Political nerves jangle over rent reforms: ‘We're out defending something without any real evidence it's going to make a difference'

Irish Times

14 hours ago

It was one of the first signals that
Micheál Martin
chose to send up after he became Taoiseach again at the start of the year.
He had repeatedly identified 'housing, housing, housing' as the new Government's chief priority before, during and after the election. Now back in power, he was ready, he said, to take tough decisions to fix the country's dysfunctional housing market
One of the first issues in his sights was the system of
rent pressure zones
(RPZs) introduced as a short-term measure in 2016 as a response to rising rents but which had become embedded into the rental market.
He promised he was prepared to take 'politically very difficult decisions'.
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The property sector had been warning that the system was strangling investment, but Ministers were wary that getting rid of the rent caps would lead rents to spike. And yet, without taking action to spur investment, the supply of new apartments would continue to dwindle.
At its heart, the trade-off was simple. Potential investors wanted to see measures that would increase their returns; but that would come at the expense of rising rents. Keeping the rent caps meant investment would go elsewhere, and supply would not increase.
Fast-forward to this week and it is not clear that the Government has managed to square this circle.
Communications confusions
It is an undeniably complex set of reforms. Among other things, the Cabinet this week agreed to create new classes of landlords, expand RPZs nationally, introduce new tenant protections, bring in new rules around resetting rents, and to vary the rate at which rents can increase.
Communicating this was always going to be a challenge – made more difficult, some in Government feel, by the partial leaking of the plan. The process of trailing the Government proposals kicked off last weekend, with all the Sunday newspapers briefed that landlords would be able to reset rents between tenancies – a key measure that landlords and investors believe will allow their investment returns to rise over time.
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It seemed as if good news for landlords was on the way. One key element of the package was held back, however: the extension of RPZs to the whole country, and the extension of protections for existing tenants.
As word leaked out after the party leaders met the budget Ministers and Minister for Housing
James Browne
to finalise matters on Monday night, the Government moved to present the long-awaited move as a package of tenant protections.
'I think landlords will be less happy,' said one senior Government figure on Monday evening. But assembling the different parts of the plan into an easily digested whole would prove difficult.
'I don't think it was very helpful that it came out the weekend before,' said one Fine Gael figure last week.
'The way it appeared in the papers caused a lot of confusion,' said another Coalition source.
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The confusion extended to those who were actually making the announcements.
The original press release announcing the changes had to be amended to clarify that not all landlords had the right to reset rents every six years – only when a tenancy had been agreed after March 1st next year.
Of course,
Sinn Féin
spotted the change and taunted the Taoiseach in the Dáil.
The Opposition drove at the question of when RPZs would be extended nationally, arguing that a delay could leave tenants vulnerable to rent hikes. They then claimed victory on Thursday when the Government indicated it would make its move in weeks. Coalition sources argue that the plan was always to move quickly on this, privately pointing out that draft legislation to do this came before Cabinet on Tuesday as well.
But from the outside, it layered further complexity and confusion on to an already-dense set of reforms.
Will it work?
When he saw the final package, one developer asked: 'Why did they bother? They would have been better off doing nothing.'
Others in the sector are scornful of the notion that this will unlock a wave of investment from the nerve centres of global finance.
'There's nobody sitting in London going: 'Okay, finally, it's time, we're cracking on,'' one said.
Dermot O'Leary, chief economist with stockbrokers Goodbody and a former member of the Housing Commission, said clarity on the RPZs was 'overdue', while the ability to reset rents which the government approved was a 'positive policy development'.
'In the context of the need to attract a large amount of international capital to finance the needed ramp-up in housing supply over the coming years, this move should be welcomed. It is not, however, a panacea for the market and for a return of supply of the scale that the country requires,' he said.
Dr Michael Byrne, a rental market and housing expert at UCD's school of social policy, said the measures were a 'radical transformation' of the rental sector.
He said the deregulation of rent controls would 'likely erase' affordability gains seen under the RPZ regime in a few years, which was 'very significant'.
However, he said the removal of no fault evictions for tenants of large landlords 'transforms' rental housing in Ireland by creating the possibility for a secure home in the sector, 'bringing us in line with western European norms'.
He said there would likely be a reduction in homelessness, increased house prices due additional investor demand,and increased competition for first-time buyers from prospective landlords lured by the returns offered by deregulation.
While tenants will benefit from increased protections next year, nobody in Government is able to say when rents will fall. Research produced by the Housing Agency to inform the policy acknowledges that average rents are likely to increase in the short term, with the hope being that increased investment will boost supply and drive down rents eventually.
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That is a hard political sell: the intended market effect of the reforms may well materialise, but the political costs of stubbornly high or increasing rents will accrue much more quickly. The costs are certain; the benefits less so. Some backbenchers fume about having to line up behind measures like this.
'I think it's absolute bollocks; I don't see the fucking point. We're out defending something without any real evidence it's going to make a difference,' says one Fine Gael TD.
Other TDs in the party are more sanguine, saying it is evidence of intent, albeit not sufficient by itself.
A party source acknowledges the tension.
'There is always a challenge between the political, which wants and needs everything right away, and the policy stuff that isn't right away,' the source said.
One Fine Gael Minister who feels the reforms should have gone further fears that the costs may outweigh the gains, and that the risk is of it becoming 'another thing in housing that draws [attention to] the fact we did not hit our targets last year, and are not going to hit them this year'.
Another senior Government figure explained that the desire to attract investors back into the market had to be tempered with the political impossibility of allowing widespread large rent increases. But, this source also said further initiatives would be unveiled in the coming weeks that would make investment more attractive.
'We scared investors out of the market with rent caps and by calling them vulture funds and all that,' the source said.
'Now we're trying to get them back.'
There is a need, another source says, for steely-mindedness – that 'any short-term political pain is preferable to long-term pain of political disruption' at the next election.
And now what?
So what next? The danger of pleasing nobody is clear. But Government figures insist that this must been seen not in isolation but as part of a series of measures. And Browne has already signalled further announcements in the weeks to come.
Several figures agreed that some form of tax incentives are likely to be proposed, though they acknowledged that the Department of Finance and its Minister remain strongly opposed to such a move. That battle will take place in Government over the coming months.
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The Land Development Agency is due to be overhauled, while Tánaiste Simon Harris also pointed to measures in the National Development Plan review next month. Another move on the cards is revisiting apartment standards – something Harris has previously signalled openness to, and that he again mentioned at the Fine Gael parliamentary party meeting this week.
Such a move has also been discussed at the Cabinet subcommittee on housing, although the exact parameters of what it might entail are a closely guarded secret.
That said, one backbench participant at the Fine Gael meeting this week said: 'That can only mean one thing – the size of the apartment', adding that they are 'basically certain' such a move will come.
Those same investors who are unmoved by the RPZ reforms believe changes to allow more homes on the same piece of land would have a genuine impact.
In addition to new measures, expect focus on metrics such as headline rents, eviction numbers and above all, apartment building – evidence of the success, or otherwise, of the Government's moves.
A lot is on the line – some say, the whole ball game. During the process, tensions between the two parties were kept to a minimum.
Fine Gael is often privately a bit impolite about the Minister for Housing, while even his friends say he has been 'finding his feet' and 'reading his way into the brief'.
But, said one party figure: 'We need [Browne] to succeed. Because if he doesn't succeed the Government doesn't succeed and then we're all screwed.'