Rents to be linked to inflation

handlemaster · 27-09-2015 5:35pm #1

https://au.news.yahoo.com/world/a/29649648/ireland-to-link-residential-rents-to-inflation-sunday-times/

Government is in the process of putting together legislation to fix rents to inflation. <mod snip>. No mention of tax reductions for landlords or perhaps housing the welfare tenants in publically provided housing

Pawwed Rig · 27-09-2015 6:50pm

Will that include rent allowance limits which haven't moved for years?

the_syco · 28-09-2015 2:05am

I wonder if "landlords no longer being able to discriminate against tenants who receive welfare payments" plus "rents to be linked to inflation" is a game plan by the government to force landlords to take in RA tenants? It does have a certain twisted logic to it.

davo10 · 28-09-2015 4:21am

Reading about it in the Times, quite apart from the fact that FG do not support it, there seems to be enough holes in it for LLs to drive a bus through it. It will allow LLs to increase the rent if changes in circumstances occur for instance interest rate increases, if this is the case, increases in rents will have to be instant therefore the current situation whereby rent can only be raised once a year would be challenged. If it is not instant and rates (which have been at a historical low and can only rise) increase say by 1% adding €200 pm to mortgages, the LL will be entitled to raise the rent by a huge amount at the end of the year to recoup losses since rate rise and going forward. Also if LL exit the market or stop buying, competition for rental properties in Dublin will explode, if you think it is difficult to rent a place, what will it be like if the number of units available decreases? On the plus side of course initially rents would be more reasonable but after today's announcement in the newspaper, expect advertised prices for rentals to increase tomorrow in anticipation of the legislation. It also doesn't say whether the cap on rental rises will be confined to the term of a tenancy agreements only, if that is the case new rental costs will shoot upward from the beginning as LLs will realise that once the agreement is in place, future increases will be government controlled. I cannot see how they could interfere with what LLs charge for new rentals as that would be anticompetitive.

Pawwed Rig · 28-09-2015 6:53am

It will also end the common practice of looking after a good tenant by keeping rent static for a number of years as the increase would be built into the lease.

davo10 · 28-09-2015 7:18am

Pawwed Rig wrote: »

It will also end the common practice of looking after a good tenant by keeping rent static for a number of years as the increase would be built into the lease.

Ironically, it will be like having an "upward only" rental increase clause in the contract and will legitimise rental increases due to interest rate rises, increases in taxation, property management costs, insurance costs etc. The expectation will almost be there for the rent to increase because the Government said it should if the LLs circumstances change, nearly sounds like good news for LLs but I'm sure it won't be.

April 73 · 28-09-2015 7:29am

What about LLs who are currently charging below the market rate?
Is the increase going to be a percentage above the market rate? Or a percentage about the current rent at whatever arbitrary date this is brought in?

Between this & the story about not discriminating against RA tenants - does the government really believe that these measures will have a positive impact on supply in the private rented market?

Endless meddling, increasing costs, and a dysfunctional PRTB has only led to more landlords exiting the market.

davo10 · 28-09-2015 7:43am

April 73 wrote: »

What about LLs who are currently charging below the market rate?
Is the increase going to be a percentage above the market rate? Or a percentage about the current rent at whatever arbitrary date this is brought in?

Between this & the story about not discriminating against RA tenants - does the government really believe that these measures will have a positive impact on supply in the private rented market?

Endless meddling, increasing costs, and a dysfunctional PRTB has only led to more landlords exiting the market.

I agree, the antidote for both pieces of legislation for LLs is to increase the rent from the very beginning making rental costs even more expensive for tenants. They needed to introduce legislation which makes it clearer and easier for both tenants and LLs to obtain remedy when the relationship breaks down. Easier for tenants to get back their deposits, easier for LLs to evict errant tenants. They also should fix the RA scheme to pay direct to LL and in advance and the contract should be easy to terminate and evict if the tenant does not comply with the terms of the rental agreement.

handlemaster · 28-09-2015 7:59am

davo10 wrote: »

I agree, the antidote for both pieces of legislation for LLs is to increase the rent from the very beginning making rental costs even more expensive for tenants. They needed to introduce legislation which makes it clearer and easier for both tenants and LLs to obtain remedy when the relationship breaks down. Easier for tenants to get back their deposits, easier for LLs to evict errant tenants. They also should fix the RA scheme to pay direct to LL and in advance and the contract should be easy to terminate and evict if the tenant does not comply with the terms of the rental agreement.

