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End discrimination against small landlords

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When the government refers to the housing crisis, it usually bemoans a basic tenet of economics: the law of supply and demand. The issues that continue to weigh on the availability of properties for sale and rent are more complex.

But as a broad defense, there is a critical housing shortage at a time of ever-increasing demand.

However, with more than a decade of dire housing needs, it’s too easy for governments to wearily refer to issues of supply and demand – or, more broadly, to blame what’s routinely dubbed the “housing market.” There is mounting evidence that government policies aimed at fixing problems in a dysfunctional rental sector are causing further anomalies and worsening the situation.

A case in point is the widespread abandonment of the rental sector by so-called ‘casual’ or ‘mom and pop’ landlords. The term ‘landlord’ has been derided in Ireland for centuries. But many of these property owners have long provided a valuable source of housing to meet a variety of different needs.

As this newspaper reports today, 1,132 tenants in Ireland received evictions from their landlords in the first three months of this year. This has taken the number of such notifications to more than 3,800 in the 12 months to March – more than double the number for the previous 12 months.

Such a situation is not sustainable during a real estate crisis. Obviously something serious is wrong.

As smaller landlords exit the real estate market, the supply of available rental housing continues to fall. This in turn leads to rising rents for less and less available rental properties, leading to social problems, particularly among younger generations who are long past homebuyers and unable to afford the higher rents increasingly demanded by major international landlords.

Such landlords, known as real estate investment trusts (REITs), pay little or no taxes in return for investing in large-scale rental developments, while many casual and semi-permanent landlords pay very high rates.

In short, REITs have a distinct tax advantage over landlords who are fleeing the sector in droves. For example, local property taxes aren’t a tax deductible expense for smaller landlords, and with rental income that’s also subject to the Universal Social Charge, they can face a marginal tax of up to 55 percent.

That’s not the only benefit REITs enjoy. In 2016, the then-government introduced Rent Pressure Zones (RPZs) just as rent costs started to increase exponentially. There are now 53 RPZs nationwide. RPCs are an example of a policy aimed at alleviating problems that have worsened the situation elsewhere. In short, it has created a two-tier rental market, mainly to the benefit of international investors.

Measures to level the playing field must be introduced in next month’s budget. The government must also be careful not to fuel further rent increases. But in a market where the law of supply and demand prevails, a well thought out package of measures needs to be put in place to ease the regulatory and tax burdens on smaller private landlords.

https://www.independent.ie/opinion/editorial/end-discrimination-against-small-landlords-41910075.html End discrimination against small landlords

Fry Electronics Team

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