The government's measures to curb the rise in house prices may worsen the student-accommodation shortage in college towns and cities, USI fears.
Last month the Government decided on what the Minister for Finance, Charlie McCreevy, described as "dramatic" measures to prevent speculative investors in property from pushing first time "owner-occupiers" out of the market. The measures followed a report on house prices by economic consultants Peter Bacon and Associates.
On Bacon's recommendation, the Government decided to curb the ability of new house purchasers to offset the interest they pay on their mortgage against the tax that would normally be due on rental income. Basically that means that new landlords will be taxed harder than was previously the case on rental money received from students and other tenants. Consequently, they'll have to charge higher rents to get the same return on their investment.
Investors will now also have to pay stamp duty when they purchase new homes; the only way to avoid paying it under the new regulations is to undertake to occupy the house for at least five years. If the property is rented during that time, the owner will become liable for stamp duty.
Building and auctioneering interests have already argued that the package will lead to the cancellation of building projects and a rapid increase in rents. While some in the accommodation field view such warnings as alarmist, USI welfare officer Noel Clarke argues that "a number of factors are coming together to make next year's accommodation prospects look very bleak for students. "The implementation of the Bacon Report is great news for first-time buyers, but bad news for students, who are perpetual renters. The fact that there is less opportunity for writing-off mortgage interest against rental income will cut down on the availability of reasonably priced rented accommodation.
"The small investor is going to be cut out of the market and it's the small investors who look to students. The bigger investors aren't interested in renting at a level that's affordable to students. "Even before there was any mention of the Bacon Report, rents were increasing right across the country on a big scale."
Clarke is also worried by the Department of Education's proposal to expand third-level intake by 14,000 over the next two years. "There were queues in Galway at the start of last year just to get a list of accommodation - many of the properties were already gone by the time some students got the list. In Dublin, people were still sleeping on couches in November. Waterford has a particular problem as well. "All three cities are going to have to cater for more students next year, yet accommodation will be scarcer and more expensive."
Clarke's solution to the problem is threefold: special tax incentives to landlords who rent to students; more on-campus accommodation; and, most controversially, a Government-sponsored housing association that would cater for students.
Students in Northern Ireland already benefit from a housing association, which provides them with rent-controlled accommodation near campuses. Clarke proposes a non-profit-making body which would get its initial capital from the Exchequer and then break even on rent income. He suggests setting rent for students in such social housing at an "affordable" level of £30 to £35 per week.
The association would also provide "safe and up to standard" accommodation for non-students on low income, particularly disabled people and young single parents.
Kieran Murphy of Threshold describes the idea of a housing association for students as "interesting" but says it's unlikely to take off given the existing demand for local-authority housing - as well as the difficulties local authorities already have in buying land for social housing. In addition, many people perceive students as "privileged".
Murphy acknowledges that the implementation of the Bacon Report "is unlikely to improve the situation" for students but urges caution in predicting the precise effects the measures will have on the availability of "affordable, good quality" accommodation.
"Reversing Bacon wouldn't reverse the problem. Landlords were already charging high rents because of the price of property, and because they knew there was a shortage of good quality accommodation."
A number of other factors are conspiring against students in the present market. For example, the fact that graduates must stay on longer in rental accommodation gives landlords ample excuse to turn their noses up at students.
Clarke sees on-campus accommodation as the most effective way of circumventing that phenomenon. "The rent is higher than we would wish on some campuses, but at least you have decent accommodation and adequate heating and lighting. Most importantly for some students, you feel safe walking home."
While USI's housing-association proposal is likely to be treated cautiously by the Government, the students may be on surer ground with their proposals on campus accommodation and on tax exemptions. The Minister of State with responsibility for housing and urban renewal, Bobby Molloy, recently told The Irish Times the Bacon-inspired measures "are not cast in stone and will be reviewed from time to time".
In the meantime, brace yourselves for one heck of a scramble for accommodation this autumn. Plus ca change . . .
