Media: Rate of rent increases slows

The_Conductor

RTE are reporting on an RTB report that highlights that average rent increases slowed to 6,4% per annum to the end of Q4 2017.

Its still a fairly hefty increase- but its a definite slowdown in the market- probably a reflection of the simple fact- there is a limit to what is sustainable.
Of interest to tenants and landlords- how does this affect RPZs going forward- technically- a lot of the RPZs qualify to have their status lifted- a trend that is only going to accelerate.

How would people feel about the repeal of RPZs- and what would the effect be on the market- given we are at the limits of people's ability to pay.
?

It was inevitable that the market could only support increases up to a certain level- and it would appear we're near or at that level. The whole concept of RPZs was to tame rent increases- however, it would appear that independent of the RPZs- the market has tamed itself (people can't pay once something becomes unaffordable- and the market is unaffordable, period).

I would put it out there- that the norm might now be a plateau- followed by small falls- until a new equilibrium is reached (cognisant of the fact that we are beginning to deliver more volume to the market as a whole).

TanyGray

How has RPZ effected the number of properties to rent?
I know I would rent my property out again only if I was allowed to bring it up to market rent and the legislation wasn't so heavily against me.
Until then it's short term or nothing. I'm pretty sure I'm not alone.

The_Conductor

TanyGray wrote: »

How has RPZ effected the number of properties to rent?
I know I would rent my property out again only if I was allowed to bring it up to market rent and the legislation wasn't so heavily against me.
Until then it's short term or nothing. I'm pretty sure I'm not alone.

The average number of units a registered landlord has- is creeping up- suggesting small scale landlords are leaving the sector- while housing associations etc- are being captured in the stats for the first time.

We're going down the road of small scale landlords abandoning the sector- as the regulatory environment is just so toxic- the rent levels may be ridiculous- but the risk involved is just immeasurable- you'd be nuts not to consider your options.

Absolute number of available units- is continuing to increase- however, its less than the combined number of units the REITs alone brought to the market in 2017 (they're still compiling the stats).

DubCount

The media love reporting these stats. Rents increase, but rate of increase slows. They can pitch it any way they like and wheel out a range of politicians and homeless charities who will also look to spin it in their own direction. The problem hasn't changed - there is still a lack of supply of rental properties, so rental properties have become too expensive, and government policy to push social housing into the private rental sector only makes the problem worse. Everyone likes talking about the problem - nothing is ever done to fix it - so we will be reading the same headlines this time next year - more rental inflation and less properties to rent.

RPZ's will eventually be withdrawn. I think we are many years away from that happening. I cant see an end to RPZ in 5 years let alone 1 or 2.
When the RTB finally issues its annual report for 2017 showing landlords leaving the market, we will have the usual rabble crying "down with this sort of thing", and nothing will actually happen to make a real difference to rental supply.

The_Conductor

Once the rate of increase- is below the 4% per annum- though- which is the allowable rate of increase under the Act- its obvious that the RPZ is superfluous and no longer necessary- and we're falling towards the 4% in Dublin City now (county is up around the 7% mark).......... The whole concept of the RPZs is that they were to be temporary measures to tame price rises. As such- they failed- however, affordability itself- has, despite scarcity, proved to be the determining factor.

DubCount

The_Conductor wrote: »

Once the rate of increase- is below the 4% per annum- though- which is the allowable rate of increase under the Act- its obvious that the RPZ is superfluous and no longer necessary- and we're falling towards the 4% in Dublin City now (county is up around the 7% mark).......... The whole concept of the RPZs is that they were to be temporary measures to tame price rises. As such- they failed- however, affordability itself- has, despite scarcity, proved to be the determining factor.

Withdrawing the RPZs would lead to a wave of increases for sitting tenants. I can't see our beloved politicians getting rid of them - even if rental inflation does drop below 4%.

I agree though that the break on inflation is ultimately market affordability. Well that or rental supply and there is nothing going to happen to improve that.

The_Conductor

DubCount wrote: »

Withdrawing the RPZs would lead to a wave of increases for sitting tenants. I can't see our beloved politicians getting rid of them - even if rental inflation does drop below 4%.

I agree though that the break on inflation is ultimately market affordability. Well that or rental supply and there is nothing going to happen to improve that.

Once the link between a sitting tenant and a future tenant was broken- there wouldn't be any imperative to increase the rent for a sitting tenant.

