The continuing exodus of small landlords from the rental market as reported by the Residential Tenancies Board (RTB) is an entirely predictable consequence of Government policy in this area – most recently the introduction of six-year tenancies from next March.
The six-year rule will only apply to new tenancies but is the latest in a series of measures aimed at boosting tenant rights and controlling the increase in rents, including the extension of rent controls to cover the entire State.
There is an obvious connection between these policies and the one third increase in the number of landlords serving eviction notices over the last 12 months, the vast majority of whom cited the intention to sell their property as the reason, according to the latest data from the board. A minority wanted it for use by a family member.
Minister for Housing James Browne seems relatively sanguine about the development. He most likely views the exodus of private landlords as the lesser of two evils – the bigger one being the relentless upward pressure on rents over the last 10 years, as the supply of housing failed to match demand.
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Research from the ESRI shows that while rents remain high the rate of increase is moderating. The Minister will also be aware that the most likely buyers of these properties will be private individuals, while many sellers will be so called “accidental landlords”, such as those who inherited property, with no long-term ambitions to remain in the sector. And in some cases, the buyers may be local authorities, who will use the property for social housing of some kind.
Even allowing for such mitigating factors the fact remains that the housing shortage could last another 15 years, according to the Department of Finance, and a functioning rental market requires landlords.
The question for policy-makers is how many and of what type. To date the focus has been very heavily on facilitating large build-to-let developments funded by institutional money. There are obvious attractions to this approach in terms of scale and delivery and the number of landlords with 100-plus tenancies is steadily increasing, according to the RTB.
However, the typical rents charged in these developments only makes them affordable to those on high incomes. State-supported cost rental properties can help, but bringing them on stream takes time.
The Minister should not lose sight of the fact that small landlords are and will remain an important cog in the machine of a functioning property market. The chronic housing shortage means there is no shortage of buyers when they sell out, but their departure has consequences for a deeply dysfunctional rental market.
