PRS Landlords Under Pressure

Residential Tenancies Amendment

With pressures mounting on the government to quell the swelling tide of housing shortages amidst rising demand, it is interesting that the Minister for Housing, Planning and Local Government has this year prioritised the Residential Tenancies Amendment Bill, seeking Cabinet approval for a range of measures to bolster the powers of the Residential Tenancies Board (RTB).

The stated purpose of the proposed new Bill is to change legislation to strengthen rights of tenants and help reduce the risk of homelessness, aiming to tackle the housing crisis with the introduction of fines and costs of up to €30,000 that will apply to private landlords who illegally increase rents above the Government’s cap of 4 per cent, under the new arrangements being considered by Cabinet. However, these changes could pose a greater risk to supply overall by introducing barriers to entry and disincentives to remain in the market for private landlords.

The Residential Tenancies Act 2004 was enacted in Ireland at a time when Ireland’s PRS was gaining momentum and the sector appeared to require some structure. The 2004 Act introduced several key provisions to the sector including the introduction of minimum obligations on both landlords and tenants, the establishment of the RTB, security of tenure for tenants in situ for more than six months, mandatory rent reviews, new lease termination procedures and outlined new dispute resolution protocols. The Act placed new administrative burdens on landlords in Ireland while it was supposed that the corresponding benefits to tenants, who previously may have been perceived as being vulnerable, deemed the newly enacted burdens on landlords as warranted.

According to submissions made by the Irish Property Owners Association (IPOA) to the Oireachtas Joint Committee on Housing, Planning & Local Government, assigned to review the contents of the proposed amendment bill, the 2004 Act was already “needlessly complex” and suggested that the amendment bill effectively be “paused” in favour of a more “detailed review on the subject of the private rental sector in the interest of supply”.

While carrying out PRS inspection services on behalf of Local Authorities, Inspex has found the assertion of confusion to be true in many cases. Landlords seem to be increasingly overwhelmed by the obligations imposed on them.  The frequency at which legislative and regulatory changes are being passed seems to outpace the speed with which landlords can catch up with exactly what they are supposed to be doing, in what manner, at what regularity, and to what standard.

Threshold purported that significant transformations of PRS regulations were required as far back as 2014 when it reported that private rents were beginning to approach unaffordable levels. It advised that reform of the sector was required “to attract long-term stable investment into the rented sector”, suggesting that stable and consistent regulation is required to ensure that existing and potential investors in the PRS are not dissuaded from remaining in or entering the market.

Further regulation, in addition to existing obligations facing landlords in the Irish PRS, could endanger the integrity of the market and existing regulations, including the minimum housing standards.  From its experience in PRS inspection, Inspex notes that the majority of landlords are willing to cooperate and wish to comply with the regulations, but many small-scale landlords are struggling with the existing burden of mounting regulatory requirements.  The proposed new rules risk causing more harm than good for the existing and potential new supply of PRS stock.

With the increasing overlap of Ireland’s social and private rental markets through schemes such as HAP and RAS, it should come as no surprise that the Government aims to gain a level of control on the PRS since many of the tenants in situ are, in effect, socially housed.

The efficacy of the proposed new amendments is still an unknown, with the Oireachtas Committee already noting in its review document that an analysis of potential adverse effects on housing supply, amongst others, should be considered prior to passing the new bill into law.

With such a hefty collection of regulations and obligations already bearing down on landlords and with a real risk of additional measures driving landlords out of the PRS, incentivisation for landlords would be a better way of achieving a steady supply stream in the market.

In 2017 the Department of Housing set out inspection guidelines and targets for all local authorities, advising that initially 15% of PRS properties should be inspected, equating to approximately 51,000 properties nationally (based on 340,000 tenancies reported to have been registered by the RTB in 2017), increasing to 25% of properties, or 85,000, by 2021, assuming the quantum of tenancies remains stagnant. Achieving these targets set out by the Department of Housing would continue the helpful and informative approach for landlords and at the same time improve accommodation standards generally.

Inspex believes that a consistent and streamlined approach to PRS inspections is key, with the aim always to eliminate confusion amongst landlords and tenants, thereby alleviating barriers to compliance with existing regulatory standards.