Proposal for landlord tax break in budget

Flinty997

https://www.boards.ie/discussion/comment/120417297#Comment_120417297

What do you think happens....

https://www.irishtimes.com/ireland/social-affairs/2022/08/30/local-authorities-owed-105m-in-unpaid-rent/

Ray Palmer

https://www.boards.ie/discussion/comment/120417241#Comment_120417241

I thought it was quite clear I was speaking from a general view and asking you to explain how at least in spirit an agreement was breached? You are the expert not me.

elperello

https://www.boards.ie/discussion/comment/120417475#Comment_120417475

Sorry for any confusion but I thought you were suggesting that the State breached a contract during the property crash.

If you could link to the matter you were referring to I could give an opinion.

If you got the impression that I'm an expert I'd like to put you right by pointing out that I'm not and never claimed to be.

spaceHopper

All of this is nice but it’s going nowhere -it’s not tax at all.

There is no getting away from it, renting from a private LL should only ever be done because it’s convenient and not a necessity. It should be something you do in your 20’s then you buy and settle down. There should be plentiful social housing for those that need it.  Private ownership should be attainable.

Instead the government have sold nearly all their social housing and not replaced it. They have passed laws to require private LL’s to provide social housing.  They have heaped more laws and passed bad ad hock laws because of position pressure, for example if it wasn’t for opposition pressure there never would have been an eviction ban.  

Landlords aren’t selling because of tax. It’s  a good time to sell, prices are high but so are rent returns. What’s happened is the risk v reward has swung to far towards risk

If you have a “won’t pay tenant” then it takes 2 to 3 years to get them out. – They are hurting ordinary tenants and shouldn’t be tolerated.

When a tenant moves you can’t adjust the rent to the market rate. If you allowed the rent to fall behind then you a badly stung.

If they introduce indefinite tenancies the value of rental property is badly affected. No investor will want to buy it and a owner occupier is precluded form buying it.  Even if they were allowed to take back the property no bank will lend without vacant possession so it would be cash only buyers

It has become toxic, look at the threads here about going traveling and renting out their house, it’s always a NO too much risk.

https://www.boards.ie/discussion/2058289992/considering-renting-for-6-8-months-while-working-abroad-ukrainian-refugees-easiest-option/p1

Also if you have an indefinite tenancy you will more or less be locked into it. If your circumstances change for example getting married having kids, well nobody is going to move out of their existing indefinite tenancy so there will be no recirculation of property. 

Any LL’s exiting or dying won’t be replaced, you can’t get a commercial mortgage if the bank can never repossess  the property in the event of default. We are in for a frozen market.

There is an easy way around an indefinite tenancy. Slavery is banned – the LL says they are stopping renting but not selling – just stopping renting.  Keep it empty for 18 months then sell it. By the time is changed hands two years will have lapped and it can be re-rented at the market rate.

This government have no clue and I don’t think SF of SD’s are any better

Take this https://www.irishexaminer.com/news/politics/arid-41104216.html

On paper a good idea, except now in the short term we will see fewer houses built. Let's' say you are a developer about to build 300 houses. Let's say this was announced 3 months before you are about to start, would you go back to planning looking for 360 houses or 20% more profit from the same piece of land? That’s going to delay things by a year but so what.

Flinty997

Exactly what he said. ^

dennis72

It's regulation that's causing mass exit

Media won't touch this reason, but its reality

The deliberate complicated long notice termination/rent increase is not matched any where else in the world gives us the present supply problem

Ray Palmer

https://www.boards.ie/discussion/comment/120417598#Comment_120417598

Not sure what link you want? It is well known that hap was reduced. It is a fact HAP was reduced when there was a price crash on property if you are not aware of it while talking about agreements that would be your issue.

They did tell HAP tenants to break leases and get reduced rent. You claimed the state wouldn't/couldn't break agreements. I am pointing out the de facto did. You don't get to form an opinion based on somebody spoon feeding you reality. Your claim is the couldn't do it when they did in spirit while claiming superior knowledge on the subject.

The government have certainly moved the goal posts on landlords with no place for discussion with the providers. At best you are naive but very sure you are right on a subject.

elperello

OK I give up.

Apparently giving financial security to landlords and residential security to tenants for five years is a bad idea.

I'll leave you with a reminder that a legally enforceable contract does what it says on the tin.

PeadarCo

https://www.boards.ie/discussion/comment/120425349#Comment_120425349

At the moment a 5 year residential lease contract is unenforceable in Ireland. You cannot contract away rights you are entitled to under the law. So at the moment after 6 months a tenant can only be evicted under limited circumstances. That fact a tenant agreed to leave after 4/5/6 etc years in a contract is irrelevant. The law overrides the contract and that is not one of the reasons landlords can currently evict. The issue is with current regulations is that neither side have any certainty. From a tenants point of view they can be evicted at any time if a landlord chooses to sell. However from a landlords perspective its very hard for them to regain control of their property and that's before the whole mess with the eviction ban. The current laws are unsatisfactory for both landlords and tenants.

