Rental market lessons from abroad

 

Sir, – The article “Dublin rents to rise to €2,500 before they start to slow” (February 14th) underlines again that the housing rental market in Ireland is dysfunctional.

If the rental market functioned as it does in Belgium, for example, the supply could meet demand or even exceed demand, and rent increases would thus be reversed.

I lived and rented there for a number of years. A standard lease is based on a three/six/nine-year principle, where rent can only be increased at the beginning of each three-year stage. Properties are normally rented unfurnished.

After each three-year period, the landlord can ask the tenant to leave if the owner wants the property for a family member but must give six months’ notice, pay the tenant three months’ rent if on a three-year lease and six-months’ rent after a six-year lease period. Leases are registered with the finance ministry, and rents can only be increased in line with the consumer price index.

What’s in it for the landlord? Tax on rental income is low and based not on the rent but on a notional cadastral income level, the base for which is reset every 15 years. The result is a very low effective tax rate, which on a notional rental income of about €1,500 per month can be as low as 10 to 15 per cent.

It appears that this tax regime encourages investment in unfurnished property to let, thus creating a healthy supply-side market and keeps rents affordable for the demand side. This mutually beneficial approach for tenant (security) and landlord (good return on investment) would ensure that the Government could finally get its act fully together on the rental housing market.

The interesting thing to note is that the tax rate on rental income can be adjusted straight away to say 15 per cent by the Government and thus potentially provide an immediate and longer-term boost to supply. It is surely worth a try when everything else does not appear to have worked thus far?

It could also pay for itself in future reduced spending on rent allowance support under the social welfare system. – Yours, etc,

FRANK KAVANAGH,

Greystones,

Co Wicklow.