Focus Ireland and Chartered Accountants Ireland launch new Briefing Paper with targeted measures to keep small-scale landlords in the market

• Paper has been submitted to Government and calls for accelerated delivery of social, affordable, and cost rental housing  

• Immediate short term tax measures vital to stem the flow of a record numbers of families becoming homeless 

23 February 2023 – Focus Ireland and Chartered Accountants Ireland have today launched a briefing paper which calls on the Government to introduce targeted measures to keep small-scale landlords in the private rented market to help ease the housing crisis.  

The new paper gives further credence to the report by the National Economic and Social Council (NESC) at the end of last week which recommended the Government consider further action to improve the tax treatment of landlords.  

While Focus Ireland and the Institute agree that the long-term government objective of increasing the delivery of social, affordable, and cost rental housing is the correct course of action, the joint briefing paper highlights the short-term challenge presented by the large-scale departure of private landlords now taking place.  

The paper calls for urgent measures to address this mismatch in supply. It sets out seven fully costed proposals primarily using tax policy as a lever to encourage small-scale landlords to remain in the residential rental market in the medium to long term and help to prevent homelessness.  

Commenting Pat Dennigan, CEO of Focus Ireland said: 

“One of the biggest causes for families becoming homeless in recent times is that they are losing their homes in the private rented market as landlords are selling up and leaving the market. Focus Ireland believes that the Government must take action to encourage small-scale landlords to stay in the market as this would help to cut the record number of households becoming homeless. Urgent policy responses are required which should be targeted at landlords who are considering evicting their tenants to sell over the next number years, convincing them it is in their interest to stay, or not to evict when they are selling.”  

Commenting Dr Brian Keegan, Director of Public Policy, Chartered Accountants Ireland said:

“Small landlords are an essential feature of a fully functioning residential property market, and properties owned by these landlords are more likely to be in regional, less densely populated parts of the country, providing much needed rental stock in areas that are not as attractive to institutional investors. Renting as an investment is becoming less attractive for these smaller landlords however. Increased regulation in recent years has been driven by efforts to provide greater security for tenants in the face of a shortage of rental accommodation, but in many cases, these have increased the likelihood of small landlords leaving the market, exacerbating problems they were intended to remedy.”  

“Small-scale landlords cite the restrictive taxation obligations on any rental profits accruing to them. After settling taxes on any profits, some small landlords face a current loss on rental income. We are asking for Government and its agencies to consider our proposals for the small-scale private landlord to encourage their continued involvement in the market to ensure tenants are protected.”  

The proposals outlined in the joint briefing paper include: 

• Increase wear and tear rates from 12.5 percent to 25 percent per annum to facilitate investment in the maintenance of properties and encourage better standards where renovations do not result in the termination of an existing tenancy under section 34 and the property remains in the private rental market for the following five years. 
• 100 percent capital allowances for retrofitting costs in the year of work where landlords retrofit a property to improve its energy rating, where renovations do not result in the termination of an existing tenancy under section 34 and the property remains in the private rental market for the following five years. 
• Parity in taxation of corporate and individual landlords: a flat rate of 25 percent on Case V income for small landlords who opted to become ‘professional landlords’ by waiving their rights under section 34 of the Residential Tenancy Act (2014), giving additional security to their tenants.  
• Deduction for LPT: allow local property tax as a deduction against rental income.  
• Align allowable rental expenses with normal trading deductions: expenses available for deduction against rental income should become less prescriptive and more in line with normal trading deductions. In the context of taxing rental profits earned by an active class of professional landlords, the broader based deduction for financing costs under Case I principles should apply.  
• Succession reliefs: Professional landlords should be given access to succession reliefs, such as CGT retirement relief available to other business owners, to improve the long term investment proposition of the residential rental business.  
• CGT relief for rental properties acquired with tenants-in-situ: CGT relief of four percent per annum would accrue on an annual basis for the length of time the asset remains as a rental property. 

Download the paper here. 

ENDS