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Will rent controls effect the general quality of rentals in the long run

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    #62
    El_Duderino 09
    Registered Users Posts: 20,004 ✭✭✭✭El_Duderino 09


    Graham wrote:
    Imagine you're a landlord and you have a house with a shabby but functional kitchen.

    Would you

    a) Spend 3,000 updating the kitchen to get 1,000/month in rent b) Spend nothing on the kitchen to get 1,000/month in rent

    The funny thing is that this problem would equally be solved by market rate dropping back to below 1,000/month. Then the landlord would actually need to do something about their shabby kitchen.

    It strikes me that the ll is only getting away with selling a shabby product because it's a landlord's market at the moment The landlord has almost all the power in this scenario and is still complaining. The problem could be solved by increasing​ housing supply and the landlord would NEED to spruce up their shabby kitchen to attract tenants. Then the landlord would be happy, right?


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    #63
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    El_Duderino 09 wrote: »
    The funny thing is that this problem would equally be solved by market rate dropping back to below 1,000/month. Then the landlord would actually need to do something about their shabby kitchen.

    I don't think that's the case at all. Why would a lower rent be any incentive to update anything?

    Competition from other landlords/rental properties on the other hand may cause landlords to review standards and re-invest but there would need to be a fairly dramatic increase in supply to bring about such competition.

    The daft thing is, there is a position in the market for properties of low, medium and high quality. What's perverse about the current regulations is they economically limit improvements to existing rentals in RPZs.
    El_Duderino 09 wrote: »
    It strikes me that the ll is only getting away with selling a shabby product because it's a landlord's market at the moment

    Landlords are being forced into this as there's absolutely no way to recoup investments on anything other than very substantial improvements.

    Consider this. You're a landlord with a rental that contains fairly shabby furniture. You could do nothing and continue to get the current rent or you could spend a few thousand euro to replace the furniture and still continue to get the current rent.


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    #64
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    listermint wrote: »
    Why bother fitting it out at all, sure the last tenant pays for the repaint any way such is the theft I had of the last deposit I paid where the place was left in better condition than I received it .

    The <mod snip: landlady> didn't care. Told us she would send it on and took 30%out. No word of that on the day.

    That does happen. I don't think it's the norm though.

    I hope you took a case to the RTB.


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    #65
    wordofwarning
    Closed Accounts Posts: 697 ✭✭✭wordofwarning


    Deleted User wrote: »
    Well equally who's gonna pay to furnish a house they could be kicked out of a year or two down the line and be stuck with a rake of furniture etc. that may not fit/go in the next place they go into?

    Tenants have part IV rights from day one now to reside in a property. They are not going to be kicked out within a year or two.

    Generally most low end one bedroom apartments are the same. When I have had friends move houses, they haven't had to buy every each time, as a standard bed will fit in anywhere.


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    #66
    Tombo2001
    Registered Users Posts: 6,500 ✭✭✭Tombo2001


    The_Conductor wrote: »
    In all fairness to Bargaintown- I've furniture from there (bookcases and bedside lockers) that have far outlasted their Ikea equivalents. Its cheap and cheerful- versus just 'cheap'......

    I'll second this, the stuff I've bought from Bargaintown and Des Kelly is far better than the Swedish equivalent.

    To be honest, its more expensive so it should be better.


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    #67
    Fian
    Registered Users Posts: 2,188 ✭✭✭Fian


    The_Conductor wrote: »

    I don't think anyone anywhere would disagree with the notion of allowing a person offset rental income against rental outgoings- and up to 2004- this was allowable (I have no idea why it was abolished, but it was........)

    Actually.......

    There are two reasons why I do disagree with this.

    1 - Why should a person with a passive rental income be able to write off their rent against tax while other tenants in PAYE jobs are unable to do so? If someone makes €100k per annum in salary and then further rental income why should they be able to write their rent off against tax while someone with a job and no property can't?

