The role of security of tenure in a larger, stable, rental sector

Several trends are drawing attention to the issue of security of tenure in the rental sector.

The increased prevalence of renting, especially among those aged 20 to 40, prompts renters to worry about whether they will have security of tenure as they aspire to family formation, child rearing, bearable commutes and stable community ties.

Rapidly rising rents, reflecting the imbalance between demand and supply, draw attention to the link between tenancy security and rent adjustment.

Most acutely, the evidence that the flow into homelessness, especially of lone parents and their children, is largely from the private rental sector raises questions about the freedom of landlords to end tenancies where tenants are meeting their obligations.

The importance of security of tenure was emphasised in NESC’s 2015 report Ireland’s Rental Sector: Pathways to Secure Occupancy and Affordability Supply, which set out a vision and strategic reform agenda for Ireland’s rental sector.

The Council advises government, through the Taoiseach, and contains representatives of the employers’ organisations, unions, farm organisations, community and voluntary sector, environmental pillar and expert independent members. The report on the rental sector, like the five other reports on housing and land since 2014, was supported unanimously within the Council.

There is a fundamental relationship between tenure security and predictable rent increases. In the absence of rules on rent increases for sitting tenants, a landlord could circumvent tenure security by a sufficiently drastic raise in rent (economic eviction). Equally, when rent for a sitting tenant falls below the market rent, creating an incentive to replace an existing tenant with a new one, protection against eviction is necessary to prevent the landlord from giving notice to quit.

• The Council recommended four elements of a secure occupancy model for Ireland:
• improve rent certainty through a system of market sensitive rent regulation;
• change the then system of four-year leases to make leases indefinite;
• remove the sale of a property as a ground for ending a lease; and
• improvements to dispute resolution procedures.

Rent regulation aims to stabilise rents when there is a severe imbalance between demand and supply; other measures are needed to achieve underlying affordability. NESC argued that rent regulation should be combined with a review of the tax treatment of landlord income. Subsequently, there was progress on rent certainty with the introduction of Rent Pressure Zones.

There was also progress with the extension of Part 4 tenancies from four to six years, although this still falls short of the indefinite leases found in European countries with large stable rental sectors that offer a lifetime housing option.

In several such countries, such as Germany and Sweden, sale of the property is not a reason for ending a tenancy and property is commonly sold with tenants in place. Indeed, this applies to most commercial tenancies in Ireland. Subsequently, Focus Ireland proposed a similar reform, known as the Focus Ireland Amendment. NESC noted that strong tenant security must be coupled with effective eviction procedures, as landlords have to be sure that they can evict tenants that do not fulfil their contractual obligations.

The fourth element of NESC’s secure occupancy model was reflected in Government allocation of increased resources to the Residential Tenancies Board and related reforms.

In making the case for its secure occupancy model, NESC stressed that these reforms must be accompanied by actions to increase the supply of permanently affordable rental accommodation, the cost rental idea that is gaining traction as a guiding vision for a new Irish housing system.

Ireland’s Rental Sector: Pathways to Secure Occupancy and Affordability Supply-https://www.nesc.ie/publications/irelands-private-rental-sector-pathways-secure-occupancy-affordable-supply/

Rory O’Donnell is the Director of the National Economic and Social Council (NESC).