Rent control moves closer to homePosted: November 15, 2015
Whether you’re for or against measures to control private sector rents, it’s going to be worth watching closely what happens to new legislation in Ireland.
After a long row between the Irish coalition partners, the government has finally agreed a package of measures designed to give ‘rent certainty’ to tenants until supply increases. The package includes:
- For the next four years, landlords will only be allowed to increase their rents once every 24 months rather than 12 months as at present
- Landlords will have to give 90 days notice of any increase (up from 28)
- Landlords will have to provide evidence that any future increases are in line with the local market rate and inform tenants of their legal right to challenge them
- Tenants will have stronger protection against unscrupulous landlords who falsely declare they need to sell the home or move in a family member: landlords will have to sign a statutory declaration and face fines if it is invalid
- Landlords who house tenants on social security will get 100% mortgage tax relief against their rent (up from 75%).
Note that ‘rent certainty’ is not the same thing as rent control. What’s interesting about the package from this side of the Irish Sea is that it anticipates – and goes beyond – all of the points raised in the growing debate on rent regulation here. The Scottish Government is dipping its toe in the water with a Bill that will allow local rent control in rent pressure areas while Labour will call for new powers to freeze rents in London if Sadiq Khan wins next year’s mayoral election.
The Irish package is a compromise between the two coalition parties. Labour’s Alan Kelly, the environment minister, originally called for much tougher measures including rent increases linked to CPI. Fine Gael’s Michael Noonan, the finance minister, believed rent increases would tackle the housing crisis by attracting new investors into the sector.
And the reaction so far rehearses some well-worn themes in the rent control debate with some local ingredients added. Landlords complain that ‘rent certainty’ is really ‘rent control’ and are threatening legal action. Free market economists argue that it will reduce supply and investment and make things worse while critics say the fail to see the difference between certainty and control. Housing campaigners worry that landlords will look to hike their rents before the new system is introduced (the opposition Fianna Fail claims this has already happened because of government inaction).
However, the debate is sharpened in an Irish context because of the property boom and bust before linked to the Global Financial Crisis. A mixture of irresponsible lending and speculative development left the banks and the economy on their knees. As in the UK home ownership has fallen and buy to let ‘investment’ has soared. Private renting doubled between the censuses of 2006 and 2011 and rents are rising at more than 10% a year in most large urban centres .
Then add traditional Irish hostility towards landlords into the mix. Sinn Fein’s Gerry Adams (now an Irish TD) accused Fine Gael of opposing rent certainty because more than a third of its TDs are landlords. And independent TD Mick Wallace accused the government of selling control of the rental market to a ‘cartel’ of foreign investors.
Ireland’s housing system is different to the UK’s though for historical reasons there are some similarities too. For example, private tenants already have much stronger protection, including four years’ security of tenure once they have been in a tenancy for six months. A statutory Private Residential Tenancies Board polices the system. The coalition package also includes a series of supply-side measures that will sound familiar to UK ears: reductions in building regulation on new apartments; starter homes; support for infrastructure delivery; a levy on vacant sites; and strategic development zones.
However, UK policy is rapidly diverging. Scotland’s Private Tenancies Bill will also end no-fault possession and landlords already have to be registered. Wales has just introduced registration and licensing of private landlords and agents. In contrast, England has introduced minimal measures to tackle ‘rogue landlords’. But the Labour party was committed to longer tenancies at the last election and has since moved to the Left – and Ireland’s two-year rent freeze sounds much like the freeze in energy prices proposed by Ed Miliband at the last election.
So what happens in Ireland could have lessons for all the UK nations. The history of rent regulation here suggests that landlords (more likely the bad ones than the good) will find loopholes in legislation and that power imbalances with tenants mean they will be able to exploit them. For example, the Scottish Bill will allow landlords possession where they need to sell or accommodate a family member, but the Irish experience suggests this provision will be abused by unscrupulous landlords. However, political pressure for action is growing from tenants sick of being told that the only solution is to wait for increased supply to fix the market.
Above all, perhaps, the Irish package shows that the debate to come here will go well beyond a simple battle between the free marketeers and the rent cappers. We do not start with a perfectly free market (rents are already subject to regulation in social housing and housing benefit for private tenants is capped) and few people are proposing crude forms of rent control. As with the national minimum wage, once the principle of some form of rent regulation is conceded it will be all about the detail and the implementation.