    If the possibility of tax write downs were extended to all tenants it would just amount to an enormous subsidy of landlords and would be devastating for people on lower tax bands or unemployed - they would have little or no chance of competing.

    2 - this would be too easy to game, it would be possible to transfer your home to a company you own, and then rent it from that company on the basis of a tax write off. Meanwhile the company is repaying the loan you extended to it to enable it to buy your own property from you and so that loan repayment is being used to fund your rental payments. Effectively a cost free tax write off.


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    #68
    Samuel T. Cogley
    Registered Users Posts: 10,684 ✭✭✭✭Samuel T. Cogley


    Murrisk wrote: »
    Surely profit isn't a given for any landlord? The rent is helping towards paying off the mortgage at the end of which the landlord will have an asset which they didn't need to fully meet the payments for themselves.

    The asset itself is not enough reason to make the investment, and certainly not enough reason for crack of the arse LL's to remain in the market. One can say 'ah sure you have an asset worth X at the end' but the reality is that's not enough to keep LL's in - there are better returns and less hassle investments out there.

    No LLs = No where to rent.


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    #69
    Samuel T. Cogley
    Registered Users Posts: 10,684 ✭✭✭✭Samuel T. Cogley


    Murrisk wrote: »
    Potential renter: So, what's the rent?
    Landlord: €1200 per month
    PR: I've been offered two similar places for €300 a month less
    LL: OK, I need €1200 a month in order to clear profit after paying mortgage, expenses and tax. Interested?
    PR: Um... no?

    Absolutely fair enough - capitalist system and all that good stuff.

    However what is not fair enough is

    PR: What's the rent
    LL: €1500 a month
    PR: Oh well, that's what they all are around here
    Government: You and only you LL have to charge €1100
    LL: What the... but it's private property and everyone else is charging €400 more?
    Government: We don't care, in addition to your taxes which is about 50% of your gross - we want you to sort out the rental crisis one apartment at a time.
    LL: But that makes no sense why no simply give renters tax relief or encourage LL's to hand over houses to the council and not make it a bureaucratic nightmare, or... or... or... or... or... (insert one of the 1500 or so more effective things that could be done)
    Government: Ah well there's not as many votes in that from mislead renters.

    LL: Thanks, I'll sell it or AirBnB it.


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    #70
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,279 Mod ✭✭✭✭The_Conductor


    El_Duderino 09 wrote: »
    The funny thing is that this problem would equally be solved by market rate dropping back to below 1,000/month. Then the landlord would actually need to do something about their shabby kitchen.

    It strikes me that the ll is only getting away with selling a shabby product because it's a landlord's market at the moment The landlord has almost all the power in this scenario and is still complaining. The problem could be solved by increasing​ housing supply and the landlord would NEED to spruce up their shabby kitchen to attract tenants. Then the landlord would be happy, right?

    Honestly- even if you do increase supply- the next bottleneck in the equation is locational- i.e. are the new houses in the supply chain- where people actually want to live? People have a natural preference for more mature areas- aside from any other factor- access to facilities and amenities has had a longer run-in to bed-down and there is a far higher likelihood that one will have public transport and other needs met.

    What needs to happen- is not that the landlord would spruce up the shabby kitchen- but rather that he/she would provide a clean envelope to all incoming tenants- that is, the property would be clean and a blank canvas for a tenant to do with as they will (and there would be a commensurate onus on the tenant to have the property professionally painted and handed back in a similar manner).

    The landlord should provide the basic white goods that are specified under the Act- and that is that.

    A side effect of this- which has happened in most other countries- is a thriving second hand furniture and appliance sector- with regular auctions where tenants can buy or sell their requirements- as their want.

    Supply is a massive issue- Morning Ireland on RTE this morning states that there are currently 20,000 people with mortgage approval in Ireland- however, there are only 10,000 residences, both new and second hand, available for sale. We are currently on track to construct 18,000 units in 2017- however, our background demand level is 26,000-27,000.

