Thursday 12th September, 2024
Rents – Incomplete Data Contributing To Misinformation And Bad Policy - IPAV
Responding to today’s Residential Tenancies Board Rent Index for Q1 2024 and Individual Property Analysis’ Preliminary Findings, IPAV, the Institute of Professional Auctioneers & Valuers, said while attempts by the RTB to improve market knowledge is very welcome, much of the data is still incomplete in terms of giving a full understanding of what is actually happening in the rental market, and is consequently causing confusion, a worry from a policy perspective.
Pat Davitt, IPAV’s Chief Executive said: “Today’s individual property analysis states clearly that increases greater than 2% in Rent Pressure Zones do not necessarily indicate non-compliance, and of course there are a number of legitimate reasons as to why that may be, such as increases applied covering a period of more than one year and properties undergoing substantial upgrading, nonetheless our concern is that an incorrect interpretation is very likely to be taken from the data, as we’ve seen previously.” He said this is by no means to suggest that there is no non-compliance.
“Our concern is that there is distraction via incomplete or insufficient data rather than a focus on understanding real market dynamics,” he said pointing to a host of research to show that rent controls succeed in having the opposite of their desired effect. (See below).
“RPZ legislation has had the effect of increasing rents that would not otherwise have increased to the same level. And it has enabled large investors to set high rental levels, catering largely for the upper end of the market, a phenomenon that is now moving beyond Dublin.
“It has also created a two-tier market where those who did not raise rents before the legislation was introduced have lost out substantially, losing market value on their properties, and selling up as a result with a flight from the rental market of private landlords.”
RTB figures show a drop of 70,920 private landlords or 40% in the total number of private landlords between the end of 2021 and the end of 2023. Having dropped 40% in two years RTB August 24 published figurese show a 1.96% increase in the number of landlords between Q3 2023 and Q1 2024 (from 101,051 to 103,035), largely accounted for by landlords with 100 plus tenancies.
Mr Davitt said rent caps were only ever intended to be a short-term measure and the longer they remain, the more dysfunction they will create in the market.
“Positive incentives work in increasing supply which is the only real answer to the paucity of supply in both rental and purchasing,” he said. “Well-designed tax reliefs are such positive incentives, rent controls are negative, disincentivising the suppliers of property.”
Research on Rent Controls:
A research paper by Konstantin A. Kholodilin, published in the March 2024 Journal of Housing Economics and titled ‘Rent control effects through the lens of empirical research: An almost complete review of the literature’, examined a wide range of empirical studies on rent control published in journals between 1967 and 2023. The author concluded that: ‘although rent control appears to be very effective in achieving lower rents for families in controlled units, its primary goal, it also results in a number of undesired effects, including, among others, higher rents for uncontrolled units, lower mobility and reduced residential construction. These unintended effects counteract the desired effect, thus, diminishing the net benefit of rent control’.
Dr. Ronan Lyons, Associate Professor of Economics at Trinity College and a member of the Housing Commission recently cited very strong evidence that rent controls lead to higher rents for those not protected and to lower supply and poorer housing quality.
Professor John FitzGerald, Professor Emeritus at the Economic & Social Research Institute (ESRI) has said: “Rent controls are a short-term fix that usually turn into a long-term problem. Once in place, ending restrictions becomes increasingly problematic. The long-term effect is to curb supply of rental properties, raise overall rent levels, and ultimately damage the interests of tenants and potential tenants.”
The International Monetary Fund, recognising the counterproductive nature of excessive regulation, called in November 2023 for the removal of rent caps to increase housing supply.
Ends