The problem with RA tenants is they are people of straw even with a successful conviction the landlord still loses . What advise is currently been given to tenants who arent paying rent ? I hear it is to stay in the property this coming from organisations paid for by landlords.

4ensic15 · 28-09-2015 9:03am

handlemaster wrote: »

The problem with RA tenants is they are people of straw even with a successful conviction the landlord still loses . What advise is currently been given to tenants who arent paying rent ? I hear it is to stay in the property this coming from organisations paid for by landlords.

Tenants are rarely prosecuted, and never by the PRTB. Several bodies are encouraging tenants to flout determination orders.

MicktheMan · 28-09-2015 10:23am

I have two rental properties in Dublin.
In one, the tenants are in situ for over 10 years. In the other, over 5 years.
I have not increased the rent for a number of years now as I believe I have very good tenants. Current rent on each is 20 to 30% below market.

What do I do?

Do I write to my tenants advising them that the rent will be rising to market rates due to government interference?
On the one hand, I am happy with my tenants and do not want to change the current successful arrangements but on the other, I do not want to be constrained in the future from achieving market rent if my circumstances change but my tenants don't move.

I believe I am not the only landlord asking themselves this question this morning.

murphaph · 28-09-2015 11:43am

I expect a flurry of letters being sent to tenants like Mick's in the coming days and weeks to get rents up to market rate before this new law kicks in. I actually think some form of control of rent for sitting tenants is in principle pretty fair (I am a landlord myself). Unfortunately for them, many sitting tenants will now be hit with increases to market rate in anticipation of these new limits being imposed. I think LLs in these circumstances have no real choice but to increase now to full market rate-it would be untenable to be locked in to inflation only increases on -30% of market rate rent IMO. I only have one residential unit in Ireladnd and this doesn't affect my commercial lettings. I recently increased the residential unit to market value after 2 years without an increase (and it was lowered and lowered from 2008 to 2013 after the crash) and I'm very glad I did now. The proposed legislation is of course completely crackers...what's the point in rent caps that can follow interest rate changes?? Will LLs soon be showing their mortgage statements to tenants or what?!

It's when they start getting ideas about capping rents for new lettings that LLs should really get worried IMO. Then it's time to exit the business.

_Kaiser_ · 28-09-2015 11:49am

murphaph wrote: »

Then it's time to exit the business.

Reading this and the other thread here, I'm arriving at only one conclusion.

The current FG/LAB Government wants to do-away with small/accidental LL's entirely in favour of big foreign investment companies - like the crowd that NAMA sold the apartments in Sandyford to last year - and if I remember refused to let individuals buy previously.

Only thing that makes sense to me.

handlemaster · 28-09-2015 12:48pm

MicktheMan wrote: »

I have two rental properties in Dublin.
In one, the tenants are in situ for over 10 years. In the other, over 5 years.
I have not increased the rent for a number of years now as I believe I have very good tenants. Current rent on each is 20 to 30% below market.

What do I do?

Do I write to my tenants advising them that the rent will be rising to market rates due to government interference?
On the one hand, I am happy with my tenants and do not want to change the current successful arrangements but on the other, I do not want to be constrained in the future from achieving market rent if my circumstances change but my tenants don't move.

I believe I am not the only landlord asking themselves this question this morning.

up the rent to the market rate. The only reason your offering the lower rent is that its a reward to the tenants for doing what they are ment to be doing i.e. paying rent on time etc. Reward for normal behaviour is unnecessary

zl1whqvjs75cdy · 28-09-2015 1:35pm

The whole thing strikes me as a kite flying exercise, especially given the time of year that it is. HOwever, if we presume that there is something actually going to happen from this, the measures as described would pretty much stop REIT's from coming in and investing in blocks of apartments as their rental yields would not be as attractive. This would make the situation worse. That is even before the small time landlord decides he/she has had enough of being treated like a dog by the government. Even as a tenant I can see the treatment of landlords here is appalling.