    We *need* more supply in both the rental and for sale sectors- however, it has to be where people want/need to live- not in the arse-end of nowhere.


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    #71
    runawaybishop
    Registered Users Posts: 9,500 ✭✭✭runawaybishop


    Murrisk wrote: »
    So I just don't understand why anyone would become a landlord in the expectation that they will always clear profit. Seems foolhardy. Saying landlords should profit is a nice thought but it's not something that can always happen. And saying that landlords should be able to charge enough to profit is as much a manipulation of the market as rent controls.

    The market dictates the price of rentals, it isn't manipulation when LLs charge market rent. When rents fell through the floor many landlords lost a lot of income (no sign of rent decrease caps though, funny that). Now, due to terrible government and COCO policy the supply is hugely restricted and rents are rising. In order to garner the popular vote we have had 2 stupid and very biased resolutions enacted that restrict landlords from recouping earlier losses and ensure a worse situation for the tenant.

    The 2 year review period caused landlords to jump the predicted rates up 2 years - bad for tenants.

    The rent cap is causing landlords to exit the market - this results in less available housing, not more. Restricting rents means the LL will spend even less on the property and insist on larger deposits and be far less forgiving of any tenant issues.

    The government should stay the hell out of controlling private markets and fix the underlying issue - supply.


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    #72
    runawaybishop
    Registered Users Posts: 9,500 ✭✭✭runawaybishop


    The_Conductor wrote: »
    Honestly- even if you do increase supply- the next bottleneck in the equation is locational- i.e. are the new houses in the supply chain- where people actually want to live? People have a natural preference for more mature areas- aside from any other factor- access to facilities and amenities has had a longer run-in to bed-down and there is a far higher likelihood that one will have public transport and other needs met.

    Our planning laws need a drastic overhaul in this regard, there is plenty of room to build but you cannot build sufficient units in an effective design due to the current regulations.


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    #73
    Murrisk
    Closed Accounts Posts: 889 ✭✭✭Murrisk


    El_Duderino 09 wrote: »
    The funny thing is that this problem would equally be solved by market rate dropping back to below 1,000/month. Then the landlord would actually need to do something about their shabby kitchen.

    It strikes me that the ll is only getting away with selling a shabby product because it's a landlord's market at the moment The landlord has almost all the power in this scenario and is still complaining. The problem could be solved by increasing​ housing supply and the landlord would NEED to spruce up their shabby kitchen to attract tenants. Then the landlord would be happy, right?

    My thoughts too. Not renovating because a sky high market rate isn't being met. So, what, if the market rate was much lower, doing upkeep would be fine? Competition from other landlord would mean that the upkeep would have to stay competitive.


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    #74
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    Murrisk wrote: »
    My thoughts too. Not renovating because a sky high market rate isn't being met.

    It's not renovating because it doesn't make economic sense.


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    #75
    Murrisk
    Closed Accounts Posts: 889 ✭✭✭Murrisk


    Samuel T. Cogley wrote: »
    The asset itself is not enough reason to make the investment, and certainly not enough reason for crack of the arse LL's to remain in the market. One can say 'ah sure you have an asset worth X at the end' but the reality is that's not enough to keep LL's in - there are better returns and less hassle investments out there.

    No LLs = No where to rent.

    Oh, I agree, there are much better ways to invest money. I have no idea why anyone chooses to become a landlord.


    And as I said above, it is not a business like the one someone runs day-to-day and works hard at to make successful. It's sitting on your hoop hoping income is higher than costs.


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    #76
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    Murrisk wrote: »
    It's sitting on your hoop hoping income is higher than costs.

    Sure that's all there is to it. Buy house, rent it out, easy life. :rolleyes:


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    #77
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,279 Mod ✭✭✭✭The_Conductor


    Graham wrote: »
    It's not renovating because it doesn't make economic sense.

