SECURITY OF TENURE IN THE PRIVATE RENTED SECTOR IN THE REPUBLIC OF IRELAND

Outline

History & evolution of security of tenure in Ireland

Definitions & typologies Phases of rent control New initiatives Emerging issues and concerns

Tenure in Republic of Ireland

Source: CSO, Census of Population (various years)

1961 1971 1981 1991 2002 2006 20110

10

20

30

40

50

60

70

80

90

Percentage Distribution of Housing Stock By Tenure, 1961 - 2011

Owner Occupation 69.7%

Private Rented 18.5%

Social Rented 8.7%

Tenure in Ireland

Tenure  2006 % 2011 %

Owner Occupied 1,091,945 74.7 1,149,924 69.7

Social Housing 155,989 10.7 143,975 8.7

Private Rented 145,317 9.9 305,377 18.5

Other 69,045 4.7 50,132 3.0

Total 1,462,296 100 1,649,408 100

Definitions of security of tenure One of the ‘most critical issues’ affecting the

landlord/tenant relationship (Kemp, 2005) ‘Ensuring continued occupation of a dwelling once

access has been gained’ and ‘the security the occupant is afforded from eviction’ (O’Brien and Dillon, 1982)

‘The extent to which an interest in, or title to, property is certain or guaranteed’ (Australian National Housing Strategy, 1992)

‘Legal arrangements which offer tenants indefinite tenure of their housing, subject to proven breaches of their lease agreement that provide grounds for termination action by the landlord’ (Fitzpatrick and Pawson, 2011)

Security of tenure and rent control

Balancing of landlord and tenant interests (Kemp, 2004)

Security of tenure linked (and confused) with rent control

Security of tenure system is ‘to protect the tenant from unjustified eviction’ while rent control system ‘prevents the landlord from imposing exorbitant rent increases as a condition of renewing or continuing the tenancy and so from being able to effectively evict tenants’ ([Australian] Residential Tenancies Project, 1975)

Types of rent control

Three phases since beginning of 20th century (O’Sullivan and De Decker, 2007) 1st generation – rent freezes (WWI and WWII) 2nd generation – annual increases linked to

costs and profitability for landlords (1970s) 3rd generation – regulation within tenancy

rather than between tenancies (1990s) 2nd and 3rd generation influenced by

introduction of rent allowances and housing benefits (Turner and Elsinga, 2005)

Phase 1 – Tenant Favourable Protections (1914-1982)

Rent restricted to standard rent in 1914 Increases limited to % of rates increase

or costs from structural improvement Landlord’s right to recover property

limited Extended continuously until 1960 1960 Act divided dwellings into

controlled and uncontrolled dwellings

Controlled and Uncontrolled

Rent control over mainly unfurnished property where tenants benefited from low rents and protection from eviction

Most tenancies were uncontrolled, based on periodic tenancies, and could be terminated without reason or justification.

Actual or threatened eviction most common tenant problem.

Rent control and decline of PRS Size of PRS declined from 26% after

WWII to 10% in 1979 Rent control was a ‘significant, but not

overwhelming’ factor (O’Brien and Dillon, 1982)

Other factors were slum clearance, homeownership policies and rising incomes

Rent control contributed to 75% decline in controlled dwellings between 1946 and 1971.

Phase 2 – Landlord Favourable Protections (1982-2000)

Rent control mechanism struck down by Supreme Court in 1982

‘Unjust attack’ on landlords’ property rights in Blake v Attorney General [1982]

Legislation introduced to phase out formerly controlled sector by 2002

Rent Tribunal established to fix terms and rents review every 4 years and 9 months

Formerly rent controlled sector now ended

Limited Regulatory Reforms

Security of tenure was not revisited for a decade

Under 1992 Act, minimum notice period of 28 days, rent book requirement, registration of landlord with local authorities and some regulation of standards

Enforcement unrealistic in the absence of security of tenure as many tenants feared retaliation (Galligan, 2005)

Growth of PRS

Reasons for growth of PRS1. Ireland’s ‘Celtic Tiger’ economy• Dublin labour force grew by 150,000 in a decade• Population grew by 17% between 1996-2006• House price inflation and affordability

2. Increased State reliance on PRS• Sale of social housing in 1980s and 1990s• 39,000 on rent supplement scheme by 1996

Security of tenure a concern for almost two-thirds of RS recipients (Guerin, 1999)

Phase 3 – Balancing of landlord and tenant protections (2000 - present)

Commission on the Private Rented Residential Sector (1999) involved broad range of stakeholders

Security of tenure of up to 4 years, with provisions after 6 months that landlord must give one of six valid reasons for termination

Notice periods are based on duration of tenancy; written lease is somewhat redundant

Rent certainty model rejected in favour of open market rents that can only be reviewed annually

‘A compromise’ between landlord and tenant interests (Commission report, 2000)

