RA wasn't keeping rents high

Ray Palmer

As can be seen on threads here and news reports RA wasn't keeping rents up. There were a few people who insisted a reduced RA would mean rents would reduced. Look about it hasn't happened but people are suffering.
So why didn't it happen?

StillWaters

Ray Palmer wrote: »

As can be seen on threads here and news reports RA wasn't keeping rents up. There were a few people who insisted a reduced RA would mean rents would reduced. Look about it hasn't happened but people are suffering.
So why didn't it happen?

I think it has in some areas, read the DAFT rental report from last week, but in other areas, such as the most desirable parts of the cities it's simply supply and demand keeping rents high.

People on RA are either coming to a private arrangement with the LL (which officially is not allowed), are moving to RAS, or are moving to areas where there is less demand.

Monty Burnz

Ray Palmer wrote: »

As can be seen on threads here and news reports RA wasn't keeping rents up. There were a few people who insisted a reduced RA would mean rents would reduced. Look about it hasn't happened but people are suffering.
So why didn't it happen?

Rents are down everywhere in the country except Meath (where the .2% rise is way below inflation), Galway and Dublin according to the Daft rental report. When you take away general inflation from the Galway and Dublin figures, you are left with perhaps 10 square miles in the whole country where rents are not falling markedly.

Ray Palmer

So if we take away the larger areas with the most rental properties and ignore actual figures they dropped?
Come on that is just playing silly beggars.
The allowance was cut a percentage and that has not been reflected. People were saying the link was direct.
It is obvious the link was not as strong as people made out. LL haven't been forced to reduce rents and accept RA. If anything is seems less will take RA.
It seems pretty clear that the people saying RA reductions would mostly punish people hard off and not really benefit anyone were right.

StillWaters

But you are ignoring the reason for the RA cuts. They weren't brought in in order to reduce rents overall, they were brought in to save the State over €20m.

Inevitably a by product would be a reduction in rent, particularly in areas where there was a glut of accommodation, and that has happened. I don't see you're argument about it not benefitting anyone. It has benefitted all renters and the tax payer.

Monty Burnz

Ray Palmer wrote: »

So if we take away the larger areas with the most rental properties and ignore actual figures they dropped?

Or, to put it your way, if we ignore 99.9% of the country, they stayed stable or rose a tiny fraction?

Nobody ever claimed that rent allowance was propping up rents in areas of high demand. The whole point is that it set a floor in places where the demand did not justify such a floor - i.e. most of the country. Although perhaps you are one of those people who thinks that Ireland stops at the M50?

Zamboni

Ray Palmer wrote: »

So if we take away the larger areas with the most rental properties and ignore actual figures they dropped?
Come on that is just playing silly beggars.
The allowance was cut a percentage and that has not been reflected. People were saying the link was direct.
It is obvious the link was not as strong as people made out. LL haven't been forced to reduce rents and accept RA. If anything is seems less will take RA.
It seems pretty clear that the people saying RA reductions would mostly punish people hard off and not really benefit anyone were right.

There is a direct link but the required controls are not in place.
Landlords are exploiting desperate RA tenants and weak govt controls by accepting under the counter top up payments on RA from the tenant.

gaius c

Look at a place like Longford and the cheapest rental in the town is the RA limit so it's definitely putting a floor on prices outside the bigger cities. If rents drop in Dublin commuter towns (like say Kildare or Meath towns), people will be tempted to move out and take advantage of the lower rents. Until now, it hasn't really made sense as any savings were so small that they got gobbled up by commuting costs.

Also, the previous situation with crap places renting for the same as good places is starting to change. Price levelling in Dublin seems to have decreased and decent places are getting a premium over the not so decent places.
We also have to contend with the fact that many of the current renters will be gone like a flash once sales prices fall to within their range and also the fairly hefty stock of empty developments being kept empty.
Dublin has also proportionally lost more jobs than the rest of the country so the amount of spare cash to be upgrading to nicer houses/apartments is simply not there.
The market is nowhere near stability yet so let's wait a while before making grand pronouncements.

We could also do with a rental version of the property price index. A house 2 doors down from us went up on Daft in August looking for €150 a month more than we were paying. It stayed on Daft for 4 months until they eventually got people in who are now paying exactly the same rent as us. Try telling that to our landlord though because he thinks the original advertised price is now the going rent for the area.

