The contrast in tax breaks between renters and their landlords has never been more stark. Just three years ago, a couple could claim €1,600 on rent relief, enough to pay a full month’s rent that year in the most expensive area, south County Dublin.
In 2019, rent relief is zero and the couple now pay an average €2,200 for the same home. In the meantime, investment funds are buying up tens of thousands of apartments to rent. Last year, these firms paid just €12.8 million tax on hundreds of millions in profits. To put this into context, one firm, Ires Reit, made €119 million profit on 2,679 apartments in 12 months.
These Reits, or cuckoo funds, avoid corporation tax on all rental income and capital gains tax upon disposal of their assets, with certain conditions. The number of housing units held by the funds surpassed 30,000 last year and one of the largest, Kennedy Wilson, boasted that it makes more money on rent in Dublin than it does in Los Angeles.
Powered by tax breaks, they purchase whole developments before they are built, muscling out first-time buyers and contributing to the rental crisis. Savills says the cost of renting will rise by another 17 per cent over the next three years. In the midst of an economic boom, more Irish citizens are leaving the country than returning, due to the cost of living.
What we have is more accurately described as a rental crisis than a housing one. The homelessness surge is a result of families, many working, unable to afford rising rents and ending up in the trauma of the housing system and its transient lifestyle of hotels, B&Bs, family hubs and waiting lists.
Instead of building apartments in Dublin’s centre, we’re building hotels. The irony being that the €11-an-hour staff that will work in them can’t afford to live near by and are at the mercy of cuckoo funds.
There is not enough pressure on the Government to take action on rent and it has hidden behind the 2016 rent cap fudge, which simply didn't work
The rental crisis should be tackled in the budget. The Government says there’s no room for giveaways, such as reintroducing rent relief, but oddly there’s no room to collect tax from booming corporate landlords either.
In April, when cuckoo funds were a hot topic, Fianna Fáil demanded a tax review, saying the issue couldn’t wait until the budget talks in the autumn. They seem to have gone off the idea since and there is no buzz about tackling funds in next month’s budget or of providing some air to stressed-out renters.
Housing supply
Fine Gael has bet heavily on these Reits solving the housing supply issue, wooed by tax breaks in the same way they’ve championed micro-taxes for tech giants to provide jobs. The two issues are related, not least because within 24 hours, Minister for Finance Paschal Donohoe warned he had no scope for spending in his budget but vowed to defend in EU courts his costly appeal against the €14 billion Apple tax bill. Rent and tech are linked because its highly paid, transient workforce have been blamed for rental crises from San Francisco to Lisbon.
There is not enough pressure on the Government to take action on rent and it has hidden behind the 2016 rent cap fudge, which simply didn’t work. Though set at 4 per cent, prices have risen in double digits. An added problem is a lack of a coherent strategy from any protest movement.
Raise the Roof, an umbrella group of trade unions, student and community groups, has campaigned for a legal right to housing, a target too broad to achieve a specific outcome. Their campaigns, focused on homelessness, haven’t chimed with unaffected renting professionals.
Rent freeze
In Berlin, campaigners fought for a clear target; a total rent freeze for five years. The proposed laws, published in June with backdated caps, saw shares in landlord firms fall.
Irish banks' mortgage rates are double the euro zone average, which should also be tackled in the budget
A huge battle, fuelled by popular anger, is under way to pass the law. Amsterdam is also considering tough rent caps and Lisbon legalised one in July. The grassroots movements have been helped by the presence of powerful local government and big populations of tenants.
Ireland has weak local government and fewer renters, but there is a historic shift in the pattern of home ownership under way. Berlin’s tenants were triggered by seeing average rents in the most upmarket area surpass €1,500 a month, €700 below Dublin’s top average.
We long ago passed the point where rage should have turned into pressure on Government, with Fianna Fáil joining the cause.
Another issue keeping people trapped in the rental market is the fact that Irish banks’ mortgage rates are double the euro zone average, which should also be tackled in the budget.
Workers’ taxes provide by far the largest portion of income for the State at 38 per cent, over double that of corporation tax. Those workers are maintaining public services and in return they get unaffordable rents, weak tenant rights, unattainable home ownership, no relief, planning rules that strip character from cities and Government inaction on all fronts.
If we want to halt the soulless gentrification and “generifying” of our capital and give space to allow families to simply live, Fine Gael has to act for tenants over landlord firms. They won’t, until those voting renters cry out as one.
Oliver Callan is a writer and satirist