 house landlord, the regulations are getting quite onerous - looking for an electrician cert at the moment ! never mind lime mortar for my own house !)

Ray Palmer

https://boards.ie/discussion/comment/117619142#Comment_117619142

if you were selling a house with original feaures and construction it is great. If you are renting anything that is outside of the most basic nasic conditions tenants will not follow. Only way is if very hih end rentals. Dublin is being destroyed in many ways and landlords and property owners are effectively forced to increase the rot. Try an keep original features in a rental is a nightmare. I had tenants steal everything brasss from a property including the hinges off a 150 year old door that he destroyed by doing so. His deposit and insurance didn't come close and it took me years to get full replacements. Stolen again a few years later.

jimmycrackcorm

Here's a real-life example of how ridiculous the situation is regarding small-time landlords. My SIL has a two-bedroom apartment and three kids. Being a little cramped, she decided to rent out her apartment and her family rent a three-bedroom house instead. So, in theory, her family get the property size they need for a 200 hundred euro extra per month and a couple moved into her apartment with a spare bedroom saving 200 euro per month had they had to rent a house instead. My SIL would never be able to afford to remortgage to buy a house to suit due to negative equity so this was the only option and was fine - they got a garden and the extra room needed.

So everyone is happy with the situation. The next thing is she gets a tax demand from Revenue because she is now an evil landlord. Can't offset the rent from her apartment against the fact that she herself is renting. So she ended up having to move back, and her tenants were forced to rent a house instead, at a higher cost to them. Apart from the ridiculous income tax situation, the period rented out counts as CGT eventually.

It's things like this that are ridiculous, a complete lack of common sense in revenue. Any small landlord is realistically paying 52% tax so, in many cases, it's a huge disincentive to renting as it's not worth the hassle when the property is worth more just sitting still, not worrying that your tenants will overhold and you end up paying for repairs and damages that can't be reclaimed.

REITs and the like of large property funds will eventually get caught with CGT on disposal, so I think the state will see a benefit once the supply problem is fixed; that offsets somewhat the argument that they're not paying tax now, and also it's often ignored that it's pension funds that are funding these and their returns are paid to people who have to pay tax on that.

The question also has to be asked of the government why it's more of an incentive for someone to rent their property for an Airbnb than do a long-term rental deal especially when realistically that income is taxed at 52%.