RA wasn't keeping rents high

Monty Burnz

Kosseegan wrote: »

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 the7 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.

Economics is all about marginal behaviour. If the B&B cuts its price to - say - €50, then some of the people who are planning to stay in the hotel will figure it's not worth double the price of the B&B, and will switch to stay there instead. The price cut at the B&B has reduced demand for the hotel. Simple stuff.

Kosseegan

Monty Burnz wrote: »

Economics is all about marginal behaviour. If the B&B cuts its price to - say - €50, then some of the people who are planning to stay in the hotel will figure it's not worth double the price of the B&B, and will switch to stay there instead. The price cut at the B&B has reduced demand for the hotel. Simple stuff.

There is no marginal behaviour in this situation. The hotel guests want a hotel and are willing to pay for it. Until an equivalent hotel comes along they will not switch. The guests paying €100 a night could alwyas have saved by going to the B & B.
RA tenants being priced out of an area have no effect on those who remain, because those who remain will still be in competition with each other. Once an RA tenant is priced out it may drive up rents in the area he moves to but will have no effeet on the area he has left behind.

gaius c

Meanwhile back in the real world, a definite gap is opening up between apartments and houses in west Dublin 8.

Monty Burnz

Kosseegan wrote: »

There is no marginal behaviour in this situation. The hotel guests want a hotel and are willing to pay for it. Until an equivalent hotel comes along they will not switch. The guests paying €100 a night could alwyas have saved by going to the B & B.

What? So you are saying that in the real world, real people who are looking for accommodation will pay any price to stay in a hotel, and no price for a B&B will tempt them to stay there? Total bullsh!t, I'm sorry. I've made that choice myself only a few weeks ago.

This is the problem with analogies - people seem to forget that they have to be based on some sort of reality.

Kosseegan wrote: »

RA tenants being priced out of an area have no effect on those who remain, because those who remain will still be in competition with each other. Once an RA tenant is priced out it may drive up rents in the area he moves to but will have no effeet on the area he has left behind.

Nonsense again. Total nonsense. Their movements can drive rents up, but not down? That's actually hilarious if you think about it.

jimmycrackcorm

uberalles wrote: »

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

What a country

I know also of two friends who moved houses albeit still close by with cheaper RA. Seems to be rife.

I think that's good for the country.

The_Conductor

gaius c wrote: »

Meanwhile back in the real world, a definite gap is opening up between apartments and houses in west Dublin 8.

Yes, and its a widening gap.
Its a reflection of the simple fact that be built hundreds of thousands of apartments between 1994 and 2007, but damn few houses in comparison. Most people aspire to living in a house with a garden for the kids, however for every 1 house constructed like this in any given area- there could be 20 or even 30 apartments constructed since 1994. If you want to break away from these type statistics- you have to go to comparatively rural areas- where construction of single housing units was rife.

In short- back to supply and demand. Many, many more people want to live in houses, than do in apartments- and there is a constraint in the supply of houses........

Kosseegan

Monty Burnz wrote: »

Nonsense again. Total nonsense. Their movements can drive rents up, but not down? That's actually hilarious if you think about it.

It is hilarious that you don't understand what you are talking about. A person priced out of a market no longer has any influence in it. If I cant afford a Rolls Royce and go and buy a ford, it has no effect on the price of Rolls Royce. I wasn't bidding anyway. It may have an effect on the proice of ford since in am now increasing demand.

The_Conductor

Kosseegan wrote: »

It is hilarious that you don't understand what you are talking about. A person priced out of a market no longer has any influence in it. If I cant afford a Rolls Royce and go and buy a ford, it has no effect on the price of Rolls Royce. I wasn't bidding anyway. It may have an effect on the proice of ford since in am now increasing demand.

Not a good analogy- the supply of Rollsroyces is deliberately constrained to ensure their 'luxury status' (which in an Irish context could be houses with gardens in constraint), versus Ford- who will sell you literally as many units as you desire (apartments). Your apartment price does not vary because of a uptick in demand- whereas the list price of new Rolls- actually increases as their order books are filled........... So.........?

Kosseegan

smccarrick wrote: »

Not a good analogy- the supply of Rollsroyces is deliberately constrained to ensure their 'luxury status' (which in an Irish context could be houses with gardens in constraint), versus Ford- who will sell you literally as many units as you desire (apartments). Your apartment price does not vary because of a uptick in demand- whereas the list price of new Rolls- actually increases as their order books are filled........... So.........?

So buying a ford has no reducing effect of Rolls if the purchaser was not going to buy a rolls anyway.

Thus a tenant priced out of a market segment has no influence on it when he goes for an alternative.

If there is sufficient demand a manufacturer takes the opportunity to jack up prices. No reason why fords can't do it any more than rolls. It naturally takes more individuals demanding before there would be a noticeable effect.

