Seeking a stable market

When Moore and her family moved into the house in 2012, the rent was €790 a month. This latest hike, due to come into effect in April when a two-year freeze expires, marks a 58% rise over four years.

So can the new rent rules unveiled by Coveney keep the likes of Moore in their homes? Or can landlords continue to raise rents at will, despite Fine Gael’s first steps toward market intervention?

The Seanad will debate the Planning and Development (Housing) and Residential Tenancies Bill on Wednesday but, with Fine Gael and Fianna Fail committed to support it, the legislation should be on its way to President Michael D Higgins before Christmas.

If the president has no reservations, the rental strategy will be law by January 1, imposing an immediate 4% per annum cap on rent hikes in Dublin and Cork. The cap will be extended before the end of January to parts of Galway, Limerick and Waterford, and to large commuter towns outside Dublin and Cork that meet the criteria.

Unlike Naas, Maynooth and Leixlip, which are closer to Dublin and where rents are higher, Kildare town may not meet those requirements. The cap will be imposed in areas where rent is above the national average and has risen by an annualised 7% in four of the previous six quarters. The Residential Tenancies Board will decide the areas to be capped.

If it qualifies, the 4% cap will be extended to Kildare town in January or February, and Moore will be able to appeal against the increase to the board.

Over the past 14 months, the number of people seeking private rental accommodation has risen by 60,000 and exceeded 700,000 for the first time, although the number of landlords supplying the sector is up by 12,000 in the same period. Add social housing into the equation, and about 30% of all Irish families are renting their homes.

The Department of Finance has resisted the concept of rent certainty since the fiscal crash of 2008, and Fine Gael resisted Labour efforts to introduce a measure of it in the 2011-16 coalition government. Alan Kelly, as environment minister, did manage to impose a two-year freeze on all private rents in November 2015.

Brendan Howlin, the current Labour leader, has questioned the 4% cap, arguing it is eight times the rate of inflation. Government sources said the Department of Finance insisted on 4% so as not to risk spooking “the markets”.

Coveney said it was the “rate of reasonable return” set by the Ireland Strategic Investment Fund for its investments. “If you don’t have landlords, you don’t have supply, you don’t have a functioning [rental] market,” he said.

There was a broad welcome for the new measures from lobby groups with an interest in homelessness. Focus Ireland said the starting cap in Dublin and Cork was important, because that was where rental pressures were most intense.

June Tinsley of Barnardos said: “Rents have been escalating especially in the ‘rent pressure zones’ leading to over 3,486 children and families being homeless, so these measures to limit increases are welcome. Families need rent stability so they’re not fearful of huge rent hikes that will tip them into homelessness.

“Presently, many families are living in dread of such hikes, or not asking landlords to fix damaged properties for fear of bringing attention to themselves.”

But the Irish Property Owners’ Association, one of several organisations representing landlords, issued a provocative statement during last week’s Dail debate on the bill. Following the latest “onslaught” on the property sector, the association said its members were considering withdrawing from all state-sponsored rental schemes and imposing a variety of new charges — for car parking, keys, lease documents and property taxes — to bypass Coveney’s rental cap.

“Rules can be manipulated. If you bring in a rule, people find other ways to do it,” said Karl Deeter of Irish Mortgage Brokers. “When Alan Kelly’s freeze came in, a lot of people raised prices before it.”

For Deeter, the only puzzling element of last week’s political row over rent legislation was why there was a row at all. “That Fianna Fail was against the plan was remarkable,” he said. “They created the topsy-turvy financial situation. Brian Lenihan reduced mortgage interest relief to 75% in the 2010 Finance Act. It meant landlords had to get as much rent as they could. More than 70% of them are ‘mom and pop’ landlords [not multiple property owners or institutional players].”

Perhaps it was this political baggage that forced Fianna Fail into a climbdown after it seemed poised to veto Coveney’s plan. Barry Cowen, the party’s housing spokesman, first demanded the 4% cap fall to 2%; that it be extended beyond Dublin and Cork to the commuter counties of Louth, Meath, Kildare and Wicklow, and the cities of Galway, Limerick and Waterford; and that a package of tax incentives for landlords be negotiated within months to offset the impact of the cap.