    It doesn't have to make economic sense- because of the scarcity factor- wholly independent of market rates, it doesn't make sense to renovate- where you're going to have people fighting over the property, come what may.

    If supply increases- once again- wholly exclusive of market rates- a landlord may need to distinguish himself from competing properties- by providing a better renting experience to prospective tenants.

    Once supply side issues are resolved (whenever that is)- there will be an impetus on landlords to renovate or provide something additional to prospective tenants (could be something like free wifi so they don't need their own package- I setup an unlimited connection between 4 units for a letting agent recently- one primary location and 3 spurs coming off it. The letting agent can remotely reboot or diagnose any issues that arise and deal with them remotely.


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    #78
    Murrisk
    Closed Accounts Posts: 889 ✭✭✭Murrisk


    Graham wrote: »
    Sure that's all there is to it. Buy house, rent it out, easy life. :rolleyes:

    I'm simplifying obviously, but yes, it is much easier and less hands-on than other businesses. Roll your eyes all you want! There not much else you can do but charge the highest rent you can and use the money to pay your costs. How does it compare to other business in terms of elbow grease, advertising campaigns etc.? Enlighten me.


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    #79
    Murrisk
    Closed Accounts Posts: 889 ✭✭✭Murrisk


    The_Conductor wrote: »
    It doesn't have to make economic sense- because of the scarcity factor- wholly independent of market rates, it doesn't make sense to renovate- where you're going to have people fighting over the property, come what may.

    If supply increases- once again- wholly exclusive of market rates- a landlord may need to distinguish himself from competing properties- by providing a better renting experience to prospective tenants.

    Yeah, that's it really, I think that's what El Duderino was getting at. If there is a glut of rental properties out there, a LL needs to work a bit at making their place attractive.

    Even before the rent controls came, market rate being asked was already sky high in pressured regions, way higher than it should ideally be, so downing tools because a figure even higher than that can't be met comes across as whinging.


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    #80
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    Murrisk wrote: »
    I'm simplifying obviously

    no kidding


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    #81
    runawaybishop
    Registered Users Posts: 9,500 ✭✭✭runawaybishop


    Murrisk wrote: »
    I'm simplifying obviously, but yes, it is much easier and less hands-on than other businesses. Roll your eyes all you want! There not much else you can do but charge the highest rent you can and use the money to pay your costs. How does it compare to other business in terms of elbow greases, advertising campaigns etc.? Enlighten me.

    There is significant work in getting appropriate tenants, maintenance, contracts etc. There is also huge risk and very little security. Tenants can walk out leaving the property wrecked and there is next to nothing yo can do about it. You must pay the full rate of tax on all income and the government will cap your income.

    So in reality it compares very poorly to other businesses.


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    #82
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    The_Conductor wrote: »
    If supply increases- once again- wholly exclusive of market rates- a landlord may need to distinguish himself from competing properties

    Absolutely.

    I just can't see supply increasing or demand decreasing in the short term.


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    #83
    Murrisk
    Closed Accounts Posts: 889 ✭✭✭Murrisk


    Graham wrote: »
    no kidding

    Yes, I was simplying but not by much. Property rental doesn't compare to other businesses in terms of opportunities to grow the business and putting the work into making that happen. Having being surrounded but both self-employed people and investment property-owning people much of my life, that is plain to see. Amazing how all these property owners have full-time jobs when a property is apparently as much work as any other business. Please. It's a passive business for the most part, aside from doing maintenance work sometimes, and even that is often farmed out to someone else. There is a reason why many people eventually tire of renting out property, it's not really worth it if one is hoping to make a profit.


