Bonus post: SF's plans for PRS reform

This article was originally published as an opinion piece in the Irish Examiner (10/09/24), I’m sharing it here for those who missed it.

The publication of Sinn Féin’s housing plan earlier this week has put housing back at the centre of political debate. But while most discussion has focused on the party’s plans for affordable home ownership, its proposals for the private rental sector (PRS) are perhaps the most radical of all.

The big areas Sinn Féin want to shake up are rents and security of tenure. In relation to rents, their long standing promise is to introduce a three year rent freeze, a policy that will be welcome for tenants who have seen rents rise by more than 100% in the past decade, but will no doubt alarm landlords. After that three year period, the party’s new plan will abolish the Rent Pressure Zones and replace them with a new ‘index based’ or ‘reference rent’ system, as exists in countries like Germany.

Research by the ESRI shows the RPZ rules, which cover 80% of tenancies and limit annual rent increases to a max of 2% per annum, have been effective in dampening rent inflation. The current regime, however, has two problems. First, rent inflation is far in excess of 2%. RTB data shows that average rent increases over past year have been 5.9% for existing tenancies and 9.1% for new tenancies. Affordability thus continues to be a key challenge. Second, RPZs have created what we might call a ‘two tier’ rental sector, where longer standing tenancies can be significantly below market rents, while properties newly brought to market can be significantly above average.

Importantly, the Department of Housing’s recent review of the PRS argued that it was time to review the RPZ measures and consider reform. Similarly, the Housing Commission’s recent report, also published over the summer, argued for replacing the RPZs with a reference rent system.

Under Sinn Féin’s proposal, a specific rent index will be created for each local area, and rent increases will be pegged to comparable properties (in terms of size and quality) for the relevant location. The logic is that landlords will not be prevented from hiking rents so they are close to the average, but will be prevented from rent increases that exceed the index. What will matter most to landlords and tenants is of course the specifics of how this index will be created, something not provided in Sinn Féin’s plan, as that will determine its impact on the sector.

Sinn Féin’s housing plan is very concrete, however, when it comes to security of tenure, proposing to eliminate the most frequently used grounds for tenancy termination – sale of property. Where a tenant pays their rent, landlords will only be able to terminate a tenancy when they need the property for their own use (under very strict limits), or to undertake renovations. All the research conducted over recent years, by Threshold and others, shows that lack of security is the number one issue for many tenants, and a leading cause of homelessness.

Sinn Féin’s plan for the PRS contains a number of other reforms that will be welcomed by many tenants: they promise to ensure tenants are allowed to keep pets, explore a ‘rent-to-buy’ policy, and introduce an ‘NCT’ for landlords, to ensure properties are up to scratch.

Taken together, this vision amounts to a seismic shift of PRS policy, and one that has the potential to be very unattractive for landlords. Sinn Féin have never made a secret of their pro-tenant stance, and now we can see exactly what this would mean in practice if the party is successful in the coming general election.

With such an emphasis on pro-tenant policies, one might ask how the largest opposition party plan to ensure the PRS expands to meet the demand for private rental housing from a growing population? The answer is they don’t. A distinctive feature of their proposal is that it explicitly commits to shrinking the PRS, i.e. reducing the proportion of households who rent privately. The logic seems to be that the best PRS is a small PRS. To pull this off, of course, their housing plan will need to ensure the growth of alternative tenures, namely homeownership, cost rental and social housing.

On the face of it, this makes sense. Around one third of PRS tenants receive HAP or another rent subsidy, and most experts agree these households would be better served in social housing. Research from the Department of Housing shows that the overwhelming majority of private tenants aspire to homeownership – so helping them exit the sector makes sense too. My own research on cost rental housing, where more than 85% of households were previously private renters, shows that residents vastly prefer cost rental housing to the PRS. If we know the PRS isn’t meeting the needs of many cohorts, so why not help those households transition to another form of housing, making our housing system less reliant on the PRS? From Sinn Féin’s point of view, taking such a perspective allows them to put forward radical pro-tenant policies without worrying too much about the potential for reduced supply of PRS housing, a neat solution.

Sinn Féin, in other words, plan to pull off two things simultaneously: a radical reform of the PRS to make it more secure and affordable for tenants, while at the same time making our housing system much less reliant on the PRS by increasing the availability of alternative tenures. They want to combine a seismic shift of PRS policy and a rearrangement of the tectonic plates that underpin our housing system.

From a tenant’s point of view, the big challenge is that both aspects of this audacious plan need to be successful. This is because radically reforming the PRS risks driving landlords out of the market, so if this not accompanied by the growth in alternative forms of housing it could lead to a disastrous imbalance of supply and demand, compounding the very problem that has gotten us into the mess that is our current housing system.

Sinn Féin certainly can’t be faulted for lack of ambition, but the big question is whether they can pull off their proposed reorganization of the housing system. And whether voters are willing to take that leap of faith with them.