But in direct talks with Coveney on Wednesday, Cowen almost immediately conceded the 4% cap. Within another 24 hours, he agreed to an early, but not immediate, extension of the cap to cover other high-rent cities and satellite towns.

“In fairness to Cowen, I think his main difficulty was selling it to elements of his party,” said a Fine Gael source. “TDs across the commuter counties were pushing him hard on it.” Others in Fine Gael saw the hand of Micheál Martin, the Fianna Fail leader, directing last-minute opposition to another government initiative.

“We’ve seen it on water charges; we saw it in the budget row over the start date for the pension and welfare increases in 2017. Micheál gets jittery on issues,” said a senior Fine Gael figure. “And with Coveney involved, maybe there was a bit of Cork South-Central constituency politics too.”

On Twitter last Tuesday, Sinn Fein’s TD in the constituency, Donnchadh Ó Laoghaire, also indulged in a little local politics. “Average rent of properties on daft.ie today from minister’s home town of Carrigaline is over €1,200 — yet no controls here,” he tweeted.

Coveney replied in the Dail on Thursday: “Once I get data from the Residential Tenancies Board, there is no reason that the Carrigaline-Ballincollig electoral area, as long as it passes the thresholds, cannot be designated a rent pressure zone also.”

Two weeks ago, Coveney cut an isolated figure at a Fine Gael parliamentary party meeting as up to a dozen backbenchers criticised his handling of the water-charges issue and disagreed with his opposition to refunding fees to those who had paid.

The critics included Senator Jerry Buttimer, a constituency colleague; and Dara Murphy, minister for European affairs and TD for neighbouring Cork North-Central. Michael Noonan, the finance minister, spoke in colourful terms that suggested he, too, favoured paying out for political peace. It was time to get this “dead cat” off the field, he said.

Oddly, one of the most supportive of Coveney was Leo Varadkar, the social protection minister and his main rival for the leadership of Fine Gael. Yet while Varadkar came to Coveney’s defence at the parliamentary party meeting last month, he was critical at cabinet last week. When Coveney briefed colleagues on his rental strategy, Varadkar complained his department had not been briefed in advance, despite being paymaster for rent supplement and the housing assistance payment, and running the Money Advice and Budgeting Service that helps distressed mortgage-holders keep their homes.

In responding to ministers’ observations, Coveney ignored Varadkar’s intervention. In the closing days of last week, his political stock rose dramatically within Fine Gael. “What could have been an absolute disaster turned out to be a win,” said a senior colleague. “Simon began the week with a plan that he wasn’t going to get through the Dail, and the possibility of making a bad situation worse with the uncertainty it would have caused if Fianna Fail brought it down.

“He needed a break and caught one. But he works hard and had done his homework on this. And when Barry Cowen couldn’t get a telephone line to come on RTE’s Morning Ireland on Thursday, Simon was able to explain in a methodical way why he was doing 4%, where it came from, and about the other cites.”

It was significant, too, that the taoiseach weighed in behind his housing minister last week. Kenny told his parliamentary party meeting on Wednesday evening he was prepared to pull the bill from the Dail rather than concede the 4% cap.

At last Tuesday’s strategy launch, Coveney just laughed when asked if it would boost his Fine Gael leadership prospects. Damien English, his junior minister in housing, dismissed any link with his colleague’s leadership ambitions. “There is no leadership contest,” he said yesterday. “It is irrelevant. Simon and myself and the officials in the department are happy to have got this strategy through.”

Coveney’s plan may come too late for Kathleen Moore, however, after last week’s rent review notice. “I have no idea whatsoever what I am going to do,” she said. “To get word like that in the door less than two weeks before Christmas is just awful . . . The rent will be €350 more a month. I’ve a weekly income of €485. Words can’t explain the worry.”