Limit of four percent a year on rent increases for three years announced by Minister Coveney

patslatt

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Newstalk's George Hook's show at around 1.15pm today discussed the 4% limit in Dublin and Cork. As George correctly points out, this could be a cosmetic move that substitutes for real action by the government to increase housing supply.

Of course, the rent increase limit is likely to prove unconstitutional. Some forecasts suggest rents in Dublin could rise by 20% in a year in a free market, which would suggest an unconstitutional transfer of income from landlords to tenants.

While 4% increases seem generous in the present low inflation, soon the opposition parties will bid for tenant votes by demanding lower increases.

A nasty aspect of these rent controls is that shortages of housing will occur immediately if the 4% increase is less than what a free market increase would be as seems likely. People who might use less space, be forced to share or move back to their parents' home will be under less financial pressure to do so. Landlords who are about to invest in rental properties will be put off by the undermining of the free rental market. A chronic shortage could result and at the very least the supply of desperately needed rental properties will be slower to materialise.

Key money is likely to become a feature of renting as tenants desperate for a place to live pay large cash sums to landlords for the keys.

Minister Coveney should focus on his sensible measures for increasing housing supply and stop meddling with free market prices. Those prices signal information about supply and demand all across rental markets and controlling them invariably produces poor results.


<Mod> This thread has been merged with "Will new rent controls completely halt investment in new rental properties, causing massive shortages of rental housing?" </Mod>

The new 4 percent rent control's dangerous threat to Irish rental housing supply is illustrated by Canadian experience. In the inflationary 1970s, the government of Ontario, Canada introduced rent controls, panicking rental housing investors. High rise buildings then under construction meant for rental housing were instead sold off as condominiums. From that time until rent controls were lifted in the 1990s,apparently not a single new high rise apartment building was built by private sector investors. New supply came mainly from government housing projects and from small scale private single family housing, duplexes and triplexes.

The reason the latter supplanted high rises was the freedom to rent at market rents or sell the units on vacant possession and realise their market value as private homes. In comparison, high rise apartment buildings couldn't get reasonably quick vacant possession of all apartments that would enable a profitable sale, avoiding losses of rents on units lying vacant for years.

The new Irish rent controls could produce a far worse result than Ontario's for two main reasons. First, construction of housing in Dublin, Cork and Galway has been hobbled by red tape of planning and zoning and by hostility to density and high rises, unlike the booming housing and condo construction in Toronto where 30 to 40 story apartments have mushroomed for decades.

Second, the new Irish rent controls have blocked a safety valve that would increase supply-the right to charge full market rent on vacant possession. In Ontario and the UK, rent controls realistically recognised the economic need for that safety valve as new supply was incentivised through that loophole. Another safety valve in the UK was letting landlords charge extremely high prices for metered gas heating. What motivated the Minister of Housing Coveney and his advisers to block the safety valve-abysmal economic ignorance or envy of landlords?

Irish investors and landlords are likely to cease investing in new housing and sell off existing properties if they perceive that their 4 percent rent increases will be subject to political populism and reduced, and that there is a high risk controls will become permanent. Massive shortages of rental housing and massively increased homelessness could easily happen. In a market where rents are rising rapidly,if controls suppress market rents for several years on end, removing controls would result in huge increases in rents which would be politically very unpopular. So it is likely that controls would only be removed on vacant possession, which would take many years for bargain rentals.
 
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Dedogs

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in fairness thats thick cause if lads cant make their money back in rent theres goin to be noone rentin out houses......
 

Spanner Island

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in fairness thats thick cause if lads cant make their money back in rent theres goin to be noone rentin out houses......
I think they're making plenty of money.

Too much probably.

And if they don't like it they can always sell up and do something else.
 

loaf

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Newstalk's George Hook's show at around 1.15pm today discussed the 4% limit. As George correctly points out, this could be a cosmetic move that substitutes for real action by the government to increase supply.
It will stop thousands of people being priced out of their own home. You might have issues with the policy, but I don't see how it can be described as a 'cosmetic move'.
 

Kommunist

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What landlords are doing in order to circumvent rules is just giving notices to tenants, raising rent and then finding new tenants.

The 2 year freeze did f*ck all to stop rent increases.
 

Hunter-Gatherer

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uncontrolled immigration is the reason for uncontrollable housing costs.

this attempt to over-regulate and legislate the market will just drive all the behaviours into the black-economy. Expect lawlessness, sharp practice, rule breaking, and every manner of nutty behaviour in the rented sector.

its going to look like Chicago under alcohol prohibition.