Minimum Notice Periods under RTADuration of Tenancy Notice by

Landlord

Notice

by

Tenant

Less than 6 months 28 days 28 days

6 months or more but less than 1

year

35 days 35 days

1 year or more but less than 2 years 42 days 42 days

2 years or more but less than 3

years

56 days 56 days

3 years or more but less than 4

years

84 days 56 days

4 or more years 112 days 56 days

Termination for breach of

obligations

28 days  

Termination for anti-social

behaviour

7 days  

Housing schemes based on RTA

1. Rental Accommodation Scheme (RAS) Long term RS recipients 18 months + Greater security than law, by written agreement Local authority pays landlord directly Differential rent paid by tenant to local authority Differs from RS scheme, where tenant must

pass on welfare payment and pay a contribution as well

‘Hybrid’ of social housing and private rented 30,500 private transfers between 2005-2014

Housing schemes based on RTA

2. Social Housing Leasing Initiative (SHLI) Long term leasing for 10-20 years Discounted market rent and local authority or

housing association covers management and maintenance

Similar to RAS, legal obligation to rehouse tenant Limited take-up of 4,600 units since 2009 Longer agreement and rent levels at lowest level

for some time Upper limit to security of tenure?

Housing schemes based on RTA

3. Housing Assistance Payment (HAP) Like RAS, RS recipients of 18 months + Like RAS, local authority pays landlord directly Like RAS, tenant will have access to wider social

housing options Unlike RAS, tenant contribution deducted at

source Addresses rent arrears issue that exists under RAS

and affects eligibility to other social housing options

Currently being piloted in 7 local authority areas

Security of tenure after RTA

Security of tenure not main problem faced by tenants

Deposit retention (tenants) and rent arrears (landlords) are the main sources of dispute to PRTB, representing about 70% of all disputes

But economic downturn has impacted • Rise in illegal evictions from 3-5% over 2007-2011

to

8-9% in 2012-2013• Rent arrears increasing from 19% in 2007 to 35%

in 2012

2007 2008 2009 2010 2011 2012 20130%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

35%43%

51%39% 43% 37% 32%

3%

5%4%

4%3% 9%

8%

43%33% 22%

25% 23% 22%25%

19% 19% 23%32% 31% 32% 35%

Dispute Applications to PRTB 2007-2013

Rent Arrears

Other

Illegal Evictions

Deposit Retention

Rent levels and affordability

Three current difficulties that impact on security of tenure Overall reduction in supply

• Housing output has fallen by 90% since 2006• Properties to rent in Dublin down by 40% since 2011

Rent reviews and higher asking rents• Annual rent inflation from 2.2% in 2012 to 9.7% in 2014• Dublin rent inflation peaked at 16.7% in April 2014, now

spreading to commuter counties• Reviews of rent more common after period of stability

Reductions in welfare payments• Reductions of up to one-third since 2009• Displacement of tenants and rise in family homelessness

Shortage of properties to rent

Data and chart: daft.ie

‘Rent Stability in the Private Rented Sector’ Report (September 2014) Escalation of rents and rising family

homelessness Rents unaffordable, especially for single people

on average income in Dublin (41% of net income using PRTB/CSO data)

Report rules out rent regulation due to potential negative impacts on supply (evidence?)

Report recommends other measures:

better market information, extending rent review period, raising rent supplement limits, tax incentives for landlords/supply, voluntary rent certainty leases (impact?)

Minister for the Environment initially opposed to ‘rent control’ but now committed to ‘rent certainty’.

Rent certainty

“I am not talking about rent controls. It’s a different model, this is

rent certainty… What we’re looking at is a process whereby

people can have some certainty as regards rent into the future

while [housing] supply is being dealt with.” (Minister Alan Kelly, 28 February 2015)

“It’s understood the proposals would involve landlords not being

able to increase rent beyond the rise in the consumer price index

unless they can show that upgrades have been carried out on a

rental property that would justify an above inflation rent

increase.” (thejournal.ie, 28 February 2015)

Rent Control vs. Rent Certainty

Rent Control [Blake v Attorney

General]

Rent Certainty

Permanent freeze on rents at historic levels.

No effective mechanism for recovery of possession or review of rent.

Basis of scheme arbitrary, unfair, irrational.

Regulate rate of rent increases for defined period (e.g. duration of tenancy) only.

RTA mechanisms for recovery of property and 12-month review period unaffected.

Model connected to pressing social need and based on objective criteria (e.g. CPI index).

Conclusions

Distinct phases in evolution of security of tenure in Ireland that mirror typologies of rent control

Balance of interests sought in 3rd phase framework

Underpinned new schemes to prolong and deepen security of tenure

Security of tenure is inextricably linked with rents

Rising rents posing a new challenge to security after of tenure a decade of 3rd generation rent controls

Rent regulation under consideration