Will new rules help or hinder renters?

In an era of escalating rents and tight supply, anything that protects the rights of renters is generally considered to be a good thing.

Particularly perhaps, as recent figures from the ESRI show, more and more younger people are set to rent for longer periods of their life, with one in three of those aged between 35 and 44 unlikely to own a home by the time they retire.

So, the introduction last month, of long-term tenancies, akin to those enjoyed in the rest of Europe, has been welcomed by many, as it should allow renters greater permanence.

However, it may yet disrupt renters in unforeseen ways.

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The regulations

Up until the introduction of the new regulations on June 11th, landlords were entitled to terminate a lease every six years for any reason, under what was known as a Part 4 tenancy. If the tenancy wasn’t terminated, then it would continue for another six years (further Part 4).

Now, however, this flexibility for landlords has been removed, as, once six months pass, the only way they will be able to end a tenancy will be for reasons as set out under the Residential Tenancies Act 2004.

These include: breach of obligation by the tenant; failure by the tenant to pay rent; the dwelling is no longer suitable; the landlord intends to sell the property; the landlord wants the property for a family member; the landlord intends to substantially refurbish or renovate the property; or the landlord intends to change its use.

So, once a tenant is in a property for six months or longer, the tenant has the right to remain in it for as long as they wish. This is subject to the tenant paying their rent/maintaining the property etc.

The new rules only apply to tenancies created after June 11th 2022, and so won’t apply to those in place before this date — for now. It is expected that the new regime will apply to all tenancies by 2028.

The response

Key to the effectiveness of the new rules will be how landlords respond to them. Already, a tide of regulatory and taxation burdens means that an increasing number of landlords are selling out, which means that rental stock is shifting to owner-occupier stock. Good news for homebuyers, but not so much for renters.

Recent figures from Sherry FitzGerald for example, show that in the second quarter of this year, more than a third (37 per cent) of all vendors selling second-hand homes were investors — one of the highest proportions on record since Sherry FitzGerald Research began tracking in 2003.

So one fear is that the changes might act as a further spur to the plethora of smaller landlords already leaving the market.

Margaret McCormick of the Irish Property Owners Association says the new rules will have a “significant detrimental impact” on the sector.

“I think the interference in the market, rather than improve security for tenants, will result in less accommodation for renters,” she says.

It’s not necessarily the rules in and of themselves; it’s the scale of change in the sector.

“The problem is that the legislation is changing at such a rapid rate that there’s no confidence or stability in the market,” she says. “I think that landlords are extremely worried about all of the legislation in the sector, and the consistent and constant changes.”

She suggests a better approach may have been to allow a number of different types of lettings, as opposed to a blanket unlimited approach.

“The rights of tenants are increasing all the time, and the obligations of landlords are increasing,” she says, noting that in other countries long-term leases tend to be on a self-repairing basis. But in Ireland, the landlord will be responsible for maintaining the property over the life of the lease.

Another concern is how the rules might affect tenant selection.

As McCormick notes: “Property owners need to know that they can get properties back.”

So if a landlord has the option of renting to someone in Ireland on a short-term work contract, or potentially on a longer basis, who might they choose? Or will a landlord be predisposed to renting to a group of young professionals — knowing that the tenants might keep turning over but the tenancy will stay in place, potentially for decades?

Tenants need protection; but they also need access to homes, so the implementation of the new rules must be keenly watched to ensure that they don’t have any detrimental consequences in making an already tough rental market even tougher.