Kosseegan

Monty Burnz wrote: »

Rents are down everywhere in the country except Meath (where the .2% rise is way below inflation), Galway and Dublin according to the Daft rental report. When you take away general inflation from the Galway and Dublin figures, you are left with perhaps 10 square miles in the whole country where rents are not falling markedly.

The last published inflation figure I saw was negative. Any rise at all is therefore significant. There are now shortages of rental offerings being reported in Dublin. There is virtually no new building, household formation is increasing so the trend is towards even tighter supply and an overspill into areas of lower demand.

Ray Palmer

Zamboni wrote: »

There is a direct link but the required controls are not in place.
Landlords are exploiting desperate RA tenants and weak govt controls by accepting under the counter top up payments on RA from the tenant.

Oh please give it up. This is just part of the many reason given before the cut.
It was said it would not help rents for the vast majority. It was said maybe some would be helped but very few.
It just didn't happen the way those who said it was keeping rents up said it would.

Only those marginalised already have suffered. The objective to reduce spending worked but people have suffered. All pointing to it failing to prove the direct link. It just forced people out of where they were living and continues to do so

Monty Burnz

Kosseegan wrote: »

The last published inflation figure I saw was negative. Any rise at all is therefore significant. There are now shortages of rental offerings being reported in Dublin. There is virtually no new building, household formation is increasing so the trend is towards even tighter supply and an overspill into areas of lower demand.

YIY inflation is at 1.2% in October according to the CSO. We heard all the stories about running out of property during the bubble - didn't really pan out that way though. And of course we had net immigration at that time. Now we have net emigration.

Monty Burnz

Ray Palmer wrote: »

Only those marginalised already have suffered. The objective to reduce spending worked but people have suffered. All pointing to it failing to prove the direct link. It just forced people out of where they were living and continues to do so

If people are moving into lower-rent accommodation and rent is falling all over the country, how does this support your argument?

Ray Palmer

Monty Burnz wrote: »

If people are moving into lower-rent accommodation and rent is falling all over the country, how does this support your argument?

Because it didn't reduce the rent costs around. Rents didn't fall the same level. The claim was rent is linked directly with RA. That would mean 10% cut in RA would mean 10% cut in rents. It didn't.

Milk & Honey

Monty Burnz wrote: »

If people are moving into lower-rent accommodation and rent is falling all over the country, how does this support your argument?

Who says people are moving into lower rent accommodation?

Equality

Rent allowance definitely props up the rental market in rural Ireland.

The house beside me is privately rented for 250/month. The landlord won't take rent allowance, and does not need to as he has no mortgage.

Many similar houses are rented on the same estate through rent allowance for 550 approx/month. They all charge the exact max that is allowed under rent allowance.

irishguy

Monty Burnz wrote: »

Rents are down everywhere in the country except Meath (where the .2% rise is way below inflation), Galway and Dublin according to the Daft rental report. When you take away general inflation from the Galway and Dublin figures, you are left with perhaps 10 square miles in the whole country where rents are not falling markedly.

Really? in the area you quote there are just over 1.5M people living which is about 1/3 of the entire population. There are also a few other counties which are fairly stable, but yes there are a few areas that are going to keep dropping.

Monty Burnz

Ray Palmer wrote: »

Because it didn't reduce the rent costs around. Rents didn't fall the same level. The claim was rent is linked directly with RA. That would mean 10% cut in RA would mean 10% cut in rents. It didn't.

That's a very, very naive and incorrect understanding of supply and demand. If you increase the cost of bread or cars by 10%, would you expect a 10% fall in demand?

Monty Burnz

Milk & Honey wrote: »

Who says people are moving into lower rent accommodation?

Ray said it.

StillWaters

Ray Palmer wrote: »

Because it didn't reduce the rent costs around. Rents didn't fall the same level. The claim was rent is linked directly with RA. That would mean 10% cut in RA would mean 10% cut in rents. It didn't.

But as is shown again and again on this forum, Ireland is not one property market. In areas where supply is greater than demand, base rents fell almost exactly in line with the cut in RA. In areas where LLs have potential tenants queuing down the street for a viewing, the cuts had no impact.

