Opening
· Firstly, I wish to thank Senator Ó Clochertaigh for bringing forward this Bill and providing us with another opportunity to discuss what I think we all agree is one of the most significant issues facing us today and an absolute priority for this Government.
· As Senators will be aware, I have tabled a proposed amendment to the motion.
RTB Rent Index Figures
· There are acute pressures in the rental market. These pressures are driven by a number of factors - by rising demand, by a lack of supply and by the high costs that indebted landlords face in servicing their loans. These stresses are borne out by the latest data from the Residential Tenancies Board – the RTB.
· The RTB Rent Index Data for Q2 2016 show that private rents rose nearly 10% across the country compared with the same period in 2015. In Dublin, rents are now 3.9% higher than their previous peak in 2007. Rents are also increasing outside of Dublin, although they remain at 11.2% off their peak levels. All of these trends are broadly in line with the trends reported in the recent Daft.ie report for the same period. There is no question that the increases are placing huge pressures on tenants, particularly those who are seeking new accommodation.
· If ordinary people are spending more of their income on rents and mortgages, that leaves less for the many other demands of life. This is affecting the economy but, most importantly, it is affecting people’s quality of life. It also puts many working families in a more perilous financial position and, in extreme cases, at risk of homelessness.
· There is no doubt that the problems in the rental sector are part of a bigger problem; Ireland is in the midst of a housing crisis. And the problems caused by high rents reflect, and are reflected in, the other issues facing the housing market – not enough homes for first time buyers, increased demand for social housing and unacceptable levels of homelessness. While many factors contribute to these problems, the one factor common to all of them is the prolonged and chronic lack of supply of new houses.
Rebuilding Ireland
· The core issue behind almost all of the pressures throughout the housing market is a lack of supply. For the rental sector, the best way to reduce and stabilise rents in the long term, and benefit the entire sector, is to increase supply and accelerate delivery of housing for the private and social rented sectors.
· Rebuilding Ireland, the Government’s Action Plan on Housing and Homelessness aims to increase and accelerate housing delivery across all tenures to help individuals and families meet their housing needs. It sets out over 80 actions that the Government is taking through new policy, new legislation and innovative measures in the budget to achieve that aim.
· A strong and viable private rental sector can play an important role in the housing market and our wider economy. It can provide a housing option to those who either cannot or choose not to enter the owner-occupied market but still have sufficient means to meet their own accommodation needs. It can provide a housing option to meet rising demand and it can promote flexibility and better alignment to a more mobile labour market, making it easier for individuals and families to pursue job opportunities or adapt their accommodation to changing family circumstances.
· It can also reduce the macro-economic risks of an over reliance on home ownership. We have seen examples over the last decade where States with relatively large private rented sectors, such as Germany and Switzerland, have been better insulated against housing booms than States with small rented sectors, like Ireland and Spain.
· Indeed, the rental sector in Ireland has traditionally been regarded as a residual sector in which households who would prefer either to own their own home privately or access permanent social housing must serve time on their way to their true tenure of choice.
· The rental sector in Ireland has doubled in size over the course of the last 2 decades. Almost one fifth of the population now live in the rental sector. Growth in the sector has been driven by a range of factors including a reducing reliance on home-ownership as a tenure of choice, as well as demographic factors including inward migration from the EU and decreasing household size / increasing rates of new household formation.
· Notwithstanding this, the rental sector in Ireland still needs to develop and mature in order to provide a viable sustainable and attractive alternative to home ownership, rather than serving as a temporary refuge or a staging post on the route to home ownership.
· Severe supply pressures, rising rents, security of tenure issues, limited - but nonetheless unacceptable - examples of poor accommodation standards and a shortage of professional institutional landlords are impediments to delivering on a strong, stable and modern rental sector that offers real choice for individuals and households while contributing to economic growth.
· With regard to rent levels, important amendments to the Residential Tenancies Act introduced last year mean that the minimum period between rent reviews for tenancies has increased from 12 to 24 months. This will apply for a 4 year period, until 2019. In addition, the minimum period of notice of new rent is increased from 28 days to 90 days and longer notice periods for the termination of long-term tenancies have been introduced.
· These changes are important but clearly the chronic lack of supply continues to drive rents higher.
· There is no question but that we need to go further.
· However, while I appreciate the motivation behind Senator Ó Clochertaigh’s Bill I strongly believe that the proposal to strictly tie rents to the consumer price index would exacerbate an already chronic supply problem. It would force existing supply to exit the market and discourage future supply for the sector. The experience in jurisdictions where strict and blunt controls such as that proposed have been introduced is generally not a happy one. Rent control has been shown to negatively impact on supply, make tenants even more vulnerable and create strong black market distortions and inefficiencies can emerge over time.
· Rent predictability – as part of a stable rental sector underpinned by a sustainable investment environment – is something that I see as being of benefit to both tenants AND landlords.
· That is why Rebuilding Ireland, commits to developing a real and meaningful strategy for the rental sector, with a major focus on supply but also including new mechanisms for both setting and reviewing rents.
· In advance of the publication of the strategy before the end of this year, I am advancing other legislative changes for early introduction in the Housing (Miscellaneous Provisions) Bill 2016, which I will shortly be introducing in this House.
· This Bill will introduce new measures to ensure tenants remain in situ where a landlord proposes to sell more than 20 units in a single development – the Tyrrelstown amendment, and it will provide for enhanced enforcement and dispute resolution powers for the RTB.
· In terms of increasing supply, the Bill will introduce temporary fast-track planning arrangements for large-scale housing developments, and will also streamline the existing process for local authority developments, and developments by approved housing bodies, and it will support a very significant increase in the supply of dedicated on-campus student accommodation, freeing up thousands of units in the wider rented sector currently occupied by students.
· Yesterday’s budget contained important measures designed to encourage a strong supply response in the rented sector. For example, the Government has announced the restoration of 100% interest relief for residential landlords on a phased basis to support and maintain investment in rental accommodation. We are also extending the living city initiative to include rental accommodation and increasing the ceiling for the rent a room scheme from €12,000 to €14,000.
Scope of the Strategy
· For the strategy itself, I am determined that it will provide a vision of the role that the rental sector will play in the short, medium and long term, in the context of the Government’s objectives for the housing sector overall, as set out in Rebuilding Ireland.
· It will contain a range of actions focused on the 4 key areas of security, supply, standards and services. In terms of security, we will look at bringing greater tenure and rent certainty to landlords and tenants, and in terms of supply we will examine how to maintain existing levels of stock while encouraging investment in additional supply, including through affordable rental.
· In addition, measures on standards will continue to improve the quality and management of rental accommodation while actions on services will broaden and strengthen the role and powers of the RTB to more effectively provide their services and empower tenants and landlords.
Conclusion
· Cathaorlaigh, we have more to do to allow the sector to evolve into a mature, stable sector in which there is a true balance between the rights and responsibilities of landlords and tenants. Supply of new rental accommodation at affordable levels is key to this balance.
· The strategy for the rented sector, which will be in place by the end of the year, will lay out measures to address immediate issues affecting the supply, cost and accessibility of rental accommodation.