Fian

The_Conductor wrote: »

Once the rate of increase- is below the 4% per annum- though- which is the allowable rate of increase under the Act- its obvious that the RPZ is superfluous and no longer necessary- and we're falling towards the 4% in Dublin City now (county is up around the 7% mark).......... The whole concept of the RPZs is that they were to be temporary measures to tame price rises. As such- they failed- however, affordability itself- has, despite scarcity, proved to be the determining factor.

I would imagine that if the RPZ brakes were released the average rate of increase would rapidly climb back above 4% per annum. The rents most under market price are being held back by the RPZ the most. Those who are at market level might reach a point where they cannot increase rent a full 4% annually because of cheaper properties caught at artificially low price controlled prices. Allow those to revert to market levels and the whole system would jump in price again.

the RPZs will be "needed" until supply is available to meet the demand. Supply is constrained by the imposition of RPZs. It's a vicious circle/feedback loop - the existence of RPZs will prevent the supply of rental property recovering to the point where RPZs are no longer needed. Meanwhile rents will continue to fall artificially further and further behind what the market will bear, making the removal of RPZs likely to give rise to a significant price shock. Difficult to see them being removed.

Browney7

Fian wrote: »

I would imagine that if the RPZ brakes were released the average rate of increase would rapidly climb back above 4% per annum. The rents most under market price are being held back by the RPZ the most. Those who are at market level might reach a point where they cannot increase rent a full 4% annually because of cheaper properties caught at artificially low price controlled prices. Allow those to revert to market levels and the whole system would jump in price again.

the RPZs will be "needed" until supply is available to meet the demand. Supply is constrained by the imposition of RPZs. It's a vicious circle/feedback loop - the existence of RPZs will prevent the supply of rental property recovering to the point where RPZs are no longer needed. Meanwhile rents will continue to fall artificially further and further behind what the market will bear, making the removal of RPZs likely to give rise to a significant price shock. Difficult to see them being removed.

What is the reference point for the RPZs? Is it four straight quarters where the increase exceeds the national average for new tenancies registered with the RTB?

Highly unlikely the RPZs will be rescinded for the simple reason that there would be short term chaos - people getting 40% increases all descending on cheaper areas/clambering for whatever is available creating an ungodly mess.

As a side point, new rental properties can be set at "market" rates so the RPZ should be less of an issue (granted the legislatory uncertainty created by constant tinkering with the RTA should be a concern for any investor).

One thing's for sure, the supply isn't coming on stream for a multitude of reasons - I read recently that construction stopped on some developments stopped to allow a redesign of plans to cater for reduced minimum apartment sizes).

Eric Cartman

The_Conductor wrote: »

The average number of units a registered landlord has- is creeping up- suggesting small scale landlords are leaving the sector- while housing associations etc- are being captured in the stats for the first time.

We're going down the road of small scale landlords abandoning the sector- as the regulatory environment is just so toxic- the rent levels may be ridiculous- but the risk involved is just immeasurable- you'd be nuts not to consider your options.

Absolute number of available units- is continuing to increase- however, its less than the combined number of units the REITs alone brought to the market in 2017 (they're still compiling the stats).

I think smaller landlords are leaving, or turning to Airbnb so you have those units 'leaving' the stats while the units owned by REITs increase but it looks like a smaller number shoring up the first one.

The_Conductor

Eric Cartman wrote: »

I think smaller landlords are leaving, or turning to Airbnb so you have those units 'leaving' the stats while the units owned by REITs increase but it looks like a smaller number shoring up the first one.

I'd 100% buy that explanation.
One way or the other- you're going to get fewer one off houses with gardens etc- in both urban and rural areas to let- and a much larger number of apartments- often all belonging to a single landlord, in urban locations. If people imagine things are going to be better with a large-scale landlord- well, the grass isn't necessarily greener on the other side.

Eric Cartman

The_Conductor wrote: »

I'd 100% buy that explanation.
One way or the other- you're going to get fewer one off houses with gardens etc- in both urban and rural areas to let- and a much larger number of apartments- often all belonging to a single landlord, in urban locations. If people imagine things are going to be better with a large-scale landlord- well, the grass isn't necessarily greener on the other side.

It means that leaky sink gets fixed the same day, but a bounced direct debit and your carpark fob and roof terrace access don't work by midnight and theres a guy calling at the door with a fully legal notice in hand. Not great news for the 'ahh sure tomorrow will do' nation.

The_Conductor

Eric Cartman wrote: »

It means that leaky sink gets fixed the same day, but a bounced direct debit and your carpark fob and roof terrace access don't work by midnight and theres a guy calling at the door with a fully legal notice in hand. Not great news for the 'ahh sure tomorrow will do' nation.