Personally I'd agree we probably should move to a situation where we have legally enforceable fixed term residential leases similar to the commercial market. But that would require a sea change on how renting is viewed in Ireland on all sides.

In any industry you have political and regulatory risk. Both are very high in the Irish rental market. Tax breaks for landlords resolve none of this. Tax breaks are an easy option compared to reforming rental regulations.

elperello

https://www.boards.ie/discussion/comment/120425414#Comment_120425414

The contract I proposed was between the landlord and the State ie. local authority.

PeadarCo

https://www.boards.ie/discussion/comment/120425487#Comment_120425487

The issue is will the State evict the tenants after 5 years? The state is renting to tenants effectively subletting. Remember a tenants right are not going to disappear because the state/CoCo are involved. So what law governs the contract? Is it commercial leasing regulations or residential or a mix. You would need a solicitor to review every aspect of the deal.

It still doesn't get rid of the political and regulatory risk that is pushing landlords out of the residential market. In fact renting to the local authority may just increase them even further.

elperello

https://www.boards.ie/discussion/comment/120425531#Comment_120425531

I agree it's far from a panacea for all the ills of the rental market but it would buy time to address primarily the supply issue but also the other aspects you mention.

People in emergency accommodation don't acquire tenancy rights either.

Families who have been made homeless would be better off in house than in a hotel room given that the rights would be the same.

PeadarCo

https://www.boards.ie/discussion/comment/120425584#Comment_120425584

It doesn't do anything. There are landlords that rent via the council as it is so it's not exactly a new idea. It still hasn't stopped some of selling up and leaving.

The problem is renting a house is a residential tenancy and everything that comes with that. You would need to pass laws that remove tenant rights which would not be very popular. It would create a 2 tier rental market. One group would have full tenant rights and anyone living in houses considered to be "emergency accommodation" would have virtually no rights. The current government would be highly unlikely to do it, an alternative coalition even less so. The reason people don't get tenancy rights when renting hotel rooms is because they are considered guests and a separate set of laws govern that situation.

It's grand putting forward ideas but you need to have a basic understanding of why we are in the present situation. One it's a lack of supply (caused by a whole host of different reasons) and two because of a lack of supply landlords have effectively been demonised. As a result large numbers of smaller landlords are selling. Any solution whether short or long term needs to factor in these issues.

Giving landlords more money either via tax incentives or direct payments isn't going to address the regulatory and political factors pushing them out of the market.

The other elephant in the room is that landlords selling up is a good thing for a lot of people. While makes some people homeless it has also added supply for anyone in a position to buy particularly first time buyers.

Saying all that though I would agree that it should be possible to enforce fixed term tenancies. It would give certainty to both tenants and landlords particularly landlords who only want to rent a house for a short period of time(ie working abroad etc)

Grumpypants

The problem is the only way landlords make money is to sell the property. So when the market is high they will look to realise their investment. When a recession is on the horizon they will sell. When they get out of negative equity they sell.

Unless you are mortgage free there is no way to make money from renting out a home. So there is no incentive to stay and provide the service. But lots of incentive to sell.

DubCount

On the question of Landlords needing a tax incentive, there is an element in this thread which follows a line that rental income should be taxed the same as any other income, and in large part I have always agreed with that view. However, I was discussing this with some friends this week and the following example was given to me which makes me reconsider this.

Take a scenario where a Landlord is in an RPZ with monthly rent of 1200 per month. Their tenant leaves and and they are considering reletting. They would still be restricted by RPZ and would re-let at 1200 per month. Lets say they have no cost and own the property outright. They would pay about 600 per month in tax, and keep about 600. One option would be to offer the property to house Ukranian Refugees, which would allow them to claim 800 per month tax free under the Accomodation Recognition Payment. So, 200 per month better off, no RTB as its a license agreement, and after 2 years, if the Refugees leave, the property hasnt been rented for 2 years and rent can be reset to market rate.

I am not looking for an Ireland vs Ukraine discussion, and I believe in everyone having a roof over their heads. Do we need some level of incentive in the regular rental market to level the playing field in this example.

Claw Hammer

https://www.boards.ie/discussion/comment/120444155#Comment_120444155

landlords are taxed under case 5, not the same as other business but on the basis of passive income.

DubCount

https://www.boards.ie/discussion/comment/120444183#Comment_120444183

I know that. My point is that does the existence of other tax incentives in the property market make tax breaks for Landlords necessary to avoid incentivising them out of the market. We have enough leaving to sell up as it is.

BlueSkyDreams

https://www.boards.ie/discussion/comment/120444208#Comment_120444208

No.

But we do need to incentivise them to stay.

As you say, they are leaving in high numbers, so we do need to incentivise them to stay, regardless of other property related incentives currently active.

We will need private landlords to support both the private and social rental markets for a while yet.

o1s1n

https://www.boards.ie/discussion/comment/120444155#Comment_120444155

They'd really need to do something very drastic tax wise to keep small time landlords in. As in crazy drastic, like bringing it in line with the rent a room scheme where you can claim 14k tax free.