Monty Burnz

Kosseegan wrote: »

It is hilarious that you don't understand what you are talking about. A person priced out of a market no longer has any influence in it. If I cant afford a Rolls Royce and go and buy a ford, it has no effect on the price of Rolls Royce. I wasn't bidding anyway. It may have an effect on the proice of ford since in am now increasing demand.

What are furiously trying to ignore is that there is not two separate markets for property, one for RA tenants and one for private tenants. There is one market with properties of various standard (and price). You are determined to pretend that no substitution can take place between different properties because your whole argument will fall flat on its face if you do.

In the real world however, people routinely choose between a nice property in a more distant suburb and a grottier one in a nice area at similar prices, or choose to live with others because it's half the cost of living alone, or to move further away from a city to get a garden for the kids etc. etc..

Meanwhile, you try to pretend that your 'two market' model exists in the real world and one market never affects the other. Ridiculous.

gaius c

smccarrick wrote: »

Yes, and its a widening gap.
Its a reflection of the simple fact that be built hundreds of thousands of apartments between 1994 and 2007, but damn few houses in comparison. Most people aspire to living in a house with a garden for the kids, however for every 1 house constructed like this in any given area- there could be 20 or even 30 apartments constructed since 1994. If you want to break away from these type statistics- you have to go to comparatively rural areas- where construction of single housing units was rife.

In short- back to supply and demand. Many, many more people want to live in houses, than do in apartments- and there is a constraint in the supply of houses........

Small sample size I know but a two bed apartment for the price you would have paid for a one bed last year.
www.daft.ie/21283875

What may change that dynamic is people who would like to live in houses but can't afford to. Long way to go before any sort of market stability yet.

Kosseegan

Monty Burnz wrote: »

In the real world however, people routinely choose between a nice property in a more distant suburb and a grottier one in a nice area at similar prices, or choose to live with others because it's half the cost of living alone, or to move further away from a city to get a garden for the kids etc. etc..

What i am talking about is where people don't have a choice because they cant afford it. Once they are priced out, they are out. It is one market with may segments. If you are out of a segment of the market you can't influence it.

Monty Burnz

Kosseegan wrote: »

What i am talking about is where people don't have a choice because they cant afford it. Once they are priced out, they are out. It is one market with may segments. If you are out of a segment of the market you can't influence it.

Just wrong, wrong, wrong. If the lower end of the market experiences price falls (and you seem to accept that it can) then people who can afford the more expensive end of the market can be tempted into the cheaper property as they prefer to use the money they save on something else (savings, lifestyle, education, whatever).

Substitution occurs. Exactly the same as the person who opts for the B&B and an expensive dinner instead of a hotel and a Big Mac.

Kosseegan

Monty Burnz wrote: »

Just wrong, wrong, wrong. If the lower end of the market experiences price falls (and you seem to accept that it can) then people who can afford the more expensive end of the market can be tempted into the cheaper property as they prefer to use the money they save on something else (savings, lifestyle, education, whatever).

Substitution occurs. Exactly the same as the person who opts for the B&B and an expensive dinner instead of a hotel and a Big Mac.

That is people who can afford it affecting the market. i am talking about people who can't afford it.

Monty Burnz

Kosseegan wrote: »

That is people who can afford it affecting the market. i am talking about people who can't afford it.

You appeared to be claiming that cutting rent allowance cannot affect rents for the more expensive properties.

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.

I have demonstrated that it can.

riclad

Well in many areas of dublin ,ra is irrelevant as average rent is above ra limits.
or in estates theres few flats take take ra tenants ,only ra tenants are single mothers renting houses .

Monty Burnz

riclad wrote: »

Well in many areas of dublin ,ra is irrelevant as average rent is above ra limits.
or in estates theres few flats take take ra tenants ,only ra tenants are single mothers renting houses .

AAAAGHGHGHGHG

It's very relevant, as I have just spent half a dozen posts explaining.

Edit: actually, that's an over-reaction on my part - RA levels won't have a huge impact on rents in the nicest areas, certainly not in the short term.

Ray Palmer

So the claim is rent is going lower as demand decreases because RA reduction lower demand on the overall market.
What is being ignored is RA is not accepted by many LL before and has decreased since. Supply to RA has reduced. Demand for RA accepting property has increased. No movement on price payable as would be natural.
In theory this means more property supplied to private renters as former RA properties are now only abilible to them.

Factors ignored would be
1 people upgrading due to too many RA tenants near by
2 the limit at which property will be provided. Ie LL refusing to lower rent
3 the effect of RA reduction hasn't been demonstrated in the real world

I know the theory but by ignoring real world application the point is the theory hasn't been proved but disproved. Main reasons are ignoring all the real factors.

