I’m renting but in the relatively fortunate position that I have won a decent amount of money gambling over the last few years that will be able to pay a good chunk of equity towards the house my wife buys, with a mortgage in her sole name for the remainder.
However, I do not understand the climate we are in with regards to rents in Ireland. I have an economics and finance degree and a postgraduate in global capital markets so feel I should be somewhat enlightened, but I do not understand it.
My confusion, in a nutshell, is how the “supply and demand” argument continues to function in an environment where tenants are charged rents at extortionate levels by landlords clearly profiteering from the situation for years.
I cannot understand how a movement has not started where renters form what would look like a union and refuse to pay any more increases on rent and collectively refuse to pay a month or two months’ rent in a year at each of their rent prices.
If renters chose to do this together there would be little landlords could do to get this money reimbursed, in my opinion. The court system would not be able to handle all of these cases if even 40 per cent or 50 per cent of people did not pay. If there was a half decent movement, I can’t imagine 50 per cent of renters would pay their months’ rent when it was explicitly clear a huge part of the State was not going to.
I guess my question is what would be the ramification for individuals if they refused to pay their rent where 50 per cent of renters chose to skip paying, let’s say May’s payment, to their landlord?
I know I’m asking you to speculate but I would really appreciate some opinion on it. Have a large portion of renters in a country ever refused to pay rent, for a specified time period and if so what was the outcome?
Mr G K
It’s quite clear that you are considerably more qualified than I am, academically, in understanding the dynamics of the rental market. And there is clearly a strong political, with a lower case “p”, element to this query. But let me try to address it in personal finance terms, which is what this column is about.
The price of housing is, as you say, subject to supply and demand. The more people chasing a limited number of properties, the higher the price will go. Given Ireland’s growing population and the generally lagging supply, the trend in prices has generally been up with a few limited exceptions.
What is interesting in the Irish market is that rents have been rising faster than home purchase costs. There are two possible reasons for this, I guess: either landlords are gouging or there is a greater supply squeeze on the rental side of the market, which means the “market rent” is rising.
I’m certainly not saying that there are no landlords who take advantage of people and charge ludicrous rents – just as we know there are a small minority of tenants who take advantage of landlords. But clearly in a working rental market, these landlords are left with empty homes.
In any case, there is increasing regulation of the Irish rental market. We now have rent pressure zones covering most of the State’s urban areas and the wider Greater Dublin areas – where most people are looking to rent. These limit landlords to rent increases of the annual rate of inflation or 2 per cent, whichever is the lower. And 2 per cent is well below the prevailing rate of inflation.
Rent pressure zones are far from perfect. First up, new rentals – properties coming to the market for the first time or which have been off the rental market for at least two years (one year for protected structures) – can charge the prevailing “market rent”, which will be higher than the artificially constrained rent pressure zone level. And, certainly in Dublin, where there has been significant investment by funds in build-to-rent over recent years, a lot of the limited rental stock available to people is “new to market”.
The likelihood is that, faced with an organised rent strike, there would be an attempt by Government to streamline eviction procedures
There are other exemptions too, including where a property has been significantly extended, had rooms added or its layout permanently altered, has been adapted for use by someone with a disability or had its Ber rating substantially improved.
And then, of course, there are large swathes of less built-up areas across the State outside rent pressure zones.
Data from the Society of Chartered Surveyors Ireland (SCSI) says that with rent rises well below inflation and recurring eviction bans, landlords accounted for 40 per cent of all residential property sales in the last three months of 2022. And the most recent report from property website Daft, in November, said there were just 1,087 homes available to rent nationally on its website, including just 345 in Dublin.
I’m not an economist but the general – though not universal – view in that group appears to be that the issue is one of supply, not gouging. There appears to be significant political resistance to certain types of landlords – big institutions – at a time when smaller private sector landlords are leaving the market and local authorities are struggling to increase their stock. If so, that is likely to increase the supply squeeze, not mitigate it.
So what happens if you or someone else organises this rent strike?
The first challenge, of course, is persuading people to do so. This involves people taking the risk that they and their families will be evicted from their homes in a climate when everyone is fully aware there is no social housing option immediately available. Sure, there is an eviction ban now but that will not last forever, particularly in the face of any organised rent strike.
I’m sceptical whether people’s irritation at the level of rents will trump their fear of eviction with no alternative accommodation but you may be right.
You’re certainly correct that the courts would struggle to manage the workload you anticipate. As it is, it can take an age to get rent dispute cases through the Residential Tenancies Board and then, if not resolved, through the courts.
The likelihood is that, faced with an organised rent strike, there would be an attempt by Government to streamline eviction procedures. Whether that would work or not would depend on how the subsequent real-world testing of any new regime worked out.
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What is more certain is that landlords would either refuse to provide references to tenants for future lettings or provide references that make securing a future tenancy difficult. And, of course, a history of refusing to make contracted payments would likely damage the prospects of any tenant involved in getting a mortgage – and potentially other loans – in the future.
So the stakes are high.
There have been rent strikes in different countries, including Ireland, mixed results, though I have not come across examples over the past 50 years outside student protests.
From your own position, it is indeed fortunate that you have amassed decent savings over recent years to help buy a house. Hopefully those have been banked rather than being put back into what you yourself describe as further gambling ventures. Your winning record in recent times cannot hide the fact that these are clearly high risk “investments”.
Assuming the money is there to allow your wife borrow the remainder in her own name, well and good. However, Irish banks are nothing if not predictable and I would expect that their first instinct will be to demand names on the mortgage and the deed to give them the security of going after both of you, should the need arise and that, consequently, they will want a look at your earnings and credit record as they assess “ability to pay”.
She will need to insist that she is assessed on her own record and repayment capacity. That does not necessarily mean the property cannot be in names: after all, you will be contributing a substantial chunk to the purchase price. But if the intention is that it be in her name, I’d expect the bank to require that she have personal control of all the funds required to purchase, including those savings of yours.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to email@example.com. This column is a reader service and is not intended to replace professional advice