“Increased regulation in recent years has been driven by efforts to provide greater security for tenants in the face of a shortage of rental accommodation, but in many cases, these have increased the likelihood of small landlords leaving the market, exacerbating problems they were intended to remedy”
There is growing curiosity about why many Irish landlords are withdrawing from the property rental market. Landlords who are considering leaving the market may have multiple factors influencing their decision. In this article, we will explore the characteristics of Irish landlords, examine the reasons why they are exiting the market, and discuss the changes they would like to see implemented to encourage them to remain in the market.
Private landlords, who are mainly non-institutional, provide 94% of residential rental accommodations in Ireland. 80% of them had a net income of less than €20,000 in the previous year, and 60% had a gross income of less than €60,000. However, over the past five years, 43,000 homes have left the rental market and have rarely returned to it once sold, leading to low rental stock and high prices.
Increased Regulation
According to the Irish Property Owners Association (IPOA), the regulatory environment for private landlords is challenging, particularly for those who own properties in Rent Pressure Zones, where rent increases are limited. Rent Pressure Zones (RPZ) were introduced by the Government back in 2016, to help make it easier for people to find affordable accommodation as rents increased. They are designated areas where landlords can’t increase rent by more than the current level of inflation or by 2% – whichever is less.
As the level of inflation in Ireland currently stands at 8%, landlords with properties in these areas can’t increase their rent by more than 2% each year.Rent Pressure Zones have led to a situation whereby many landlords are restricted to substantially below market rent, and therefore find themselves in an unsustainable situation with costs increasing and income restricted
As a result, more than half of small landlords surveyed in the last 12 to 18 months plan to sell their properties in Rent Pressure Zones.
High Level Tax rate
Private landlords in Ireland pay the same rates of tax on their rental profit as they do on any other income they have, and their rental income less deductible expenses is added to their other Irish-sourced income, such as employment income. This often results in private landlords paying tax of 52%, whereas institutional landlords are treated differently and pay less tax on their rental income
High Property Prices
Rising property prices have piqued the interest of many homeowners, especially those who found themselves becoming ‘accidental landlords.’ This originated during the property market crash, when property prices plummeted compared to the outstanding mortgage balance, compelling homeowners to lease their properties. Fast forward to the present, where we’ve witnessed a steady rise in property values over the past half-decade, enabling homeowners to contemplate selling their homes and settling their mortgages.
What changes do landlords want to see introduced?
Urgent policy responses are needed to convince landlords to consider evicting their tenants to remain in the market or not evicting them when selling. The proposal includes measures such as parity in the taxation of corporate and individual landlords and an increase in wear and tear rates to encourage better standards in the maintenance of properties. The Irish Property Owners Association (IPOA) has also called for the introduction of roll-over relief on Capital Gains Tax and the removal of Rent Pressure Zones and the current eviction ban.
A final word from MRE’s Kevin Loonam:
One of the biggest causes for families becoming homeless in recent times is that they are losing their homes in the private rented market as landlords are selling up and leaving the market. The government needs to stand up and do something to encourage landlords to enter or stay in the market. The very legislation introduced to protect tenants is whats causing many to become homeless. The key milestone to achieving this is to review the current tax structure to individual landlords while allowing for the deduction of local property tax against rental income.
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