Sounds about right.

Perhaps in ten years time- after this sort of mayhem has become the new normal- some people will look back on the good old days- where they could live in a nice house in the suburbs, pay their rent on time, not have a rent rise in the 9 years that they're tenants, get a Christmas card and a fruit basket from the landlord at Christmas- and no other contact whatsoever- left to live their lives in peace.

As the old Yiddish curse goes- 'may you get what you wish for'.......... (be careful what you wish for, you just might get it............)

Eric Cartman

The_Conductor wrote: »

Sounds about right.

Perhaps in ten years time- after this sort of mayhem has become the new normal- some people will look back on the good old days- where they could live in a nice house in the suburbs, pay their rent on time, not have a rent rise in the 9 years that they're tenants, get a Christmas card and a fruit basket from the landlord at Christmas- and no other contact whatsoever- left to live their lives in peace.

As the old Yiddish curse goes- 'may you get what you wish for'.......... (be careful what you wish for, you just might get it............)

I just can't wait to see what all the "scumbag landlord / slumlord / greedy penny pinchers etc..." posting crew do when those types actually turn up....

The Student

The_Conductor wrote: »

Sounds about right.

Perhaps in ten years time- after this sort of mayhem has become the new normal- some people will look back on the good old days- where they could live in a nice house in the suburbs, pay their rent on time, not have a rent rise in the 9 years that they're tenants, get a Christmas card and a fruit basket from the landlord at Christmas- and no other contact whatsoever- left to live their lives in peace.

As the old Yiddish curse goes- 'may you get what you wish for'.......... (be careful what you wish for, you just might get it............)

As a landlord the above is my current approach. However with big/institutional landlords it is a different ball game completely.

Lets see how people like dealing with institutional landlords. I have spoken to a number of colleagues who have institutional landlords and have had nothing but problems with them trying to get something fixed/replaced. They are sorry they left the small landlords.

dudara

The_Conductor wrote: »

Once the link between a sitting tenant and a future tenant was broken- there wouldn't be any imperative to increase the rent for a sitting tenant.

I can see your argument, but I think you're discounting the fact that some landlords will always want to get the maximum that they can.

Right now, I think the RPZs are having the desired effect and they are curtailing rent increases. I don't think that affordability having exceeded ability is the limiting factor yet. If RPZs were to be removed, I think we would see an awful lot of increases as landlords moved to make up their losses and hence I think we would see an awful lot of debt, overholding and defaulting as people simply wouldn't be able to afford or keep up with the increases.

Michael D Not Higgins

DubCount wrote: »

RPZ's will eventually be withdrawn. I think we are many years away from that happening. I cant see an end to RPZ in 5 years let alone 1 or 2.

The RPZ is automatically withdrawn after the 3 years according to the legislation. The temporary nature is intended to not run afoul of the constitution. The Housing Agency would have to recommend an area to become an RPZ again by use of the criteria in the legislation: 4 of the last 6 quarters would have to have an annual increase of over 7% and the average rent has to be over the national average.

Currently Dublin, for example, doesn't satisfy this criteria. I doubt the Minister will use his powers to remove any RPZ in operation but when the RPZ is automatically removed, there will be a lag between the Housing Agency being able to get the report together and suggest another RPZ or possibly a lag because the area not qualifying as above.

Guaranteed there will be mass letters of rent review at the end of December 2019 with huge rent increases.

GGTrek

Michael D Not Higgins wrote: »

DubCount wrote: »

RPZ's will eventually be withdrawn.  I think we are many years away from that happening.  I cant see an end to RPZ in 5 years let alone 1 or 2.

The RPZ is automatically withdrawn after the 3 years according to the legislation. The temporary nature is intended to not run afoul of the constitution. The Housing Agency would have to recommend an area to become an RPZ again by use of the criteria in the legislation: 4 of the last 6 quarters would have to have an annual increase of over 7% and the average rent has to be over the national average.

Currently Dublin, for example, doesn't satisfy this criteria. I doubt the Minister will use his powers to remove any RPZ in operation but when the RPZ is automatically removed, there will be a lag between the Housing Agency being able to get the report together and suggest another RPZ or possibly a lag because the area not qualifying as above.

Guaranteed there will be mass letters of rent review at the end of December 2019 with huge rent increases.