Ray Palmer

Monty Burnz wrote: »

That's a very, very naive and incorrect understanding of supply and demand. If you increase the cost of bread or cars by 10%, would you expect a 10% fall in demand?

Never even suggested that. Go look up the original thread (which you were involved in). People were saying rent was kept up unnaturally by RA and they said everywhere. They and you have suggested a direct link. That would mean 10% cut would have a direct 10% cut in rents. IT SIMPLY ISN'T TRUE AND HAS BEEN PROVEN. Direct means direct and it was nonsense then and is now.

Monty Burnz wrote: »

Ray said it.

No I didn't look back and you will see I didn't.

StillWaters

Ray, how can you argue there is not a direct link, search DAFT for any provincial town and you will find most accommodation is exactly the price of RA for that type of accommodation? I'm not sure how much more the market can be squeezed in these areas, but at the moment LLs are chasing the cuts down.

Monty Burnz

Ray Palmer wrote: »

Never even suggested that. Go look up the original thread (which you were involved in). People were saying rent was kept up unnaturally by RA and they said everywhere. They and you have suggested a direct link. That would mean 10% cut would have a direct 10% cut in rents. IT SIMPLY ISN'T TRUE AND HAS BEEN PROVEN. Direct means direct and it was nonsense then and is now.

Again with the 10% cut in one leading to 10% cut in the other. That's bizarre - can you back up your claim that anyone ever said that? It obviously depends on the elasticity of demand (and also depends on the time horizon).

Ray Palmer wrote: »

No I didn't look back and you will see I didn't.

You said:

Ray Palmer wrote: »

All pointing to it failing to prove the direct link. It just forced people out of where they were living and continues to do so

So unless people are being forced out of places because the cost is now too high and then somehow move into somewhere equally or more expensive...that's what you said, whether you meant to or not.

The_Conductor

Its simple economics really.
If you reduce rent allowance by 10% (let just say 10% for arguments sake), it does not mean that all rental accommodation is going to fall in price by 10%.
If the market was not a mixture of private and public accommodation (aka private tenants and those availing of RA and other schemes)- then, yes, there would be a direct correlation- its an indirect elasticity though- precisely because it is a mixed market.

As alluded to above- many areas are more desirable than other areas- and will have demand from different tenant types. Why would a landlord accept EUR400 from a RA tenant, when a private tenant is willing to pay EUR500, for the exact same property? However if the RA tenant, who still needs to be housed, has his or her budget reduced to EUR360- he or she is forced to move further away, into a less desirable area, reducing demand for Property A- and driving down its rental yield. Where once private tenants might have been willing to pay EUR500- now they're willing to pay EUR450. Obviously this is still of limited, if any, help to the RA tenant- it is however a reduction in the overall rent load.

Some areas have had larger falls in rent, than have others- and some (very few) areas have in actual fact had increases over the past year. Parts of Meath, Galway city, Inner city Dublin and a few unusual places (rural Cork) have limited supply and a constant demand- and simple economics has determined that their prices have not fallen- or have fallen to a lesser extent than other areas.

It is an imperfect market- however making blanket statements that an x% reduction in RA should result in an x% reduction in rent for every property in the country- is wishful thinking in the extreme. The overall rent load- is falling and continues to fall. If you want to live in a more desirable area- then tough- you're going to have to accept that you're in competition with everyone else- and competition determines demand.

If anything- the reductions in RA need to hand-in-hand with a massive scheme to ensure all rental accommodation is up to standard- so there is perception that RA tenants get a worse deal accommodation wise (or a better deal) than anyone else. Until such a time as there are consistent standards adhered to nationally- we will have this perception- rightly or wrongly. RA tenants often feel they don't have the same opportunity to walk as a private tenant has- they do though- and they have the exact same protections- if they are willing to assert them. On the other hand- if they go overboard asserting rights- that private tenants don't- they end up in a situation where a landlord simply isn't interested in renting to them anymore- the paperwork and constant legwork can be the straw that breaks the camel's back.

There is a direct correlation between RA levels, and rent levels. A correlation does not mean its a 1:1 ratio though- that is the point being made here. If it were purely a RA market- you still wouldn't have your 1:1 ratio- because you'd still have lots of people who wanted to live in Dublin 2, versus a limited few who want to live in Killucan, Co. Meath. Its simple human nature.

Monty Burnz

smccarrick wrote: »

Its simple economics really.