A very negligible difference has been made and almost none in the highly populated areas with the majority of rental property.

Monty Burnz

Ray Palmer wrote: »

So the claim is rent is going lower as demand decreases because RA reduction lower demand on the overall market.
What is being ignored is RA is not accepted by many LL before and has decreased since. Supply to RA has reduced. Demand for RA accepting property has increased. No movement on price payable as would be natural.
In theory this means more property supplied to private renters as former RA properties are now only abilible to them.

True WRT some landlords not accepting RA tenants, but enough do to ensure that we are still looking at one market. Imagine if 50% of hotels would not accept RA people booking rooms - the 50% who do accept them are plenty to ensure that a single market exists.

Ray Palmer wrote: »

Factors ignored would be
1 people upgrading due to too many RA tenants near by
2 the limit at which property will be provided. Ie LL refusing to lower rent
3 the effect of RA reduction hasn't been demonstrated in the real world

So landlords would rather leave their property empty than rent it out for lower levels of rent? I can't see that plan panning out very well, especially if they have mortgages on the property.

Also, you have yet to explain why rents have fallen for about two thirds of the population in 98% of the land area in the country according to the DAFT rental report.

Ray Palmer wrote: »

I know the theory but by ignoring real world application the point is the theory hasn't been proved but disproved. Main reasons are ignoring all the real factors.

A very negligible difference has been made and almost none in the highly populated areas with the majority of rental property.

You keep claiming it has been disproved when the data clearly shows that rents have fallen for most people in most of the country. In what sense does that disprove the theory?

murphaph

Monty Burnz wrote: »

Just wrong, wrong, wrong. If the lower end of the market experiences price falls (and you seem to accept that it can) then people who can afford the more expensive end of the market can be tempted into the cheaper property as they prefer to use the money they save on something else (savings, lifestyle, education, whatever).

Substitution occurs. Exactly the same as the person who opts for the B&B and an expensive dinner instead of a hotel and a Big Mac.

I've said it before-it's all regional and the effects are drastically different on Achill Island than in Dublin, but IMO (in Dublin) the "cheap and nasty" end of the market is now seeing increasing prices as RS recipients can't afford to compete with private paying tenants for "decent" accommodation.

I'm not arguing the merits of the policy...I am a taxpayer and understand that RS needed reducing, but the government did call it incorrectly when they thought they could "steer" rents in general by changing their rates. In certain regions they can, but generally not in Dublin as the demand for rentals is strong there still (likely not the case in your average midlands town, no disrespect).

I just know what I know "from the coal face". My tenants will not be able to afford their home/my house from January 2013 when their RS is to be suspended (if they haven't found somewhere else to live). They will not be able to afford any 2 bed property (they are strictly speaking "over accommodated" in my 3 bed place) in the area (D15, not the most expensive in Dublin by a long stretch). I honestly don't know what they will do with a kid in school nearby. Even the one beds that are in budget (775 max) do not accept RS for the most part as LLs are getting increasingly fed up with delayed payments and so on.

I'm desperately trying to get my house under the RAS scheme for my tenants' sake because I have a feckin' heart, but I'm not St. Vincent dePaul: I can't reduce to 775 when average rates for the type of property are 900 MINIMUM, and heading northwards again.

Monty Burnz

murphaph wrote: »

I've said it before-it's all regional and the effects are drastically different on Achill Island than in Dublin, but IMO (in Dublin) the "cheap and nasty" end of the market is now seeing increasing prices as RS recipients can't afford to compete with private paying tenants for "decent" accommodation.

I'm not arguing the merits of the policy...I am a taxpayer and understand that RS needed reducing, but the government did call it incorrectly when they thought they could "steer" rents in general by changing their rates. In certain regions they can, but generally not in Dublin as the demand for rentals is strong there still (likely not the case in your average midlands town, no disrespect).

I just know what I know "from the coal face". My tenants will not be able to afford their home/my house from January 2013 when their RS is to be suspended (if they haven't found somewhere else to live). They will not be able to afford any 2 bed property (they are strictly speaking "over accommodated" in my 3 bed place) in the area (D15, not the most expensive in Dublin by a long stretch). I honestly don't know what they will do with a kid in school nearby. Even the one beds that are in budget (775 max) do not accept RS for the most part as LLs are getting increasingly fed up with delayed payments and so on.

I'm desperately trying to get my house under the RAS scheme for my tenants' sake because I have a feckin' heart, but I'm not St. Vincent dePaul: I can't reduce to 775 when average rates for the type of property are 900 MINIMUM, and heading northwards again.

What happens when no RA people can rent your property anymore?

murphaph

Monty Burnz wrote: »

What happens when no RA people can rent your property anymore?

