Michael Byrne: Budget 2024's tax relief for landlords 'a shot in the dark'
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The Government’s decision to include a tax relief for landlords may well prove to be one of the most controversial aspects of the Budget 2024.
In a housing system in which lots of people are feeling pain, it’s inevitable that questions will be asked about a measure that favours a cohort who are often seen as particularly privileged, given that the vast majority of landlords own at least two houses when many are struggling to acquire their first.
Moreover, economists, such as Trinity’s Professor Barra Roantree, have pointed out that such a measure is poor value for money.
On the other hand, it has long been argued that landlords are ‘fleeing the market’. This, it is argued, calls for Government intervention for two reasons: because it impacts the supply of private rental properties and because when landlords sell up it typically results in the termination of a tenancy.
The termination of private rental tenancies is one of the main causes of instability in our homeless system. Homeless charities and service providers confirm that it is one of the leading drivers of homelessness.
The reality, however, is that Budget 2024’s tax relief for landlords has been designed, and introduced, in an evidence vacuum. It may come as a surprise to many readers, given the frequency with which we are told that the private rental sector (PRS) is shrinking and landlords are fleeing, that the private rental sector is in fact not shrinking but growing and, moreover, we have very limited information about whether, and to what extent, landlords are in fact leaving the market.
The idea that landlords are fleeing the market thus shrinking the supply of rental housing is primarily based on the Residential Tenancies Board’s register of tenancies. This data shows that the number of registered tenancies fell from 320,000 in 2016 to 246,453 tenancies in 2022. However, this summer, new CSO data from Census 2022 reported that there are in fact 330,000 households in the PRS, and that this number has increased by 7% since 2016.
On October 10, (Budget day, as it happens), I attended the Oireachtas Committee on Housing, Local Government and Heritage to get to the bottom of what is going on here, along with representatives from the CSO and the RTB. There are a number of possible reasons why these data sets are so different.
First, some tenants of Approved Housing Bodies (the voluntary bodies that provide a significant proportion of new social housing) may have miscategorised themselves as private tenants. However this, according to initial analysis from the CSO, is not likely to be a major factor.
Second, licensees, such as those living in the same dwelling as their landlord, are not technically ‘tenants’ and therefore are not registered with the RTB. They are, however, captured by the Census. We don’t know how many of these are out there, but again it is unlikely to be a large number as it seems logical to think that in most cases it would be the landlord, rather than the licensee, that would fill in the census form.
A further issue, raised by Fine Gael Senator John Cummins, is that when someone rents a property from a family member it will not be captured by the RTB but may be captured by the Census.
However, the elephant in the room is the non-registration of tenancies by landlords. As noted, the RTB registrations started to fall in 2016. This is the year in which the project of reforming the rental sector began, including the introduction of rent regulation. International evidence suggests that non-compliance can increase as regulation grows, as more landlords seek to operate in the ‘black market’ in the hope, for example, of evading rent regulations.
In order to shed some light on this issue, I recently worked with Threshold to examine a sample of 146 tenancies associated with clients who contacted them in the first two weeks of September 2023. Of these, 76, or 52%, were unregistered tenancies. This figure is, of course, not representative and is merely meant to flag the potential importance of this issue.
Nevertheless, that such a high proportion are unregistered is certainly a cause for concern. If non-registration is indeed a key part of explaining the discrepancy between the CSO and RTB figures, it may suggest that in recent years we have witnessed not so much landlords fleeing the sector, as landlords fleeing regulation.
The CSO and RTB will work over the coming months to get to the bottom of all this, but whatever the case, the upshot is that there is currently no evidence that the rental sector is shrinking.
Nevertheless, even if the sector is not shrinking overall, there may still be a significant cohort of landlords who are selling up. There is no doubt that this is an important issue and it is impacting our homeless crisis, and therefore needs to be taken seriously. It is also true, however, that the number of landlords exiting the sector is unknown. Some public commentary suggesting otherwise is based on a misinterpretation of the data.
For example, there has been a particularly dramatic fall in the number of registered tenancies since 2020. But this has nothing to do with landlords leaving the sector and relates to the fact that the RTB has introduced a new and much-improved annual registration system which means the register is now much more accurate.
Another frequently referenced data source is the number of Notices of Termination registered with the RTB. This has increased markedly from mid-2022. However, this can be explained by a legislative change requiring Notices of Termination to be registered with the RTB to be valid. The increased number thus implies greater compliance, not a great number of landlords exiting.
More generally, the Notice of Termination data covers a short period of time (since 2019). During much of this period ‘eviction bans’ were in place, thus distorting the data. We therefore have no idea what the long-term or even medium-term average number of Notices of Termination issued might be, and thus we have no way of saying if the current number is higher or lower than normal.
More generally, in any given year, a certain number of landlords will exit the sector. In other words, even in a perfectly functioning rental market, we will have a certain number of exits. We thus need to consider what level of landlord exits is appropriate, or consistent with a functioning market. Without such a figure, we have no way of saying with any certainty if the current number of exits, which, again, is unknown, requires a policy response. Moreover, we cannot assess with any certainty what level of policy response might be warranted.
From this point of view, Budget 2024’s support for landlords is pretty much a shot in the dark. It’s a response to an important problem, but one of which we know neither the extent nor the cause. It appears to be driven more by narrative than by evidence. And, when it comes to policy for the private rental sector, it’s hard not to notice that some narratives seem to be heard much more loudly than others.
- Dr Michael Byrne is a lecturer at UCD's School of Social Policy, Social Work, and Social Justice, and Director of the Equality Studies M.S.c.