A new sheriff in town? The RTB & non-compliance in the PRS

The Week in Housing 01/10/21

The RTB Q2 2021 report came out this week and it was once again consternation all round as rents stubbornly refused to stop growing. It's a story we're all familiar with at this stage, but within the overall continuity there are some important changes afoot.

First, the most important new data from the report. Average rents grew nationally by 7% in the past year. In Dublin they grew by 4.4% and by 8.7% in the Greater Dublin Area. Outside Dublin they grew by around 10.5%. This puts average rents in Dublin at a somewhat incredible €1,848 per month, while the figure for Galway is €1,355 and for Cork is €1,344. The new data represent a very worrying return to the extremely high rent increases which pertained up until around 2018. In more recent years, the market had cooled somewhat, which commentators had attributed to the RPZ rent measures (see this analysis from the ESRI) or possibly the market simply 'topping out'. The pandemic saw rents almost stagnant (even falling in Dublin City).

At first glance, we might be tempted to attribute these latest significant rent increases to certain short run factors. First, a rebounding of demand caused by the easing of pandemic restrictions and increased economic activity. Second, the announcement of the new RPZ measures linking rent increases to HCPI may have led some landlords to engage in pre-emptive rent hikes. However, this data is from the second quarter of 2021, and so we would not expect either of these factors to have really had an impact at that stage. Moreover, we can see in this data that rents generally grew much faster outside of Dublin and especially in more rural areas, by over 17% in Leitrim, for example. This suggests that they reflect the pandemic era of working from home rather than the more recent period. This is indeed worrying as it may be the case that in the second half of 2021 we see a big surge of demand in Dublin as offices and campuses reopen, and an attempt by landlords to hike rents in response to the new RPZ rules.

In terms of the more novel trends here, the first relates to the divergence of rent changes in Dublin versus the rest of the country. As shown in the table below (based on RTB data), annual changes in average rents in Dublin were in synch with national rents for much of the period since 2016. The pandemic initiated a change here, as the rate of increase fell more significantly in Dublin than elsewhere. This trend is compounded in the latest data, with rents in Dublin now increasing much more slowly. This won't be much cause for comfort for Dublin renters, as they still pay far more rent than anywhere else in the country. Indeed, as the RTB report itself points out, a one-bedroom apartment in Dublin costs more than a four-bedroom house in many parts of the country. Moreover, we may well see a reversal of these trends if demand in Dublin rebounds as we move out of the pandemic.

But the most interesting development has been the framing of non-compliance. It is not mentioned in the report itself, but the associated press release contained a very surprising quote from Padraig McGoldrick, Interim Director of the RTB:

"[T]he level of increase in Q2 2021 is a source of concern and, while there may be legitimate reasons reflecting the rate of increase, it may also indicate an unacceptable level of non-compliance by landlords with rent setting regulations restricting rent increases in Rent Pressure Zone areas (RPZ). The impact of not complying with these measures can be very severe, and the RTB is committed to ensuring increased compliance with these requirements."

The same press release also notes that the RTB can apply fines of up to €15,000 and/or costs of up to €15,000 and that, as of Q2 2021, they had commenced 400 investigations and issued €260,000 in fines in relation to breaches of the RPZ rules.

I've been researching the PRS in Ireland since 2014 and this is the first time I have seen any real official acknowledgement of the non-compliance issue (I have written about it previously, see this report with Threshold). The RTB indeed has tended to thread very gently around this issue. For example, they often cite the fact that only 2% of tenancies end up in formal RTB dispute processes as an indication that everything is hunky dory. In more recent years, new legislation has equipped the RTB with more powers, including power to investigate and initiate actions against non-compliant landlords in relation to certain matters. The RTB now appears more keen to embrace its role as 'regulator', rather than as merely a 'dispute mediator', as has sometimes been the case in the past.

More surprising still is the following quote, again from McGoldrick:

"On the basis of a request from Minister Darragh O’Brien... the RTB will escalate its response and introduce an accelerated and focused campaign to identify and, where necessary, pursue those who abuse or ignore their rent setting responsibilities.”

This is a much more forthright tone than we have ever seen before. The RTB has always tended to frame their role as 'supporting landlords' and followed an education-led approach, which implied that any non-compliance was due to lack of knowledge on the part of landlords. Here we see a very different tone, and what is more, it's coming all the way from the top. To see the Minister for Housing come out with a very clear 'I see you' to Ireland's non-compliant landlords really is a step change. Is this the end of the culture of non-compliance in the rental sector? I certainly hope it is at least a step in that direction, as the tolerance for non-compliance is one of the most pernicious symptoms of tenants' status as second class citizens.

Events

On the 6th of October a bumper global report will be launched by UNECE, in conjunction with Housing Europe and UN Habitat. On the 11th of November the Housing Agency have a seminar on changes to Part V legislation. Housing Rights are organising a conference on the PRS in Northern Ireland on November 24.

What I'm reading

No shortage of new reports this week. The Simon Community published new research on experiences of homelessness during Covid-19, Threshold and the St. Vincent de Paul look at energy inequality in the PRS, and Clúid Housing have published what looks like great new research on Part V (which I hope to return to next week). The Independent Living Movement Ireland published a new report on a much neglected area: housing rights and disability. Further afield, two major new studies of the impact of the pandemic on US landlords came out this week. The RTB (who had a busy week!) published a very useful document explaining recent new legislation in the sector. And for the history buffs, a new book on Dublin corporation's first housing schemes in the late 19th and early 20th centuries.