There is no doubt that the crisis can be a catalyst for change, and nowhere is it more prevalent than in the U-turn in Ukrainian refugee housing. As tens of thousands continue to arrive on our shores, the state has had to turn around to ensure they have a place to live, especially over the longer term.
A plan proposed by Housing Secretary Darragh O’Brien is to amend the Fair Deal scheme to allow care home residents to keep rental income from vacant homes if they are used to it from the war to house broken families. It is not known how many of these houses exist and they are not all suitable, but estimates of up to 8,000 are probably accurate.
Of course, there’s nothing wrong with every home being handed over to a needy family with no money changing hands, but it’s an indictment of a system when, for a decade or so, calls have been made in the midst of our own housing shortages to do just that.
Fair Deal, or the Nursing Home Support Scheme as it’s more properly known, takes a portion of the wealth (7.5 per cent per annum) and income (80 per cent) of a person who enters a nursing home and tops it up to pay the bill in a public or private establishment.
For many, especially NINJA retirees (no income, job or assets), it’s a no-brainer. They can choose where to live, no matter what the cost, and they can defer property withdrawal until after their death.
For those on the cusp, with decent income and quality assets, it’s not so good. A lot of money is cut, although the contribution to care is never more than the actual cost (it is not a collection system like insurance), but many families have to do complicated calculations as to whether it is actually better to just pay in full private care and forgo Fair Deal as the payer can receive generous tax breaks on the bill and their family can use and inherit assets free from government interference.
For example, if they rent out the resident’s house, the rental income can be offset against the cost of the care home without the HSE lashing out at not just 80 per cent of it, but the principal at 7.5 per cent per annum on the value of the care home property (although this is limited to three years), which is at least a double whammy.
A vacant lot
No wonder the sums just don’t add up for many, and it makes more financial sense to leave the house vacant or occupied by a relative to keep the lights up (and importantly home insurance) They use Fair Deal where the government anyway will foot the bill for the staggeringly high nursing home fees.
Some commentators, particularly those dealing with the macroeconomics of the matter, point to the fact that the ‘fair’ deal is inherently unfair to the taxpayer.
The support alone costs over a billion euros a year, and today’s taxes are something that can only be partially repaid in a few years.
Age Action’s Celine Clarke says changing legislation to allow people to keep income from renting out their home while living in a care home is a good idea if a number of key concerns are addressed.
“It is imperative that the AAC Act is fully enacted and that adult protection laws are implemented to protect people from potential elder abuse,” she says. “Some who live in a nursing home are there temporarily or have the expectation that it will be a temporary facility.”
She adds that the situation is just as important for renters, “given that the house may not be available for rent in the medium to long term.”
Peter McElroy of Fair Deal Solutions, which helps families with applications, says there is hope last year’s amendment to the Nursing Home Assistance Program Act would address rental income.
“What happened was that it changed the way proceeds from the sale of a vacant house are treated because like the house, it has a three-year limit,” he says.
The resulting pile of cash is separate from the full asset recovery normally applicable. It was expected that rental income would also be treated in a similar way, but this has not been done.
“It would be a huge gift to allow someone to do that, but it didn’t happen,” says Mr. McElroy. The only expense deducted from this is the local property tax, unlike a landlord who allows for expenses such as fees, maintenance, etc. That’s really unfair.”
The effect is to tip someone into the tax net (or at the higher rate), and 80 percent of nearly all rental income is withheld as well.
“It’s not worth it,” says Mr. McElroy. “There is also the hectic factor. What if the renter stops paying or you have to pay for damage and repairs? Then you pass. The tenant is on site and you only have 12 months to pay under the deferred loan. There is no advantage there.”
One possible solution would be for the state to pay a homeowner a tax-free stipend instead of full market rent.
Qualification for the Fair Deal
Two assessments are required before anyone in a public nursing home or private home with public beds can participate in the Fair Deal program.
care needs assessment
This is a medical requirement in which a decision is made about a person’s ability to perform everyday activities such as bathing, shopping, and dressing; family and community support available to them; and whether they have domestic help. A GP or other medical report may be required. If you are not considered to be in need of inpatient care, you must wait six months before making another application.
Once the need for a nursing home is recognized, the person’s financial contribution to their care is evaluated from two perspectives: income and assets.
80 percent of their net income will be charged (40 percent for a couple). This includes pensions, rental income, dividends, etc. and is deducted each year.
7.5 percent of wealth is calculated (3.75 percent for a couple), including detached house (capped after three years), other real estate, land, ARF, savings (the first €36,000 or €72,000 of a couple is not taken into account) and submit an annual account. There is a “review” of the assets transferred over a period of five years.
There is a loan program to defer this part of the bill until after the person’s death. If it is deemed that the person could pay for their own care, they may be denied access to Fair Deal.
https://www.independent.ie/business/personal-finance/rent-income-and-the-fair-deal-scheme-41535452.html Rental income and the Fair Deal program