That's the only way I'd remotely consider staying in with the uncertainty around everything at the moment. It's become such a risky business that it should reap high returns if you're willing to take the risk.

Otherwise there really is no point staying in.

maurice1

The risk vs reward isn't worth it and now seems to be a good time to get out.

The leaked PWC report in todays times: https://www.irishtimes.com/business/2023/04/09/pwc-note-advises-clients-to-sell-assets-before-sinn-fein-takes-power/

This SF bill at 2nd stage through dail about NCT for rentals will undoubtable cost €100's of euros in time and inspections. These Minimum Energy Performance from EPBD in 2030 will cost owners €1000s. Not being allowed to sell it to whom you want seems unbelievable.

Letting out property isn't viable anymore

Looking at page 14 of DAFT report from Ronan Lyons,

He cites a €337,000 (+apt cost +stamp duty tax +Solr + protection insurance , estate agent selling fees) as average priced apartment in Dublin at 5.9%

Basically Apartment rent is divided as follows, when bought for cash

33% Maintenance, LPT, Apartment Management fees, letting agents

33% Tax

33% Landlord

Therefore Landlord receives (5.9% *33%) = 1.97% net

9/4/23 Raisin Bank Ireland rate 3.16% - dirt 33% = 2.1% net

There is the argument that property will go up, just ask any purchaser in 2007.

Mentioned earlier in the thread is that it doesn't matter if Landlords leave the market, as the property is still there, except a rented 4 bed house has more people living there than a owner occupied 4 bed.

Of course if the govt wanted to stem the exodus of LL from the market, they could just repeat the 2012 CGT break they gave the riets and offer existing property owners no CGT if they stay in the market until 2028. By then SF will have built so many houses, homelessness wont exist.

I constantly hear that loads of TDs are landlords and shouldn't vote on the matter, I never hear the same people, stating that Eoin O"Brin SF is a renter and shouldn't vote either. He stated on the RTE Monday panel show last month that He rents at €1100pm yet He said his property is easily worth €2000pm.

SF also believe landlords leaving the market is not a big issue as people who are currently renting are buying the ex rentals as permanent homes.

What they have forgotten to factor in in the amount of people from overseas, people that were living at home to save a deposit, people buying a holiday home are also buying the properties reducing the housing and rental stock further.

SwimClub

https://www.boards.ie/discussion/comment/120459448#Comment_120459448

SF and landlords is just the scorpion and the frog fable playing out, everyone in the rental market will end up drowning because it's just their nature.

They just don't have the higher level executive function required not to drown everyone.

SwimClub

https://www.boards.ie/discussion/comment/120463924#Comment_120463924

"The French sociologist Jean-Claude Passeron saw the scorpion as a metaphor for Machiavellian politicians who delude themselves by their unconscious tendency to rationalize their ill-conceived plans, and thereby lead themselves and their followers to ruin."

Sounds about right.

Fkall

Tax breaks will not work - even if private landlords were treated the same as the REITS

Take the example of IRES REIT whose management is facing a shareholder revolt as the company’s share are trading at a 40% discount to fair value.

https://www.boards.ie/discussion/comment/120485176#Comment_120485176

The majority of private landlords would not have shareholders to worry about, they would only be concerned with making a reasonable return for themselves so I don't really understand the comparison you are trying to make.

Fkall

When the largest landlord in the market, who utilises the most tax efficient structure possible, can’t make a reasonable return what chance does a private landlord.

IRES shares trade at a 40% discount to the value of the properties they own.

DownByTheGarden

Does anyone really believe that any tax break (probably with 10 miles of red tape to go with it) will not be only so that landlords stay until some sort of other handcuffs are got onto them (like a permanent eviction ban) and then be just reversed with the next quarterly legislation change.

My advice. Ignore any and all carrots, they are just to distract you while they find a bigger stick. GTFO while you still can.

o1s1n

https://www.boards.ie/discussion/comment/120485495#Comment_120485495

Apples and oranges, they are two entirely different things.

If you gave small time 1 property landlords the 14k 'rent a room' tax break for an example, then this would be a huge incentive for them to stay in the market.

spaceHopper

https://www.boards.ie/discussion/comment/120485241#Comment_120485241

You aren't taking on board the problem. Small Landlords can also legally work the tax system in their favour. They are leaving because the risk in to high now, not because of tax. For them to stay they need a fast and fair way to get rid of tenants who won't pay. Social Welfare is there to help people who can't pay so it's purely won't pay. They need to know there will never be a permanent lease where if they chose to sell they can get vacant possession. They need to see the state stepping up and doing it's part and providing social housing and to stop relying on private rental to do it.

borderlinemeath

As a small landlord the only tax incentive that would have me consider staying would be a CGT amnesty if I were to stay in the market for a further 5-10 years. ie if I keep my tenants housed for a further 5 years and choose to sell I get a reduced CGT on selling, keep for 10 years a further reduction. I have 9 years left on the mortgage so if I could take a hefty CGT discount at the end of the mortgage term I'd play the long game. If you have a property that had built up good equity it could be a sweetener to some.