Taxation of private landlords on rental income should be more than halved and regulations on new tenancies should allow for current market rates to apply rather than those set years ago, the Irish Property Owners Association (IPOA) has said.
Otherwise the current flood of smaller landlords leaving the rental market will continue, it has claimed.
It follows a survey by the Society of Chartered Surveyors of Ireland (SCSI), which found that 40 per cent of residential property sales in the last quarter of 2022 were landlords leaving the rental market.
IPOA chair Mary Conway described the SCSI figures as “extremely alarming, but not at all surprising”. They were, she said, the result “of unsustainable taxation and regulatory burdens”.
The SCSI research showed that landlords “are acting on their previously indicated intentions to sell their properties. In 2022 the IPOA conducted a survey, together with the Institute of Professional Auctioneers and Valuers (Ipav), which found that 57 per cent of landlords with properties in rent pressure zones (RPZs) planned to sell their property,” she said.
Landlords “have had to contend with rising maintenance and mortgage costs amid the spike in inflation, with no means to offset costs for those with properties in RPZs. All this comes on top of a high tax burden of up to 52 per cent for non-institutional landlords, compared to 0 per cent for institutional investors,” she said.
[ Wave of small landlords exit as buy-to-lets make up 40% of property sales in Q4 ]
Taxation on rental income for private landlords should be reduced to “25 per cent, including PRSI and USC”, she said, “with institutional investors similarly taxed. They should pay their fair share”. IPOA members rented properties all over the country while institutional investors rented “only to elites”, she said.
When it came to raising rents in rent pressure zones, “which now cover almost all the country”, she pointed to a case where recently “a good tenant left the property after 10 years and the rent was never raised. It meant the landlord could only raise the rent for a new tenant by 2 per cent, because of regulation,” she said.
She felt that in such cases, a landlord renting such a property should be able to do so at current market rental rates. In such cases where “rents haven’t been raised for years”, she said, “the landlord ends up subsidising the tenants”.
The increase in landlords selling properties in the final quarter of last year “underscores the negative impact of the minuscule measures introduced for the sector in Budget 2023, which has had no impact on stemming the exodus of landlords from the market. The IPOA is therefore calling on Government to act boldly, and urgently, to create the right incentives for landlords to continue renting their properties to tenants,” she said.
Ms Conway also noted that SCSI figures demonstrated “that high prices mean that buying property remains out of reach for the average first-time buyer in many areas of the country – putting paid to the idea that landlords selling up is facilitating an increase in the number of owner-occupiers.”
Welcoming indications from Taoiseach Leo Varadkar that he intended to introduce new incentives for landlords, she said “these need to be meaningful and not cosmetic, if he is to resolve the exodus of private landlords from the market”. There was “need for a fundamental rebalancing of the approach” to the issue “rather than continuing with menial tweaks to the system, which only incentivise landlords to sell up”.
A reduction of tax on private landlords’ rental income “with commensurate rise in the rate paid by institutional investors in residential property would achieve an outcome that will avert further blockages to housing supply”, she said.