Landlords will ‘flee the market’ if taxes aren’t reduced

Landlord Flight:

You could be forgiven for thinking that this is a message addressed to the UK government, no, it’s a stark warning issued this week to the government of the Irish Republic.

The Republic has been way ahead of the UK government, years in fact, in introducing restrictive legislation, higher taxes, strict regulations and a form of rent control in the Irish rental market. Result: not surprisingly, landlords have been leaving like rats from a sinking ship, and tenants are struggling to find suitable accommodation.

A group representing Irish auctioneers are now so concerned that they are warning the Irish government that its combination of high taxes and over-regulation in the Irish rental market are the cause of landlords leaving.

The Institute of Professional Auctioneers and Valuers (Ipav) has been citing figures produced by the Irish Residential Tenancies Board that show that there were over 1,700 fewer landlords in Ireland recorded in 2018 than there were three years ago.

Is this a lesson for the UK government? Will they take notice when introducing changes resulting from the current consultation on tenancy reform in England?

A New Deal for Renting Resetting the balance of rights and responsibilities between landlords and tenants: A consultation, can be viewed here

The Irish Ipav described their situation as the “tip of the iceberg” as they expect the number of landlords offering rental properties to the Irish public to have dropped yet again when the 2019 figures are released.

Ipav’s chief executive Pat Davitt says that high taxes, excessive regulation and irresponsible tenants were the top reasons given by landlords for leaving the market, when he told the Irish Examiner:

“This very much ties in with the experience of our members,”

“Many private landlords pay tax rates of 55% on rental income and are subject to stamp duty and capital gains taxes on sales,” he explained.

“Yet commercial landlords in the build-to-rent sector pay little or no tax.

“Investment in the private rented sector has become a deeply unattractive proposition for the private landlord, despite record high rents,” he added.

Reflecting what appears to be exactly the situation in England and Wales, Mr Davitt said that perceptions rather than reality often influence political debate and ultimately, policy. Perhaps the media can be blamed for some of this? He called on the Irish government to improve the tax situation for landlords in the forthcoming Budget.

He also issued the warning that if the situation, as far as landlords are concerned, is not improved: “We can expect more private landlords, who are the primary providers of accommodation for the less well off, to flee the market.”

In 2017, nearly one-million people (895,600) were living in rented accommodation in Ireland. The equivalent figure in England is much higher.

According to the latest available figures from the ONS for the UK:

• The number of households in the private rented sector in the UK increased from 2.8 million in 2007 to 4.5 million in 2017, an increase of 1.7 million (63%) households.
• Younger households are more likely to rent privately than older households; in 2017 those in the 25 to 34 years age group represented the largest group (35%).
• Households in the private rented sector are getting older; between 2007 and 2017, the proportion of household reference persons aged 45 to 54 increased from 11% to 16% while those aged 16 to 24 dropped from 17% to 12%.
• As at financial year ending (FYE) 2017, 62% of households in the private rented sector in the UK had spent under three years in the same accommodation and only a small proportion (4%) had been in the same residence for 20 years or longer.
• Northern Ireland has the newest private rented dwelling stock (38% built after 1980) in the UK, while Wales has the oldest (43% built pre-1919).

[Image: The Ha’penny Bridge, or the Penny Ha’penny Bridge, and officially the Liffey Bridge, is a pedestrian walkway built in 1816 over the River Liffey in Dublin, Ireland. It’s a cast iron bridge from Shropshire, England.]

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