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    #84
    runawaybishop
    Registered Users Posts: 9,500 ✭✭✭runawaybishop


    Murrisk wrote: »
    Yes, I was simplying but not by much. Property rental doesn't compare to other businesses in terms of opportunities to grow the business and putting the work into making that happen. Having being surrounded but both self-employed people and investment property-owning people much of my life, that is plain to see. Amazing how all these property owners have full-time jobs when a property is apparently as much work as any other business. Please. It's a passive business for the most part, aside from doing maintenance work sometimes, and even that is often farmed out to someone else. There is a reason why many people eventually tire of renting out property, it's not really worth it if one is hoping to make a profit.

    One house would hardly be a full time job, i don't think anyone is saying that. It is incorrect to claim landlords sit around on their hoop watching money roll in though.


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    #85
    Murrisk
    Closed Accounts Posts: 889 ✭✭✭Murrisk


    runawaybishop wrote: »
    There is significant work in getting appropriate tenants, maintenance, contracts etc. There is also huge risk and very little security. Tenants can walk out leaving the property wrecked and there is next to nothing yo can do about it. You must pay the full rate of tax on all income and the government will cap your income.

    So in reality it compares very poorly to other businesses.

    You are absolutely right on most of that, apart from the first sentence. Compared to other businesses, that is nothing. My landlord did all that stuff when we moved in and hasn't had to do much else in the three year since. But yeah, being a landlord sounds like a load of hassle. Not really work though, just hassle. Even if the tax rate dropped and the cap was removed, profit might only happen for a few years before supply increases again. This is my whole point, why do people enter the property-rental game expecting to profit? Much better to just see it as an investment that you are getting a nice help to pay off every month. It's not really within a landlord's control whether they profit or not, unlike other businesses where there a whole lot you can do to improve things. And in other businesses, you go to wall if you can't profit, whereas a LL can probably manage to top up the mortgage themselves if rent is not quite paying it off.


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    #86
    runawaybishop
    Registered Users Posts: 9,500 ✭✭✭runawaybishop


    Murrisk wrote: »
    You are absolutely right on most of that, apart from the first sentence. Compared to other businesses, that is nothing. My landlord did all that stuff when we moved in and hasn't had to much in the three year since. But yeah, being a landlord sounds like a load of hassle. Not really work though, just hassle. Even if the tax rate dropped and the cap was removed, profit might only happen for a few years before supply increases again. This is my whole point, why do people enter the property-rental game expecting to profit? Much better to just see it as an investment that you are getting a nice help to pay off every month.

    Getting any old tenant is easy, getting a good tenant is harder and does require some effort.

    Property isn't like other businesses though, its apples and oranges. People enter it because it has an (incorrect) reputation as easy money, and then you get a free house!


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    #87
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    Murrisk wrote: »
    You are absolutely right on most of that, apart from the first sentence. Compared to other businesses, that is nothing. My landlord did all that stuff when we moved in and hasn't had to do much else in the three year since. But yeah, being a landlord sounds like a load of hassle. Not really work though, just hassle. Even if the tax rate dropped and the cap was removed, profit might only happen for a few years before supply increases again. This is my whole point, why do people enter the property-rental game expecting to profit? Much better to just see it as an investment that you are getting a nice help to pay off every month. It's not really within a landlord's control whether they profit or not, unlike other businesses where there a whole lot you can do to improve things. And in other business, you go to wall if you can't profit, whereas a LL can probably manage to top up the mortgage themselves if rent is not quite paying it off.

    Ahhh, we're back to the "landlord shouldn't make a profit, they're getting an asset" scenario.

    There's a name for that type of property investment. Social housing. It's usually funded by the state.


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    #88
    Murrisk
    Closed Accounts Posts: 889 ✭✭✭Murrisk


    Graham wrote: »
    Ahhh, we're back to the "landlord shouldn't make a profit, they're getting an asset" scenario.

    I never said they shouldn't profit, I said they shouldn't expect to profit. There's a difference. I have no issue at all with a landlord making a profit. If they do manage to, good for them.
    runawaybishop wrote: »
    Property isn't like other businesses though, its apples and oranges. People enter it because it has an (incorrect) reputation as easy money, and then you get a free house!