It's currently already like that already tbh. Max RS for family with 2 kids in Fingal is 840, which is already beatable on the open market (3 bed semi) and IMO rents are going up (slowly but steadily for about a year now) in my area (just from looking at daft, but it's as good an indicator as we have in the public domain).

I don't know how things will pan out. I wish I did. It's such a dynamic thing with weird side effects that aren't always predictable. You could even imagine that parents of grown up children might "subsidise" their rent, just to get them out of the house as they can't get mortgages and so on.

Milk & Honey

Monty Burnz wrote: »

What happens when no RA people can rent your property anymore?

Aren't you the one who has all the answers?

Victor

Milk & Honey wrote: »

Aren't you the one who has all the answers?

Play nice

Moderator

riclad

I F you have two kids, cant afford a house in fingal, i don,t know what you are gonna do.
there,s not many 2 bed houses on the market that accept ra.
Maybe look for apartment 2 bed for rent.
in the long term you have to stay in dublin,
if you are a family that wants to get a council house or apartment.
tHE councils outside dublin are not building many house,s .
IT seems to me as if rent allowance in that area ,has
fallen below the market rate.
I know the ra rate outside dublin is different.

i know a woman on ra , 7 years fingal, paid 1000 euro
per month.
After 7 years got a 2bed apartment .

Zamboni

Luckily I've never had to avail of the RA/social housing service.
What happens if a person/family cannot find accommodation within the RA limits (assuming no top up).
Do they either apply for social housing in the same area or do they have to move to an area where accommodation is available within the RA limit?

Ray Palmer

Monty Burnz wrote: »

True WRT some landlords not accepting RA tenants, but enough do to ensure that we are still looking at one market. Imagine if 50% of hotels would not accept RA people booking rooms - the 50% who do accept them are plenty to ensure that a single market exists. :

Except when you say some the reality is most won't take RA. So the use of 50% in your example is exaggerated and misleading
[Quote=Monty Burnz;81768247
So landlords would rather leave their property empty than rent it out for lower levels of rent? I can't see that plan panning out very well, especially if they have mortgages on the property.[/Quote]
You keep on proclaiming simple economics and supply a demand yet don't seem to actually understand it. Fundamental to supply and demand is where supply dries up as people are unwilling to provide at certain price points. LL will sell, move in, not reduce rent etc. they are not tied in to provide the market for ever.

Also, you have yet to explain why rents have fallen for about two thirds of the population in 98% of the land area in the country according to the DAFT rental report.

Monty Burnz wrote: »

You keep claiming it has been disproved when the data clearly shows that rents have fallen for most people in most of the country. In what sense does that disprove the theory?

So you are claiming rents have reduced because of RA. No other influences are around? Started when RA was reduced? No it didn't and all existing factors remain. A negligible effect from RA no where near the impact proponents suggested thus disproving the effect.

Monty Burnz

Ray Palmer wrote: »

Except when you say some the reality is most won't take RA. So the use of 50% in your example is exaggerated and misleading

I'll accept your contention if you can prove that most landlords will not accept rent allowance. Are there statistics somewhere that you are basing this claim on?

Ray Palmer wrote: »

You keep on proclaiming simple economics and supply a demand yet don't seem to actually understand it. Fundamental to supply and demand is where supply dries up as people are unwilling to provide at certain price points. LL will sell, move in, not reduce rent etc. they are not tied in to provide the market for ever.

Wrong. If they sell to another landlord, supply of rental property remains the same. If they sell to someone who is renting, they reduce rental demand. If they sell to an owner occupier, the owner occupier sells or rents their property to someone else. The supply remains the same.

The only circumstance where supply will be reduced is if people leave houses empty. Your contention is that if rents fall, then landlords would rather receive no rent at all rather than slightly less rent. I doubt it.

Ray Palmer wrote: »

So you are claiming rents have reduced because of RA. No other influences are around? Started when RA was reduced? No it didn't and all existing factors remain. A negligible effect from RA no where near the impact proponents suggested thus disproving the effect.

I'm saying that the facts show that rent has fallen broadly across the country, which rather flies in the face of your claim that RA played no role in maintaining high levels of rent.

riclad

OF course rents are going down, people are emigrating or leaving country areas to find jobs.
Unemployment is going up, there s billions being paid
by government to pay bondholders, debts of anglo bank etc
The economy is getting smaller.
Landlords in fingal use ,d to go for single mother ra
tenants in fingal,
THEY were getting 900 plus per month,for 3 or 4 years.
IF RA LIMIT is reduced to 750 ,
they might just stop accepting
ra clients in that area.
ra tenants may move to areas where they can
get acccomodation under ra limit.
Maybe theres 2bed apartments being rented under
ra scheme, i do,nt know.
OF course dublin rents are roughly, twice rents in rural areas .

Kosseegan

Monty Burnz wrote: »

What happens when no RA people can rent your property anymore?

They go to the margins.