Putting a cap on prices always fails. The problem here is Supply and Demand. No wonder landlords are all selling up and investing in Farms/factories/sweetshops whatever.

This is typical kneejerk populism from a government looking back over their shoulder at the rise of FF and trying to buy the electorate coming up to the next election. This does not build one single house. This does not prevent one single newcomer arriving to our cities.

We should be having our centre cities expensive and filled with working people who send their kids to nice schools. We should have the poor living out in the poor areas. Instead we will now be giving a subsidy to the long-term unemployed knackers to occupy good housing while working people must commute from 70 miles away. Utter lefty madness.
 
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realistic1

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Newstalk's George Hook's show at around 1.15pm today discussed the 4% limit. As George correctly points out, this could be a cosmetic move that substitutes for real action by the government to increase supply.
So now all renters can expect a 4% annual increase. The Government is just a complete disgrace and are making things worse for tenants every time they interfere. Supply is the only answer, but the vested interests among Government and their friends are hindering attempts to help the supply issue.
 

realistic1

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It will stop thousands of people being priced out of their own home. You might have issues with the policy, but I don't see how it can be described as a 'cosmetic move'.
People cannot afford the current rents and if they lose their jobs they are out on their ears. This policy will still increase rents by 12% in 3 years.
 

Kommunist

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uncontrolled immigration is the reason for uncontrollable housing costs.

this attempt to over-regulate and legislate the market will just drive all the behaviours into the black-economy. Expect lawlessness, sharp practice, rule breaking, and every manner of nutty behaviour in the rented sector.

its going to look like Chicago under alcohol prohibition.
I think you should re-examine what you are writing. Immigration has nothing to do with housing, we have 223,000 empty houses, no rent regulation, collapse of construction in social housing and active boarding up of buildings which were previously available as social housing.

We have a transition into permanent rent rather than anything else which exclusively benefits landlords and also employers.
 

mr. jings

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I think his new law urging all stable doors to be firmly shut after any livestock has already fled will probably have more impact.
 

patslatt

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I think they're making plenty of money.

Too much probably.

And if they don't like it they can always sell up and do something else.
They probably are making too much money but that doesn't change the fact that controls will reduce supply of rental housing compared to the free market supply while demand for rental housing will also be greater, creating shortages. Where are people going to live?
 

Hunter-Gatherer

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. Immigration has nothing to do with housing, .
really ? how deluded is your argument. Do you think all newcomers will be living in mongolian yurts ?

 

patslatt

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It will stop thousands of people being priced out of their own home. You might have issues with the policy, but I don't see how it can be described as a 'cosmetic move'.
Controls will allocate the scarce rental housing supply inefficiently, creating shortages where no rental housing is available if control prices are less than free market rents. Existing tenants will benefit at the expense of people looking to rent.
 

Hunter-Gatherer

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control the money and we will create a monster market of ''insiders and outsiders'' whereby money is no guarantee of getting what you need. Meanwhile others sit pretty and laugh out the window at you. So the unemployed and underskilled again get a help up at the expense of the middle classes.
 

patslatt

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So now all renters can expect a 4% annual increase. The Government is just a complete disgrace and are making things worse for tenants every time they interfere. Supply is the only answer, but the vested interests among Government and their friends are hindering attempts to help the supply issue.
Some strong measures have been taken to increase supply: centralisation of technical building standards in the Dept of the Environment; fast track planning for projects of over a hundreds of houses with Bord Pleanala; identification of hundreds of sites suitable for housing which puts pressure on councils to speed up planning; and investment of hundreds of millions in housing infrastructure such as water, sewerage and roads.
 

gerhard dengler

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If properties that are being rented have a mortgage, and the ECB decides to raise interest rates in the meantime, the landlord is expected not to pass on the increase to the tenant until 2 year time frame elapses? After the two years elapses either the existing or a new tenant will get it with a rent increase to recoup the interest charge not passed on during the moritorium.
 

patslatt

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People cannot afford the current rents and if they lose their jobs they are out on their ears. This policy will still increase rents by 12% in 3 years.
But the desperately tight rental market is going to remain tighter under 4% increases-with serious shortages likely- than under free market increases which likely would be higher. Many people won't be able to come to Dublin for work.
 

realistic1

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But the desperately tight rental market is going to remain tighter under 4% increases-with serious shortages likely- than under free market increases which likely would be higher. Many people won't be able to come to Dublin for work.
You sound like Government official making excuses for non action. The Vested interest among Government and its palls is the issue, simple as! There will never be a return to civilized housing and rents while these parasites continue with their pretend actions.
 


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