In my opinion this is not what is going to happen. I haven't got time lately to prepare very detailed posts (too busy with business), but the govvie is preparing a new legislative package for this year that (among many other bad news for landlords) will make sure that no RPZ will expire unless the minister in his subjective power will decide so, which will probably be never! This is what happens with rent controls: they are just a vote winner at very little cost to the politician and the state!

They have been removed in Cambridge/MA through a referendum, in the UK by Thatcher after 30 years of socialist policies had destroyed the UK private rental market in the early 80s on a strong conservative agenda (which is unlikely to happen now in Ireland). Again in Ireland they were only removed in the early 80s by a serious legal challenge to the Supreme Court and the govvie opposed it all the way to the supreme court twice! I still believe that once they are renewed, the only solution will be the legal challenge as in the 80s.

The Student

GGTrek wrote: »

In my opinion this is not what is going to happen. I haven't got time lately to prepare very detailed posts (too busy with business), but the govvie is preparing a new legislative package for this year that (among many other bad news for landlords) will make sure that no RPZ will expire unless the minister in his subjective power will decide so, which will probably be never! This is what happens with rent controls: they are just a vote winner at very little cost to the politician and the state!

They have been removed in Cambridge/MA through a referendum, in the UK by Thatcher after 30 years of socialist policies had destroyed the UK private rental market in the early 80s on a strong conservative agenda (which is unlikely to happen now in Ireland). Again in Ireland they were only removed in the early 80s by a serious legal challenge to the Supreme Court and the govvie opposed it all the way to the supreme court twice! I still believe that once they are renewed, the only solution will be the legal challenge as in the 80s.

I would have to agree with you on this. Expect more landlords to leave the market.

burkey2k0

The_Conductor wrote: »

Once the rate of increase- is below the 4% per annum- though- which is the allowable rate of increase under the Act- its obvious that the RPZ is superfluous and no longer necessary- and we're falling towards the 4% in Dublin City now (county is up around the 7% mark).......... The whole concept of the RPZs is that they were to be temporary measures to tame price rises. As such- they failed- however, affordability itself- has, despite scarcity, proved to be the determining factor.

In my own case The RPZ legislation was the only reason I had a 6% increase in rent this year rather than a 34% increase as was requested from my landlord. And that took me taking them all the way to a PRTB adjudication, so I wouldn't say it failed personally. And I'm sure I''m not alone.

I'm also a sitting tenant for 6 years with zero requests to the landlord in that time, so loyalty to a 'good tenant' is not something that is factored in by the new multi-unit landlords in the sector (My landlord being one of the biggest REITs in the country that are supposedly 'good' for the sector). However as an aside, I do know for a fact that they are getting away with ignoring the legislation anyway, so in that way it is indeed failing.

The mode of implementation of the legislation, maths and stats of it however means it will be quite a while until it falls below 4%. So long live the RPZs, and I say that being a landlord also myself.

Michael D Not Higgins

GGTrek wrote: »

In my opinion this is not what is going to happen. I haven't got time lately to prepare very detailed posts (too busy with business), but the govvie is preparing a new legislative package for this year that (among many other bad news for landlords) will make sure that no RPZ will expire unless the minister in his subjective power will decide so, which will probably be never! This is what happens with rent controls: they are just a vote winner at very little cost to the politician and the state!

They have been removed in Cambridge/MA through a referendum, in the UK by Thatcher after 30 years of socialist policies had destroyed the UK private rental market in the early 80s on a strong conservative agenda (which is unlikely to happen now in Ireland). Again in Ireland they were only removed in the early 80s by a serious legal challenge to the Supreme Court and the govvie opposed it all the way to the supreme court twice! I still believe that once they are renewed, the only solution will be the legal challenge as in the 80s.

That's possible alright but if that was the plan, why not bring it in like that in the first place? I thought the reasoning was they didn't want to write unconstitutional laws again and the time limit made it more palatable and less likely to challenge.

Browney7

Michael D Not Higgins wrote: »

That's possible alright but if that was the plan, why not bring it in like that in the first place? I thought the reasoning was they didn't want to write unconstitutional laws again and the time limit made it more palatable and less likely to challenge.

Public servant: "Minister, would you like to rectify the problem at hand or place it in a can and kick it sufficiently down the road for some other schmuck to deal with in a few years"

Minister :"get me my kicking boots"

Michael D Not Higgins

Browney7 wrote: »

Public servant: "Minister, would you like to rectify the problem at hand or place it in a can and kick it sufficiently down the road for some other schmuck to deal with in a few years"

Minister :"get me my kicking boots"

Both do the same thing of kicking it down the road. The one that was implemented means they have to sort it again in 2019/20.