Unfortunately simple economics and Irish property bulls never really got along very well.

Zamboni

Ray Palmer wrote: »

Oh please give it up. This is just part of the many reason given before the cut.
It was said it would not help rents for the vast majority. It was said maybe some would be helped but very few.
It just didn't happen the way those who said it was keeping rents up said it would.

Only those marginalised already have suffered. The objective to reduce spending worked but people have suffered. All pointing to it failing to prove the direct link. It just forced people out of where they were living and continues to do so

Give what up?
The reason I gave is part of the reason why there is a discrepancy between the goal and the result.
The landlord who accepts a top up on an RA payment is complicit in exploiting a person who is desperate for accommodation.

If tenants went into social housing instead of topping up, there would be a far more visible effect on the artificial rental floor.
If landlords were in some way denied the ability to accept a top up, there would be a far more visible effect on the artificial rental floor.

So to clarify, there is a direct link - but weak govt controls on its implementation are being abused by complicit landlords and desperate tenants.
And I blame the state for weak controls - not the landlord or tenant.

uberalles

I know two couples paying top ups to LLs. Seems to be rife.

What a country

Kosseegan

smccarrick wrote: »

Its simple economics really.
I

As alluded to above- many areas are more desirable than other areas- and will have demand from different tenant types. Why would a landlord accept EUR400 from a RA tenant, when a private tenant is willing to pay EUR500, for the exact same property? However if the RA tenant, who still needs to be housed, has his or her budget reduced to EUR360- he or she is forced to move further away, into a less desirable area, reducing demand for Property A- and driving down its rental yield. Where once private tenants might have been willing to pay EUR500- now they're willing to pay EUR450.

How does the RA tenant moving away influence rents in that scenario? The private tenant was willing to pay €500. This was out of the league of the RA tenant and so had no influence on the rent level. The RA tenant moving away changes nothing. If anything it might make the area even more desirable with fewer RA tenants around.

Monty Burnz

Kosseegan wrote: »

How does the RA tenant moving away influence rents in that scenario? The private tenant was willing to pay €500. This was out of the league of the RA tenant and so had no influence on the rent level. The RA tenant moving away changes nothing. If anything it might make the area even more desirable with fewer RA tenants around.

Simple economics. Now the private tenant is not in competition with the RA tenant. Less demand = lower prices.

Ray Palmer

Monty Burnz wrote: »

Simple economics. Now the private tenant is not in competition with the RA tenant. Less demand = lower prices.

Too simple as has been my point that RA is a minor factor. Supply and demand curves include willingness to supply at a given rate. As so many LL don't accept RA very little effect on the market. Higher demand areas this is more previlant.
So reality is €500 rent never changes as it was never available for RA. The prediction of mass reductions everywhere didn't happen.
RA availability has decreased as supply reduced to RA. Rents certainly have not reacted as predicted by those championing it. That is all, I understood economics before and since. It's impact was overestimated and the proof is in the market after a year

Kosseegan

Monty Burnz wrote: »

Simple economics. Now the private tenant is not in competition with the RA tenant. Less demand = lower prices.

The private tenant wasn't in competition with the RA tenant in the example. The private tenant was prepared to pay €500 so presumably there were others. If the RA tenant can't compete he has no influence on the €500.
It must be presumed that if €500 can be got that there would be a reasonable number of private tenants who would emerge in a reasonable time prepared to pay €500. That is the market price. The absence or presence of individuals who cant afford it has no influence and can't have. There is no effect on supply or demand.
Take an anoliogy with this situation. A hotel can achieve 80% occupancy at €100 a room. Potential guests who can only afford €75 a room go to a nearby B & B. If the B & B guests decide to go to a different area completely what effect does that have on the hotel at €100?
The answer is nil since they still have the original guests seeking rooms.

Theboinkmaster

Ray Palmer wrote: »

As can be seen on threads here and news reports RA wasn't keeping rents up. There were a few people who insisted a reduced RA would mean rents would reduced. Look about it hasn't happened but people are suffering.
So why didn't it happen?

That's quite a bold & general statment to make with no supporting evidence at all (internet threads & vested interest media outlets don't count).

Where is your evidence & data? You have none so why bother starting a thread without it :rolleyes::rolleyes::rolleyes: