Harry McGee: rent supplement rise signals change in policy

When property prices have crept up in the past, the stock political response has been to provide a financial stimulus.

It happened in the 1980s and 1990s when a first-time-buyer grant of £3,000 was made available.

It seemed attractive on the face of it, a relatively tidy sum that would help pay the deposit or the fit-out afterwards.

However, such stimulus measures had a downside – in a rising market, those who were selling the property simply added about that amount to the price.

One of the cardinal rules when dealing with estate agents is not to disclose your limit as they will promptly bring it to you. The ultimate recipient of the “free” benefit was not the purchaser but rather the developer. The grant was eventually scrapped.

The same argument has been made in relation to rent supplement and housing assistance payments. Rents have risen sharply in recent years and rent supplement has not kept pace.

Rent supplement

Despite persistent calls by Opposition parties and non-governmental organisations, the consistent message of the previous government was that increasing rent supplement would lead to increases in rents across the board.

This would affect tenants in the lower end of the market, in particular.

Minister for Social Protection Joan Burton and her department persisted with this argument until the general election, although they urged councils to show a good deal of flexibility in pressure points such as Dublin.

But moral suasion is not as effective at changing minds as hard cash is.

The announcement by Minister for Social Protection Leo Varadkar and Minister for Housing Simon Coveney yesterday that rent supplement would increase signals a substantial change of policy.

It is difficult to assess if this was a genuine change of mind or if it was done by the Government for political expediency. One of the preconditions laid down by Fianna Fáil in return for "supply and confidence" support of Fine Gael was an increase in rent supplement.

The policy provides for a hike in rent limits of between 15 per cent and 30 per cent, depending on the geographical location.

In three of the four Dublin authorities (the exception is Fingal), the increase will be 29 per cent on average.

Varadkar defended the move, saying the “facts had changed” since the last review by his department in April 2015. He said there had been a steady increase in the number of families going into homelessness.

Rent certainty

When asked why he was confident that landlords would not hike up rent, he pointed to the recent law which gave tenants two years of rent certainty. He said this measure would ensure there was no price gouging.

So, will it work?

It is obvious rent supplement has been lagging very badly behind the market prices. If the market was confined to those receiving rent supplement, it is likely some landlords would have acted out of self interest with this increase. But the private rental sector is so oversubscribed that rents have been rising sharply over the past number of years.

That was giving rise to a situation where those relying on welfare payments were struggling to make ends meet. This measure should remedy this a little.