    We're on the same page here really, I totally agree!


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    #89
    Samuel T. Cogley
    Registered Users Posts: 10,684 ✭✭✭✭Samuel T. Cogley


    If LL's can't make a profit they can build a million units a week in Dublin and there will still be a crisis in rentals. I dunno maybe that's the plane, force everyone into purchasing.


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    #90
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,279 Mod ✭✭✭✭The_Conductor


    In business- the going rate for return on an asset- is between 7 and 10%- the riskier the business- the higher the rate of return that is the norm.

    Government intervention, almost singlehandedly, has turned the business of residential lettings- from a largely formulaic pedestrian business- into a high stakes game of poker- where landlords can often find themselves with an overholding tenant- and the tenants egged on by government funded organisations (such as Threshold).

    If we accept that the average property price in the country is 250k (its actually a lot higher in Dublin- through scarcity)- this implies a gross annual rent of between 17,500 and 25,000 - or between 1,450 and 2,100 per month.

    I.e. government action has almost singlehandedly increased rent nationally by about 650 Euro (on average) per dwelling per month- this is solely the risk premium associated with the regulatory environment in which landlords operate.

    Other than the vulture funds- who are purchasing and letting entire apartment blocks- and not paying any tax- I can't think of a good reason for any prospective landlord to consider entering the sector- it just doesn't make any sense.

    According to the CSO- home ownership levels are at historically low levels (by historically low- they are using 1960 as a baseline). One can only imagine that the aim of the government is to drive home ownership at any price- that price now being- there are over twice as many people with mortgage approval to buy property- than there are properties available to purchase. Only thing that is going to do- is continue to drive prices through the roof.


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    #91
    GGTrek
    Registered Users Posts: 834 ✭✭✭GGTrek


    Murrisk;"If a business doesn't make profit, it goes to the wall indeed. No business is guaranteed profit. All businesses are a risk and to me it seems like renting a property is riskier than most in this regard. I consider property to be something you'll be lucky to profit from. It's a much more passive interest than someone running a business as their day job. It's not a hands-on business. With other businesses, there is advertising, there is constant strategising on how maximise profit, there is deciding how to make the product you are selling attractive to buyers, there is a whole lot of elbow grease going into growing the business. Property rental is basically sitting on your arse, hoping that you can charge enough to clear profit, with a bit of maintenace work thrown in that doesn't come close to matching the work put into running an active business. It's the quintessential "easy money" endeavour which is why so many people got caught up buying investment property in the boom. To me, it's just another pension fund that you pay into and profitting is a nice side benefit.

    Potential renter: So, what's the rent?
    Landlord: €1200 per month
    PR: I've been offered two similar places for €300 a month less
    LL: OK, I need €1200 a month in order to clear profit after paying mortgage, expenses and tax. Interested?
    PR: Um... no?"


    A big list of common misconceptions wrote down by someone who has probably never managed property. Landlording is a very hands on business especially if you have several separate tenancies/properties to manage. It is exactly as any other business with a big startup fixed cost, variable maintenance, administration, legal/regulatory costs, variable revenue called rent, risky capital gains when disposing of the assets. You are just believing and repeating the drivel that the Irish media publishes in order to side with a certain government friendly political agenda. Look at the tens of thousands of landlords who failed during the crisis. Nobody cared until the massive reduction in housing caused a massive increase in rent, then the socialist/paternalistic groups so common in Irish society started to care and scream and looked for somebody to blame.

    Why do you think the Irish govvie has abdicated it's responsibility to provide and maintain social housing? Because it is hard work and it requires resources (capital, people, knowhow, ...) that it is not willing to provide. Much easier to blame the lazy private landlords that speculate on society and they just sit on their a...e waiting for the money to come in. There are a few thousands landlords like this in Ireland, but they fail very quickly if they have the misfortune of getting a bad tenant. I would avoid sweeping generalizations like the ones I quoted.


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