The solution is simple, build a lot, and fast. The government is (probably rightly) scared of lighting a rocket under the construction industry again and so this won't happen at anything near that rate that's required. Instead we get badly thought out and not fir for purpose legislation from Alan Kelly who doesn't know if he's coming or going.

MicktheMan · 28-09-2015 4:29pm

handlemaster wrote: »

up the rent to the market rate. The only reason your offering the lower rent is that its a reward to the tenants for doing what they are ment to be doing i.e. paying rent on time etc. Reward for normal behaviour is unnecessary

Wrong. Paying rent on time etc is a given, not a reason for below market rent.

I value not changing tenants annually a lot and when I find tenants who respect me and my property, I will give a break on rent i.e. not jacking up the rent at every opportunity, (especially in a rising market) where below market rent can become a form of golden handcuffs for the tenant. When the rent is reviewed (generally every 2 years), we negotiate and agree the new rent (up or down!).

This then means that I do not get called for small stuff that they can deal with themselves (as they don't want to disturb me) and this is important to me as I live over 250km away.

rustyjack · 28-09-2015 10:34pm

MicktheMan wrote: »

Wrong. Paying rent on time etc is a given, not a reason for below market rent.

I value not changing tenants annually a lot and when I find tenants who respect me and my property, I will give a break on rent i.e. not jacking up the rent at every opportunity, (especially in a rising market) where below market rent can become a form of golden handcuffs for the tenant. When the rent is reviewed (generally every 2 years), we negotiate and agree the new rent (up or down!).

This then means that I do not get called for small stuff that they can deal with themselves (as they don't want to disturb me) and this is important to me as I live over 250km away.

Mick, I am in same boat as you.
Any more information whether the rents will be capped at market rent or existing rent?
Thanks,
Rusty

athtrasna · 28-09-2015 10:40pm

rustyjack wrote: »

Mick, I am in same boat as you.
Any more information whether the rents will be capped at market rent or existing rent?
Thanks,
Rusty

Article said there are plans to introduce legislation, which then must be drafted, published, debated in the Dail and Seanad, passed in both and then sent to the President for signing into law. Plenty of time yet and the detail will come out once it's published.

MicktheMan · 28-09-2015 11:42pm

rustyjack wrote: »

Mick, I am in same boat as you.
Any more information whether the rents will be capped at market rent or existing rent?
Thanks,
Rusty

That is the question.

Aren't rents already capped at market rent (as per current legislation).

In my view, rents will be capped at existing and this is what concerns me.

handlemaster · 29-09-2015 8:17am

MicktheMan wrote: »

Wrong. Paying rent on time etc is a given, not a reason for below market rent.

I value not changing tenants annually a lot and when I find tenants who respect me and my property, I will give a break on rent i.e. not jacking up the rent at every opportunity, (especially in a rising market) where below market rent can become a form of golden handcuffs for the tenant. When the rent is reviewed (generally every 2 years), we negotiate and agree the new rent (up or down!).

This then means that I do not get called for small stuff that they can deal with themselves (as they don't want to disturb me) and this is important to me as I live over 250km away.

thats why I said it was unnecessary

pwurple · 29-09-2015 9:28am

First thing I thought when I read this, was "Uh-oh, I better bring all rents up to market rate ASAP".

I do not get the point of this. How is this supposed to solve the current supply problem?

1) This will drive rents up further.
2) More impediments will discourage new landlords from entering the market, and reduce supply even further.
3) Less supply for higher prices = more people on the housing lists.

It's lose lose lose.

It's also completely impractical. For example, in an apartment block, we changed the system of all tenants having their own bins, to community bin collections (from a big plastic skip with a lid). It freed up space in common areas, made the tenants lives a little easier (no hauling wheelie bins around), and reduced disputes (tenant upstairs is putting his stuff in my bin, or leaving it in the stairwell). We increased the rent at review time to include the new community bin collection charge.

How would we adjust what the rent covers under this 'inflation linked' legislation? I know apartments where heat and light is included, where parking is included, where a gym or a creche is included. Does that all have to be split out? Because then you get tenant A wanting his own bloody bin service instead of the community one, and it all goes to pot again.

Rents to be linked to inflation

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