Increase in Landlords Using “Vacancy or Lack of Tenancy” Loophole to Charge Higher Rents

There are four faded buzzers next to the door of 99 Beechwood Avenue Lower, a red-brick building amid a terrace of peaked roofs and bay windows on a quiet road in Ranelagh.

The advert listing it for sale until recently noted how the property, with four one-bed apartments, was already producing “a significant rental income”.

But it had “further potential to secure full market rent levels” subject to tapping into an exemption from the rules around rent increases, with one of the options being “through vacancies”, the advert said.

If a property has been vacant for two years – or a year for a protected structure – then a landlord within a rent pressure zone can legally raise the rent by more than the rent-increase cap.

Whether the new owner will opt for vacancies for the apartments on Beechwood Avenue Lower is unclear. While the homes were sold in July for €810,000, the new owner isn’t yet listed in public records.

Official figures suggest there was a slight uptick in the first half of this year in the number of times landlords told the Residential Tenancies Board that they were claiming an exemption from rent-cap rules because a home hadn’t had a tenancy for a while.

But the totals are still small, and the RTB data doesn’t capture why a home hasn’t had a private-rental tenancy for the year or two it takes to claim the exemption – whether it was stuck in probate, or had been home to owner-occupiers, a new build, used for short-term lets, or the landlord didn’t have the money to do it up.

It does, however, raise the question of whether this policy might be encouraging landlords – even a small number of them – to leave homes vacant for years in the midst of a housing crisis, so they can charge higher rents.

A spokesperson for the Department of Housing said the exemption is needed “to ensure that new supply to the rental market in a rent pressure zone is not discouraged”.

Colouring in the Lines

Around the corner from the Lansdowne Road Dart station and the Aviva stadium, on a leafy laneway, lies a red-brick apartment complex called Cannon Place.

For more than two years from November 2017, sixteen of the homes in this high-end complex in Ballsbridge sat empty.

That was because the homes needed fire-safety refurbishment works and new boilers, said a spokesperson for the owner Hibernia REIT in November 2019.

On Tuesday 18 October 2022, a spokesperson for the company said that it had been granted an exemption from rent-cap rules when it returned those homes to the market.

“An RPZ exemption was granted for apartments in Cannon Place given they had been vacant for over 2 years to facilitate remedial and refurbishment works,” says the spokesperson for Hibernia.

“These units have since been leased, and some were offered to the HSE free of charge to support frontline healthcare workers in the early stages of the pandemic,” he says.

In the second half of 2019, landlords in Ireland filed exemptions for 153 properties with the RTB, saying that they hadn’t rented them out for the year or two years previous.

In 2020, that figure rose to 502, before rising again in 2021 to 511 properties.

This year’s figures suggest a slight further increase, with landlords filing to self-report vacancy exemptions for 293 properties in the first half of 2022.

To put these numbers in context, at the end of 2020, there were roughly 298,000 registered tenancies in the country, RTB data shows. (It didn’t have more up-to-date figures available.)

Meanwhile, there were 35,380 vacant rental properties on census night in April 2022, according to the Central Statistics Office.

The Department of Housing didn’t respond to questions about whether they think the exemption encourages vacancy, or how accurate they think the exemption figures are.

“The Residential Tenancies Board (RTB) is empowered to sanction improper conduct by landlords, including contravention of the rent controls in RPZs and related procedural and reporting requirements,” they said.

Labour Party TD and housing spokesperson Rebecca Moynihan said it is impossible really to make definitive statements or policy based on the data. “I don’t think we can extrapolate anything clearly from it.”

One problem around renters and vacancy, and renting in general, is that there is very little real data, she says. “There is a hole there.”

They don’t really know why people haven’t had tenancies in homes for a couple of years, she says. How many are exemptions for new builds, which are supposed to be included in the data? Or were some of these vacant because they were hard to fill during the pandemic and rolling lockdowns?

She thinks most people leave places vacant because the properties are stuck in probate, or they have legal problems, or they don’t have the money to do it up, she says. “I think that’s often the reasoning.”

She isn’t convinced that landlords are leaving homes vacant to get out of the rent caps on a widespread basis, she says.

“It’s definitely a loophole to get out of it, it’s something that should be closed,” she said. “But I actually think it’s probably too much hassle.”

Current Times

Pat Davitt, the CEO of the Institute of Professional Auctioneers and Valuers (IPAV), says he sees an incentive for smaller landlords looking to sell their properties for as much as they can to keep them empty.

“I’d say there is always a certain amount of people who hold their properties out for two years,” he says. “They really have no choice, if you want to get market rent for your property.”

Also, some property owners are reluctant to rent out homes at the moment because of the recent evictions ban, he says. “There is a lot of fear in the marketplace.”

In October, the government introduced legislation for a temporary pause on some evictions until the end, in March 2023, of a “winter emergency period”. That means eviction dates for these households would be delayed until between April and June of 2023.

This only applies to households where they are not at fault and tenants can still be evicted for non-payment of rent or anti-social behaviour.** **

Davitt says landlords are not sure what other restrictions will be introduced or whether the government might bring in rules stopping landlords from evicting tenants before they sell a property.

Having a sitting tenant who is paying less than the market rent reduces the value of a property, he says.

If a landlord wants to sell the home and it is rented for €1,000 per month, but other similar homes are rented for €2,000 per month, the lower rent devalues the property, in the eyes of other potential investors, says Davitt.

“It prevents landlords from selling it to other landlords when the property is not at market rent,” says Davitt. “The yield won’t stack up.”

The landlord can either evict the tenant and try to sell to a homeowner, he says, or leave it empty for two years to get it up to market rate.

“They really have no choice, if you want to get market rent for your property and you want to leave your property so that it can realise its full market value at any stage in the future,” he says.

“I’ve lost two years’ rent but I’m guaranteed I can sell it when I want to sell it,” says Davitt. “Then another landlord will buy it because the yield is correct.”

There is an abundance of supply at the top end of the rental market, he says, so all the competition and issues are at the lower end. “That is where the battlegrounds are.”

Landlords are selling up because homes are not achieving market rents, he says. “There is absolutely no doubt about that and I’d say most of the landlords that are selling are not getting market rent.”

The sale price they can achieve is attractive at the moment too, says Davitt. Taking that into account, together with the lower rental income the home brings in, can result in landlords deciding to sell, he says.

Is It Needed?

“The introduction of RPZs was supposed to serve as a recognition of the uncontrolled increase in rents pushing thousands into rent poverty and homelessness,” says Stephen Curran, communications officer with the Community Action Tenants Union (CATU).

“This exemption only serves to incentivise landlords to evict tenants from their property and leave vacant in an effort to avoid RPZ rules in a couple of years time,” he says.

There are record lows in the number of properties available to rent, he says. “Tenants desperately need a rent cut and freeze, applied across the island and for all avenues of exemptions to be closed.”

Moynihan, the Labour senator, says she doesn’t see the point of the exemption. “I don’t really understand the rationale for it.”

But there are lots of different reasons why homes are left empty, says Moynihan, and as she sees it the solution is the same: a strong tax on vacant homes.

“There needs to be a stick as well as a carrot, we need to encourage people to move those houses on because they are unproductive,” she says.

In September the government announced a vacant homes tax as part of the budget for 2023, to be set at three times the amount of the local property tax and collected by the Revenue commissioners.

But critics have said that this tax is too low to be meaningful, and that there are too many loopholes and get-out clauses.

“There are so many exemptions you could drive a truck through it,” Moynihan has said.

• with additional reporting by Lois Kapila